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Prepare a case study analysis on Case 3: “The Apollo Group, Inc. [University of
Phoenix]” found in the Cases section of your digital textbook.
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hyperlink. Please utilize this template to help you complete this Assignment.
Focus upon the idea of conducting a case study analysis with respect to The
Apollo Group’s multi-business strategy using one of the three portfolio
approaches to move the company competitively forward. Explain why a business
might choose a low cost, differentiation, or speed-based strategy.
Use titles and subtitles per slide for each guidelines element. Please include
the SWOT analysis with the four quadrants on the SWOT diagram slide. You can
find the Case Study SWOT analysis template in Doc Sharing for reference.
Assignment Checklist:
Describe and illustrate one of the three portfolio approaches. Explain why a business would choose a low cost, differentiation, or
speed-based strategy. Conduct a strategic analysis and choice for a multi-business company.
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In this Assignment that focuses upon the idea of conducting a case study analysis
with respect to multi-business strategy using one of the three portfolio
approaches to move the company competitively forward , you will engage in
developing the following professional competency:
Leadership with respect to knowing how to use software for job to support
business analysis and operations


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THE CASE 3: The Apollo Group, Inc. [University of Phoenix] Richard B. Robinson
1. A 55-year-old college professor at San Jose State University with a PhD from Cambridge
University and previous teaching jobs at Maryland, Ohio State, and Northern Illinois, John
Sperling was a surprise entrepreneur when he started the Apollo Group, parent company of the
University of Phoenix, in 1976. Ambitious, his goal was to revolutionize conventional higher
education. Most people would say that Sperling, recently celebrating his 91st birthday, has done
just that.
2. Rather than catering to 18- to 22-year-olds looking to find themselves, Sperling focused on the
then-neglected market of working adults. And he recruited working professionals as teachers,
rather than tenured professors. UOP (on-campus and online) has more than 33,000 faculty
members with less than 5 percent being full-time. Most radical of all, while nearly all other
universities are nonprofits, Sperling ran his university to make money. Those ideas sparked
overwhelming resistance from the education establishment, which branded UOP a “diploma
mill.” The result? “We faced failure every day for the first 10 years,” said founder Sperling, who
turned 91 in 2012.
3. From an IPO adjusted price of $0.76 to a mid-2005 high of $98, Apollo’s stock reflected a
company BusinessWeek considered among the top 50 performing companies on Wall Street. The
Phoenix-based company, whose day-to-day operations were still generating average annual
revenue growth exceeding 30 percent over that time, saw its revenues reach $5 billion in 2010
with net income exceeding $550 million. It has also joined the S&P 500.
4. Tuition at Apollo averages only $18,000 a year, 60 percent of what a typical private college
charges. A key factor, says Sperling, is that universities for the young require student unions,
sports teams, student societies, and so on. The average age of a UOP student is 35, so UOP
doesn’t have those expenses. It also saves by holding classes in leased office spaces around the
country, and online, by 2010, over 75 percent of UOP students studied at University of Phoenix
5. By 2010, the UOP had become the dominant player in the online education market that still
has lots of potential for growth. The bricks-and-mortar University of Phoenix was one of the first
institutions to identify and serve the burgeoning market for educating working adults. In the late
1980s, long before the Web debuted, the school began to experiment with offering its classes
online. It got off to a slow start, “and we lost money for a number of years,” recalled Brian
Mueller, Apollo’s former president.
6. As a result of this head start, however, UOP’s online option was ready to capitalize on an
online-education market that began exploding in the mid-1990s. Today, it is estimated that over
10 percent of the U.S. students earning a degree via the Net are enrolled through the UOP’s
online option. UOP’s online option also garners an outsize share of the industry’s revenues—
about one-third of the total. That’s because as the market leader, it can charge higher tuition than
most rivals. Undergraduates pay a little more than $18,000 a year at UOP, while students seeking
a master’s degree pay nearly $25,000. “They’re by far the giant in this industry,” says Edu
venture market analyst Sean Gallagher.
