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RingofFire
Joined: 22 Jul 2007
Posts: 43
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 Posted: Sun Oct 14, 2007 10:22 pm Post subject: |
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| Glenski wrote: |
Some people will be more careful with their money.
Some people will move on to another eikaiwa for lessons.
Most eikaiwa students just want to be in front of a foreigner and gawk, or they go to socialize. They aren't that serious about improving their grammar or conversation skills. It's a hobby. If they were that serious, they would only go to the places that really did improve their English.
Will there be no effect? No.
Will there be a huge effect? No.
Will Japan enact some laws to cover the situation? I think they may already have, but we all know that the government turns a blind eye to many illegalities and improprieties in this business. Just ask anyone working for a dispatch agency or a university.
So, politics and regulation may be directly influenced by consumer confidence, yes. Look how slowly the wheels of progress turn here, though. Consumer confidence in building codes (vs. bid rigging), in milk safety, in meat safety, etc. have not changed things rapidly, and the government is still ferreting out its own duplicitous actions and connections to all this, but we are not talking about such life-threatening events. We are talking about eikaiwa. |
Can I increase the size of this post and call it a "hall of fame post" too to show I agree?  |
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markle
Joined: 17 Jan 2003
Posts: 1316
Location: Out of Japan
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| Posted: Mon Oct 15, 2007 12:39 pm Post subject: |
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| Glenski wrote: |
Some people will be more careful with their money.
Some people will move on to another eikaiwa for lessons.
Most eikaiwa students just want to be in front of a foreigner and gawk, or they go to socialize. They aren't that serious about improving their grammar or conversation skills. It's a hobby. If they were that serious, they would only go to the places that really did improve their English.
Will there be no effect? No.
Will there be a huge effect? No.
Will Japan enact some laws to cover the situation? I think they may already have, but we all know that the government turns a blind eye to many illegalities and improprieties in this business. Just ask anyone working for a dispatch agency or a university.
So, politics and regulation may be directly influenced by consumer confidence, yes. Look how slowly the wheels of progress turn here, though. Consumer confidence in building codes (vs. bid rigging), in milk safety, in meat safety, etc. have not changed things rapidly, and the government is still ferreting out its own duplicitous actions and connections to all this, but we are not talking about such life-threatening events. We are talking about eikaiwa. |
No, no, no Glenski you must be wrong where are the wildly speculative predictions?, the breathless generalisations?, the totally unsubstantiated assertions?
You are never going to get into the "Hall of Fame" with such balanced well thought out REASON.
Sheesh, talk about the feeble-minded leading the delusional.... |
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Chris21
Joined: 30 Apr 2006
Posts: 366
Location: Japan
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| Posted: Mon Oct 15, 2007 9:34 pm Post subject: |
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Thanks for the insightful commentary, Markle. Lots of valid, well-thought out, and supported points.
PS - What is a "breathless generalisation"? |
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Chris21
Joined: 30 Apr 2006
Posts: 366
Location: Japan
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| Posted: Mon Oct 15, 2007 10:16 pm Post subject: |
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The following is an article from the Nikkei Kezai Shinbun, published about 6 weeks ago. Note the portion I've underlined, which explains that the Nova situation has had a negative effect on revenues industry-wide.
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Gaba English School Operator Fights To Overcome Nova Mess
TOKYO (Nikkei)--Just seven months after going public on the Tokyo Stock Exchange's Mothers market, English school operator Gaba Corp. (2133) has been forced to substantially downgrade its earnings forecast for the year ending December as a result of revelations in February that industry leader Nova Corp. (4655) had lied to customers about its services.
Gaba initially projected a 3% increase in parent-only pretax profit to 1.47 billion yen for the year, with plans to grow the number of students to 20,000 at the end of December, up nearly 4,000 from a year earlier.
However, due to the Nova scandal, foreign language conversation schools saw their revenue decline 23% year on year in the January-March period on average, after enjoying a 14% increase in the previous quarter, according to data compiled by the Ministry of Economy, Trade and Industry. The situation deteriorated in June when METI ordered Nova to partially suspend its operations.
The negative fallout from the scandal forced Gaba to announce on July 18 a downgraded earnings estimate of 8.67 billion yen sales, up 13% from a year earlier but 1.64 billion yen less than its initial projection. The company also said it forecasts pretax profit to fall 54% to 660 million yen and the number of students to stand at only 17,600 at the end of the year, with new enrollment in the first six months totaling about 7,300 students, almost unchanged from a year earlier and 2,000 short of the original plan.
Its stock price, which exceeded 110,000 yen before the announcement, temporarily fell below 90,000 yen earlier this month.
