US battle for students

March 12, 1999

Traditional non-profit universities in the United States are retaliating against their profit-led competitors after watching them syphon off large numbers of students.

Despite claiming that the up-start institutions offer second-rate, market-driven training, the traditional universities have started to emulate their competitors' most successful business practices.

New York University, for example, plans to create a for-profit subsidiary to develop and sell specialised adult-learning programmes via the internet.

Gerald A. Heeger, dean of continuing and professional studies at New York, said: "All these players have come along and we feel we need to get more assertive."

California State University, the largest public university system in the country with 23 campuses, is repackaging courses, offering them in more locations, at different times, and on the internet.

The traditional universities' biggest competitor is the University of Phoenix, part of Apollo Group Inc, which has a total degree-seeking enrolment of about 75,000 students spread among 119 campuses in 34 states as well as in Puerto Rico.

"We have gone from being the renegades to the model," said Phoenix senior vice-president Debra Baldwin.

Phoenix has become the largest private university in the United States by offering more courses, more efficiently, at more convenient times - including nights and weekends - often in cheaply leased space near to prospective students.

Robert Zemsky, director of the Institute for Research on Higher Education at the University of Pennsylvania, argues that the traditional universities have only themselves to blame for the success of colleges such as Phoenix. He said: "Phoenix only operates in markets that have high (profit) margins. Traditional schools and universities just lived off those courses. They took in a lot of money but gave little service. Now Phoenix is providing better, more coherent products."

Although the California system has launched an offensive, Dr Zemsky believes that many other non-profit universities have failed to recognise the threat.

"The problem is that higher education is adopting some of these practices piecemeal rather than as a coherent strategy," he said, likening the non-profit schools to rowing boats drifting towards a waterfall. "There is still hope that market forces will be reversed, but my bet is that they are irreversible and they are going to go over the falls if they do not respond."

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