Threats of New Entrants

Threat of new Entrants

Under the government regulation, However, Malaysian government is reasonably flexible interms of regulations for new entrants. There are legislations for PHEIs yet, the Act is not a barrier for them. In fact, Malaysian government might approve 100% of foreign equity when they get approval from the MOHE (Asian Development Bank Institute, 2011). Also, the number of PHEIs keeps increasing each year. In 2000, Government had approved 7 new local PHEIs and 3 new foreign university branch campuses (Ministry of Higher Education, 2005). Therefore, the risk of entry by potential competitors is low as the government does not limit the entrance.

Beside brand loyalty is a factor to consider. The reputation of the institution is very important in private higher education industry. Instead of considering about tuition fees and teaching methods, students are more into consideration of the brand and also the history of the university when they are choosing universities (London Evening Standard, 2012). It means that customers are less price sensitive in higher education industry, so students or parents are willing to pay for a high tuition fees for well-known universities. As the brand loyalty in this industry is high, it limits the entrance for new universities; thus, the risk of entry by potential competitors is low.

Another vital factor to study this threat is the sunk cost that PHEIs have to consider is the economies of scale. The existing big institutions like Sunway University, Help University and other key players have better economies of scale. They have been in the market for so long and can have a lower cost to maintain but at the same time earning profit. If new firms wish to enter the market, they need to have a higher cost to operate and surely will have disadvantage in terms of pricing strategy. So threat of new entry is low and not affect much for the existing key market players.