Still, CEO Chutatsu Aono said he aims to turn adversity into an opportunity. Gaba boasts a high 29% share of the market for one-on-one English conversation lessons, which is said to be worth about 30 billion yen. Because the market for group lessons, which are provided by Nova and other school operators, is believed to be worth more than 10 times that, the current situation can be seen as a good chance for Gaba to attract potential customers.
In the six months through June, the number of students continuing their contracts increased 42% from a year earlier. Believing that the high rate of continuation shows high customer satisfaction, Gaba intends to step up efforts to strengthen its brand name.
Regarding lesson fee refunds upon the cancellation of contracts, which caused the troubles at Nova, "We make it a rule to repay the lower of either 20% of the fee the customer paid for unreceived service or 50,000 yen, in conformity to the law," said Toshiyuki Makishima, Gaba's chief financial officer.
Assuming that focusing on private English conversation classes is not enough to keep the company growing, Gaba unveiled in its medium-term business plan -- released on Aug. 10 -- a plan to drastically expand its operations of one-to-one lessons for children. The plan calls for boosting the number of "learning studios" where children's lessons are taught from two to 32 in 2010 and increasing sales from the segment to 900 million yen from 30 million yen.
It will also consider merging with or acquiring companies to expand into translation, interpretation or other English education services.
The market for English conversation lessons for kids was valued at about 97 billion yen in fiscal 2006, according to Yano Research Institute Ltd. But giving lessons to children is said to be more difficult, because teachers have to be good at handling kids and schools need to meet various demands from parents.
In its medium-term plan, Gaba targets sales of 14.5 billion yen and a pretax profit of 2.3 billion yen for the year through December 2010. The firm's ability to regain investor confidence will likely depend on how successful it is in achieving its targets.
-- Translated from an article written by Nikkei staff writer Tamami Iwasaki |
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Glenski
Joined: 15 Jan 2003
Posts: 12844
Location: Hokkaido, JAPAN
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| Posted: Tue Oct 16, 2007 1:32 am Post subject: |
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What you have underlined is out of context, even with the rest of the article that you quoted, plus as a whole, even the next largest eikaiwa company is boasting a rise in projected sales, not a decline (as I think you stated would happen).
The "out of context" remark.
January to March sales dropped 23%.
Ok, but from January to June, GABA boasted an overall increase, so it doesn't really matter what happened in a very short-term 3-month period, and that is precisely what most of the rest of us have been saying.
(Also, I don't really understand the phrase "year on year". I'm guessing it means that compared to last year's Jan-Mar sales, which is like comparing apples to oranges!)
Moreover, I cringe whenever I see social scientists making such statements as " ...due to the Nova scandal..." when it should more properly and accurately read something like, "...in the light of the Nova scandal..." The writers from that article took a great liberty in writing as if Nova's actions were the cause of the drop. It's speculation at best and shoddy unsupported reporting at worst. Not only is this so-called "fact" difficult to substantiate, but how about showing us the trend over the past year, or maybe 5 years? Sales figures rise and fall for various reason, time of year not withstanding.
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| Believing that the high rate of continuation shows high customer satisfaction... |
Well, GABA can state that they believe anything they choose. Do we really have the complete story here, though? For instance, did GABA offer students something more in the light of the NOVA scandal just to capitalize on it and retain their students? (Nothing bad in that, but it is just not mentioned here, and if I were GABA, I certainly wouldn't say anything about it, just to make myself look like a great company.)
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| Its stock price, which exceeded 110,000 yen before the announcement, temporarily fell below 90,000 yen earlier this month. |
So? Again, are we claiming that the NOVA scandal caused this? Where is the proof? And, just how temporary was that drop anyway? Stocks rise and fall, and I believe GABA is pretty much rubbing its palms together in glee over its own successes and accomplishments, regardless of the NOVA situation.
So, GABA downgraded its projected earnings. Big deal. It still projected bigger earnings than last year, and it is still expanding. Besides, whoever said sales projections were accurate anyway? This article is not an example of a negative effect (unless you consider the expansion of GABA and the quality of GABA lessons themselves to be poor, of course). |
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Chris21
Joined: 30 Apr 2006
Posts: 366
Location: Japan
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| Posted: Tue Oct 16, 2007 6:29 am Post subject: |
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The "out of context" remark.
January to March sales dropped 23%.
Ok, but from January to June, GABA boasted an overall increase, so it doesn't really matter what happened in a very short-term 3-month period, and that is precisely what most of the rest of us have been saying.
