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April 2009 issue

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Agency Survey
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Roundbound business

Much is made in this industry of the power of partnerships between agency and school, yet in actual fact, many companies operate both as an agency and a school, blurring the original boundaries of business interest, or they may have an ownership stake in a partner company. Amy Baker reports.

Vertical integration is a common feature of many industries; companies buying their suppliers to streamline and safeguard their production (for example, a language school buying an agency to safeguard client numbers).

And this has certainly been occurring on a regular basis in the last few years within study abroad, as big education companies have snaffled up established agencies with a good name in a particular market. In an industry that puts a strong emphasis on partnership and loyalty, many schools are understandably reticent to discuss this business strategy, with some suggesting it will not become a widespread practice necessarily.

Nevertheless, as big companies become bigger and can financially undertake to buy up a big brand name, we are seeing more vertical integration ensue: Kaplan Aspect buying ProLinguis in Switzerland or Don Quijote buying Amerispan in the USA. Meanwhile, fellow big player, Australia-based Navitas, has majority shares in three agencies (in the UK, India and China). 

This has been one trend in terms of crossover business. The other business direction has been for companies – often smaller, nascent businesses with an eye for opportunity – branching in two directions and setting up an agency and a school, offering inbound and outbound (“roundbound”) services.

Often, one business takes off to be followed soon after by a “logical” expansion into the opposite business sector. Christopher Thebing of Kolumbus Group explains how it happened within this company, which has three language schools in Latin America and outbound agency offices in Germany, Hungary and Switzerland. “We started as a school in 2000 and set up the agency in 2004,” he says, “as we had received a good number of clients through agencies. Therefore we liked the idea to extend our business and create a new source of income for our company.”

Also in Germany, Barbara Jaeschke relates that she was of the same opinion 17 years previously when she set up GLS Sprachreisen (agency) and GLS Sprachenzentrum (school): “The reasons were financial ones,” she says of her decision to expand from an agency into offering German language courses too. “It seemed to be more efficient to produce a product than only to sell a product. And of course, it’s always safer to stand on two legs.”

Thebing feels sure that joint agency-school ownership is a natural evolution for the industry, both under one umbrella or a more arms-length approach. “I think it’s a normal development of a more saturated market,” he says. In the USA, Jean-Marc Alberola of Bridge-Linguatec agrees. His company encompasses the US-based BridgeAbroad agency and English, Spanish and Portuguese schools (BridgeBrazil, for example) in the USA, Argentina, Chile and Brazil respectively.

“There is clearly a pattern developing,” he says about vertical integration. “Strategically this makes sense, particularly for chain schools because of the economies of scale and to achieve faster/secure growth.” He points out that for any business, there’s an element of risk involved in outsourcing the marketing and sales of one’s business to a third party. “When a school’s key agent gets acquired by a competing school, the risk of outsourcing materialises. Having a diverse mix of agents helps, but in some cases, given the level of competition that exists in the marketplace, a school may be left underrepresented in a specific geographic region or on the Internet [in this event].”  

The difference between Alberola’s or Thebing’s business model and some others is that they operate both agency and school under an umbrella brand. This is not always the case however. Paul McMahon at Wired Spain Languages in Spain explains that this homestay, summer camp and high school provider was formed by agency, Sheffield Centre, after having demand for certain programmes from existing school partners. “These programmes started with high school and homestay,” he says. “The agency was already [providing services] ‘reactively’. The next step was to consolidate what they did, finely tune it; develop more ideas and then brand it.”

Most hybrid businesses that cooperated in this article make no secret however of their status as a composite company with inbound and outbound interests. Most state that management of agency and school is kept separate, although all are clear that operating “roundbound” brings intrinsic benefits. “We try to separate [divisions] as much as possible otherwise if would be almost impossible to run the business successfully,” says Boelo van der Pool of Babel Idiomas in Spain. “Nevertheless, being an agent as well, we know what is important for our own agents. And being a school, we try to learn from experiences that our outbound clients have in schools abroad.”

A number of operators point out that excelling in both businesses means very different skill sets. “Offering inbound operations demands long-term experience, a huge responsibility and a specialised operational infrastructure,” notes Tereza Fulfaro of CI in Brazil. “It’s not so easy moving into inbound operations and vice versa.”

Jaeschke in Berlin agrees. “Yes, the two product lines can complement each other,” she says. “But on the other hand, it is a completely different business, and the marketing tools and the target groups differ in many respects,” she points out. “I don`t think that a school that suddenly thinks to run an agency will be able to compete against professional agencies in the market. The know-how is completely different. On the other hand you cannot simply go ahead and open a school as you can open an agency: A school is never a one-man-show as an agency can be in the beginning: you need good staff, and capital to set up the classrooms etc.”

Caroline Fox of Twin Group in the UK underlines that moving into operating language schools was a challenge. Twin Group started off solely organising work placements in the UK before expanding with a language school division and then opening an agency, Work and Volunteer Abroad (Wava), four years ago, after seeing a rise in interest in work placements overseas among Britons.

“The schools definitely took much more time and money to get right,” she says, before adding, “The Wava agency took a while to be established not least because we had not really understood the difficulties of being an agent, its not an easy job!”

Fox is confident that more companies will move into a roundbound reality and notes a rise of composite companies working with each other on a truly reciprocal level: “We work with a number of partners who send to us and with whom we send students,” she observes. “This partnership way of working helps organisations work together to solve problems, develops closer working practices and a real sense of collaboration, trust and friendship.”

