Four megatrends that are changing the competitive landscape of international education

Slowing growth, a booming middle class, shifting destination market share, and new regional study destinations are helping to set a new competitive dynamic in international education.

1. Slower growth, new destinations

Roughly five million students are studying abroad today - an increase of nearly 67% since 2005 - and the OECD projects that eight million students will be studying abroad by 2025. The big question is, what happens to the growth curve after that? A major driver of student mobility to date has been unmet demand for higher education in developing countries: when students can’t access quality education at home, they become motivated to go abroad. This trend has spurred astonishing growth in the numbers of Chinese and Indian students that travel overseas to study over the past decade. But the relative popularity of destinations is changing all the time. Asian higher education systems are steadily strengthening, to the point where several universities in China, Hong Kong, Singapore, and Malaysia now rank among the world’s best. A growing number of students in these countries are choosing to stay within the region to study, and students from other countries - including African ones - are adding Asian destinations to their list of attractive options. As Asia increases its capacity to absorb students from the region and expands its recruitment of international students, countries such as the US, the UK, Australia, Canada, and New Zealand may well see demand for places in their institutions slow, especially from major sending markets such as China and India. TAKEAWAY: Pursuing greater diversification in international enrolments will become ever more important for institutions outside of Asia. This is underlined not only by Asian institutions’ climb up the rankings, but also by the fact that the number of Chinese university-aged students will be notably smaller 15 years from now: demographers expect China’s population of 20-24-year-olds to decline by 20% from 2010 to 2020.

2. Middle class rising

Countries with expanding middle classes will see more of their students able to consider study abroad. In Asia, the middle class is expected to grow from 600 million in 2010 to more than 3 billion in 2030 to represent 66% of the total global middle-class population. World Education News and Reviews (WENR) notes that “Upper-middle-income economies … are the ones driving growth in outbound student mobility. The total number of outbound international students from upper-middle-income economies jumped 161% between 2000 and 2012, as compared to only 29% from high-income OECD countries.” TAKEAWAY: Some of the most significant emerging markets for international education are characterised by large and growing middle class populations. These markets include India (which may be the world’s largest middle-class consumer market by 2030), Nigeria, and Indonesia.

3. Leading destinations losing ground

At the same time as developing markets have been increasing educational capacity and quality, the heavyweights of international education – the US and the UK – have been losing market share. The US share of internationally mobile students dropped from 23% in 2000 to 16% in 2012, even as the absolute number of foreign students in America continues to climb. The UK has lost ground as well. This shift is largely a function of increasing competition among destinations. Both Canada and Australia have attracted a greater share of international students over the past decade; other countries have also gained ground. The OECD reports that “significant numbers of foreign students were enrolled in the Russian Federation (4% market share in 2012), Japan (3%), Austria (2%), Italy (2%), New Zealand (2%), and Spain (2%).” As mentioned, Asian regional hubs are also beginning to capture the attention of prospective international students. TAKEAWAY: The stage is set for a new level of competition among leading study destinations over the next decade and beyond. National visa and immigration policies (including work rights for international students), coordinated destination marketing campaigns, scholarship programmes, and intelligent strategies for the packaging of programmes and study pathways will be some of the factors countries may be able to leverage as they attempt to maintain or increase market share.

4. New competition and regional hubs

The increasing role of intra-regional mobility is clearly visible in UNESCO statistics indicating that the percentage of Latin American students remaining within the region increased from 11% in 1999 to 23% in 2007. Similarly, the percentage of mobile East Asian students studying within the region rose from 36% to 42% over the same period. Regional mobility schemes around the world have spurred such patterns. These include the ASEAN International Mobility for Students (AIMS) programme and the landmark Erasmus programme in Europe. In addition, bilateral mobility arrangements, including Mexico’s Proyecta 100,000 initiative and the corresponding 100,000 Strong in the Americas programme for students in the Western Hemisphere, are playing an ever-larger role in determining where students choose to study abroad. Finally, certain Asian economies are busy developing their own centres of expertise and actively recruiting international students to them. Recent examples include the Philippines’ English-language Training (ELT) sector and the 10,000 new seats opened for foreign students at India’s premier engineering institutes. TAKEAWAY: Students have an expanding array of educational options that are (a) close to home and (b) more affordable than those in traditional leading destinations such as the US and UK. To remain compelling, schools and governments in Western destinations will have to think hard about their points of competitive differentiation and will likely need to position themselves on benefits other than proximity and price. Bilateral agreements, quality, industry linkages including internships, and post-graduation work rights are some of the variables that will likely figure more prominently in these strategies going forward.