(Also, I don't really understand the phrase "year on year". I'm guessing it means that compared to last year's Jan-Mar sales, which is like comparing apples to oranges!) |
Let me explain to you why this is significant. The January-March period is a better indication of industry trends than the January-July period. Of course Gaba's enrollment went up in the second quarter - MEXT slapped a ban on new sign-ups for Nova. This doesn't mean that the industry was performing well, just that new students are being diverted to competing chains as Nova gets squeezed out. Couple that with the rush to cancel contracts for existing Nova students, it's remarkable that Gaba's numbers weren't better than just a 13% increase. Perhaps it's better illustrated like this... Gaba picks up 100 students, ECC picks up 100 students, and GEOS picks up 100 students - but Nova loses 3000 students... this is surely not indicative of a healthy industry. January-March represents pre-ban, before Nova's departing students artifically inflated Gaba's numbers.
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| Moreover, I cringe whenever I see social scientists making such statements as " ...due to the Nova scandal..." when it should more properly and accurately read something like, "...in the light of the Nova scandal..." The writers from that article took a great liberty in writing as if Nova's actions were the cause of the drop. It's speculation at best and shoddy unsupported reporting at worst. Not only is this so-called "fact" difficult to substantiate, but how about showing us the trend over the past year, or maybe 5 years? Sales figures rise and fall for various reason, time of year not withstanding. |
Well, the article does claim that the data was compiled by MEXT, and the conclusions were drawn by a Nikkei Keizai reporter. Additionally, the Gaba CEO acknowledges that their results were disappointing. Granted, the limits of a newspaper article make presenting copious amounts of hard evidence a challenge. But if I have to choose between the data from MEXT, the article by Nikkei Keizai, and the Gaba CEO's opinions vs. Glenski's unsubstantiated speculation, I'd trust the former any day of the week and twice on Sunday.
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| Well, GABA can state that they believe anything they choose. Do we really have the complete story here, though? For instance, did GABA offer students something more in the light of the NOVA scandal just to capitalize on it and retain their students? (Nothing bad in that, but it is just not mentioned here, and if I were GABA, I certainly wouldn't say anything about it, just to make myself look like a great company.) |
Are you suggesting that Gaba is being misleading when they claim they have high customer satisfaction... that they could be struggling to retain students in a difficult environment created by the Nova situation, and may be offering additional benefits just to maintain the status quo? If that were the case, then you would be suggesting that the Nova situation is making it harder for other companies and doing damage to the corporate eikaiwa world... but you wouldn't be suggesting that, would you?
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| So, GABA downgraded its projected earnings. Big deal. |
Gaba attracted fewer students pre-ban.
They increased sales during the ban, but not the number of new students.
Their profits declined 54%
Lost investor confidence, resulting in an almost 20% stock drop over the summer
Sounds like pretty bad news to me |
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markle
Joined: 17 Jan 2003
Posts: 1316
Location: Out of Japan
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| Posted: Tue Oct 16, 2007 10:44 am Post subject: |
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| Chris21 wrote: |
Thanks for the insightful commentary, Markle. Lots of valid, well-thought out, and supported points.
PS - What is a "breathless generalisation"? |
Nice retort Chris all the zing of... well ... a wet tissue.
And your right it should be "breathtaking generalisation" |
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partialtone
Joined: 09 May 2007
Posts: 137
Location: CA
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| Posted: Thu Oct 18, 2007 11:21 am Post subject: |
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| You may not have to guess much longer. If the foreign instructors aren't paid tomorrow I can't imagine anyone showing up to work on Saturday. Last Friday the pay delay was announced and many branches had to close the next day due to topatsus. Nova can kick around Japanese staff like that but once the foreign instructors are gone it's all over. |
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drifter13
Joined: 27 Mar 2007
Posts: 124
Location: Fujisawa
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| Posted: Thu Oct 18, 2007 2:24 pm Post subject: |
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| Friday's going to be interesting, I'm listening to "The Final Countdown" while I watch the clock click down to midnight. The fallout will take a few weeks to properly asses though, so I don't know if we're gonna get the English language market Super Nova some people are hoping for. |
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partialtone
Joined: 09 May 2007
Posts: 137
Location: CA
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| Posted: Thu Oct 18, 2007 7:03 pm Post subject: |
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| drifter13 wrote: |
| Friday's going to be interesting, I'm listening to "The Final Countdown" while I watch the clock click down to midnight. The fallout will take a few weeks to properly asses though, so I don't know if we're gonna get the English language market Super Nova some people are hoping for. |
I'm just glad something tangible is finally happening. |
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alexcase
Joined: 26 Jul 2007
Posts: 215
Location: Seoul
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| Posted: Thu Oct 25, 2007 12:30 pm Post subject: |
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Here is what happens to the English teaching industry in a country when a major chain of schools based more on financing shenanigans and image than on teaching collapses:
http://www.hothousemedia.com/ltm/ltmbackissues/may03web/may03news.htm
Not sure about the business tactics of some of those that collapsed after, but Brighton was academically not a bad chain of schools. |
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