2.4. Profitability and Market Strategy
There has yet to surface a definitive study to comprehensively assess the value of the training
industry in China. One estimate that is worth a healthy dispute buoys around RMB 35 billion.
It is also difficult to estimate the number of training providers in China. Some experts claim
there exists 40,000 government affiliated training centers throughout China, while others say
there must be more than 100,000 training companies. The training market in China is still
very much in the development stages. We can witness the ongoing transition in the market
and feel the variances in the supply side of training companies, with poor, fair and excellent
quality of services.
The training market in China currently is just not well defined in terms of the Chinese laws,
rules and regulations. Poor quality training providers can be met across a spectrum of
offerings. As price is not a predominant factor, it is usually difficult to distinguish poor quality
from adequate training providers. A common opinion in the market is that a select group of
state-owned, as well as small local training companies are making recognizable improvement
in the quality of their training programs. Training is valuable because good training helps
to enhance performance and productivity. However, poor quality training generates a
domino effect of waste. Choosing inappropriate training initiatives, training suppliers and
unqualified trainers results in catastrophic costs. A few years back, prior to systematic human
performance improvement programs in the United States, it was estimated that 60% of all
training was evaluated as a wasted investment. There is certainly a mood of caution and
buyer beware in the China training procurement environment.
There are several reasons why poor quality training companies still exist on the market. Depending on the particular type of training and geographic location several of the following
conditions can be observed:
- Poor training quality providers try to attract the less experienced training buyers by offering
them a well-packaged but comparatively poor and faulty product. The buyer¡¯s expectation
and supplier¡¯s capacity to deliver are not matched.
- Well established trainers delivering global standard quality rarely maintain a physical
presence in second and third tier cities in China, leaving companies outside the key
metropolitan regions with a limited selection of performance oriented deliverers of training.
- Training providers of questionable quality often set as their target larger masses attracting
both individuals as well as corporate customers (often in forms of prepaid training
cards/vouchers). Their business model is large volume, low price, and low quality with testimonials of success stories that are bound to exist amongst a minority of trainees given
the large numbers.
- Poor training quality providers win by offering an inexpensive alternative. ¡°The bitterness
of poor quality still remains after the sweetness of low cost is forgotten¡±.
- There is an evangelical, cult-like training presence that reaches the pulse of the young and
inexperienced that are entrapped under the guise of a quick fix learning experience that
is the solution to instant riches and success. These training companies often make a lot of
money within a few short years of operation and they catapult their success many times
over.
- It is not very complicated to enter the training business as long as one has a compliment of
customers and trainers. Many trainers do not demonstrate allegiance to any one training
company. Often time an independent trainer will venture off on their own and become
even more independent at the cost of their initial employer and steal away the customer.
Some buyers lack the sophistication to identify poor-quality providers and charlitans.
Suppliers are hopeful and most buyers believe that low quality and highly discounted
pricing will cease to be a luring factor as the market matures.
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