Alberola agrees. “As more hybrids appear on the market, it’s easier to enter into reciprocal agreements with other schools that own agencies,” he says. “This tends to become a stronger and longer lasting alliance than the typical agent/school commission structure.” In fact, he adds, “There are agents that would probably not represent our schools were it not for the fact that they own schools which our agency represents and vice versa. There’s a lot more at stake.”


Self-contained supply and demand

While most hybrid businesses send agency clients to partner schools in overseas countries while teaching foreign students in their own, who arrive via other agencies or directly, there are also some companies such as EF and STS that are much more self-reliant, operating a model that is closer to self-contained roundbound business.

James Crimp at Sweden-based STS explains that Lars Magnusson established STS in Sweden in 1958, organising study abroad trips out of Sweden. “Lars noticed in the 1960s that young people primarily travelled during the summer months but this left a staffing and production lull in the winter so he started STS ski tours to provide year-round employment opportunities for his staff.” The multi-faceted company quickly expanded and now has offices in 22 countries worldwide providing inbound and outbound educational services.

According to Crimp, 85 per cent of the language school, high school, au pair, international business school and ILS products are “STS run/produced products (or produced by one of its umbrella companies/brands)” but this share of production has slowly decreased. “We noticed many years ago that a diversity in products and the benefits of ‘partnership branding’ meant that we began to work more with other language school providers or established educational institutions,” Crimp explains. “Educational products have become more and more diverse over the years to include very specialised production techniques which has meant more and more outsourcing.”

STS also works with agencies. Currently agency sales account for around 20 per cent of business for the company’s language school and high school sectors. Crimp notes that when STS established its sales offices in the 1960s, “there were no other agencies so we didn’t really have a choice”.

Contact any advertiser in the this issue now

The following language schools, associations and accommodation providers advertised in the latest edition of Language Travel Magazine. If you would like more information on any of these advertisers, tick the relevant boxes, fill out your details and send.

Name

Company
Country

Telephone

Email


ACCOMODATION
Britannia Student
      Services  

ASSOCIATIONS/
GROUPS
English Australia  
Felca  
Feltom Malta  
MEI-Relsa Ireland  
Perth Education City
Quality English  

EVENTS
LTM Star Awards  

SERVICES
Internet Advantage
Your World On
      Monday  
In Touch  

TOURIST BOARDS
Malta Tourism
      Authority  

WORKSHOPS / EXPOS
English Australia  
MEI-Relsa Ireland  
Quality English  

AUSTRALIA
English Australia  
Gold Coast Institute
      of TAFE  
Perth Education City

BELGIUM
CERAN Lingua
      International 
      (Belgium, France,
      Spain, UK) 

CANADA
Canadian &
      International
      Student Services
National School
      of Languages  
Richmond School
      District #38  
Vancouver English
      Centre 
      (Canada, Mexico)

ENGLAND
Bell International 
      (Malta, UK)
Berlitz UK Ltd  
Bournemouth One
       to One English
      Language School  
English Studio  
InTuition Languages
      (Australia, France,
      Germany, Ireland,
      Italy, South America,
      Spain, UK, USA)
IP International
      Projects GmbH  
      (England, France,
      Germany, Spain)
Kaplan Aspect 
      (Australia, Canada,
      Ireland, Malta, New
      Zealand, South
      Africa, UK, USA)
Living Learning
      English  
London
      Metropolitan
      University
Oxford Brookes
      University  
Oxford International
      Study Centre  
Queen Ethelburga's
      College  
RLI Language
      Services
St Clare's Oxford  
St Giles Colleges 
      (Canada, UK, USA)
Study Group  
      (Australia, Canada,
      England, France,
      Germany, Italy, New
      Zealand, South
      Africa,Spain, USA)
Twin Group 
      (Ireland, UK)
University of Essex -
      International
      Academy
University of Sussex
Wimbledon School
      of English  

FRANCE
Alliance Française
      Paris Ile de France
CAVILAM  
Home Language
      International  
      (Australia, Brazil,
      Canada, China,
      Czech Republic,
      Denmark, England,
      Egypt, Finland,
      France, Greece,
      the Netherlands,
      Hungary, Ireland,
      Italy, Japan,
      Scotland, South
      Africa, Spain, Malta,
      New Zealand,
      Norway, Poland,
      Portugal,
      Switzerland,United
      Arab Emirates,
      USA, Wales)
IH Nice  
Universite de Paris
      Sorbonne 

GERMANY
Carl Duisberg
      Medien GmbH  
      (England, Germany)
International House
      Berlin - Prolog  

IRELAND
Active English  
Alpha College of
      English  
English in Dublin  
Galway Language
      Centre  
Irish College of
      English  
Swan Training
      Institute  
MEI-Relsa Ireland  

JAPAN
Kai Japanese
      Language School  

MALTA
Clubclass
      Residential
      Language School  
Feltom Malta  
IELS - Institute of
      English Language
      Studies  
Malta Tourism
      Authority  

NEWZEALAND
Languages
      International  

SPAIN
Colegio Maravillas  
ESADE - Executive
      Language
Español ¡Si!
Malaca Instituto -
      Club Hispanico SL

SCOTLAND
EAC Language
      Centres and
      Activity Camps.  
University of
      Glasgow 
      (England, Ireland,
      Scotland, Wales)
 
SWITZERLAND
EF Language
      Colleges Ltd  
      (Australia, Canada,
      China, Ecuador,
      England, France,
      Germany, Ireland,
      Italy, Malta, New
      Zealand, Russia,
      Scotland, Spain,
      USA)

USA
ELS Language
      Centers  
Zoni Language
      Centers 
      (Canada, USA)