7. Online education is rapidly growing, but it is still just getting started. “There are 70 million
working adults in this country who don’t have a college degree,” says Gallagher. Increasingly,
they realize that they need a degree to get ahead. But because they often have a family as well as
a job, studying online is the most convenient solution. Howard Block, an analyst at Banc of
America Securities, predicts “dramatic enrollment growth” for UOP’s online option. He expects
that half of the students in postsecondary education will one day make at least some use of the
Internet to earn their degrees.
8. UOP began to seriously tap the international market with its online option in 2005, initially
“bringing in about 500 students a month,” said Mueller. “But that’s just the tip of the iceberg.”
Though the UOP started offering online classes only in English, it has begun to offer courses in
Spanish and plans to introduce Mandarin soon as well. Ironically, UOP has done all this with
plain-vanilla technology. While other companies charged into online education with dazzling
digital content, UOP has historically offered primarily a text-heavy format that can easily be
accessed with dial-up modems.
9. This might sound like a recipe for failure. But UOP realized that interaction with humans—the
professor and other students in the class—was far more important to success than interaction
with the digital content. Thus, UOP keeps its classes small, averaging just 12 students. And to
combat the Achilles heel of distance education—a high dropout rate—it offers its students plenty
of hand-holding, including round-the-clock tech support. The result: 65 percent of its students go
on to graduate.
10. Some see plain technology as a potential negative for the virtual college. “At some point,
UOP online will need to upgrade the sophistication of its platform,” warned Trace Urdan, an
analyst with Think Equity Partners, a boutique investment bank. That will require more spending
on research and development and information technology, he warns, which could crimp margins.
Still, any extra spending could be easily offset if UOP bumped up its class size to 15 students,
argued Block. Even with today’s small classes, operating profit margins now top 20 percent. As
if listening to them, the UOP now has an excellent, visual explanation of how this type of
multifaceted online educational approach works.
11. The dot-com bubble may have burst in the world of commerce, but the promise of harnessing
the Internet for paradigm-changing growth—and even profits—still thrives in the halls of
12. A decade after the dot-com fizzle began, e-learning has emerged from the wreckage as one of
the Internet’s most useful applications. Nearly 90 percent of the 4,000 major colleges and
universities in the United States now offer classes over the Internet or use the Web to enhance
campus classes, according to market researcher International Data Corp. About 7 million
students took online classes from U.S. higher-ed institutions in 2010 according to John G. Flores,
head of the U.S. Distance Learning Assn., a nonprofit trade group outside Boston. And it’s not
just a U.S. phenomenon: students from developing countries are jumping online, too.
13. These classes continue to open new horizons for the fastest-growing segment of higher
education: working adults, who often find it difficult to juggle conventional classes with jobs and
families. Adults over 25 now represent nearly half of higher-ed students; most are employed and
want more education to advance their careers.
14. E-learning is an influence in the traditional college class as well. Online classes won’t
replace the college experience for most 18- to 24-year-olds. But from the Massachusetts Institute
of Technology to Wake Forest University in North Carolina, colleges are using the Web in oncampus classes to augment textbooks and boost communication. And students, far more
technology savvy than many of their professors or administrators, are using Web-based tools,
social media, and many other approaches to morph Web-based capabilities into their academic
experience with or without their university following along, or even approving.
15. Quality is a problem, which is a key reason why many online students drop out. That will
force a further shakeout, eliminating mediocre players. Many colleges grapple with such issues
as how much time their faculty should devote to e-teaching. And long-established rules make it
difficult for online students to get financial aid. Even as these problems are resolved, “online
learning will never be as good as face-to-face instruction,” argues Andy DiPaolo, director of the
Stanford Center for Professional Development, which offers online graduate classes to engineers.
16. Ultimately, the greatest e-learning market may lie in the developing world, where the
population of college-age students is exploding. Just as cell phones leapfrogged land-based
telephones in many developing countries, so may e-learning help to educate the masses in
countries that lack the colleges to meet demand—and can’t afford to build them.
17. E-learning is a good fit with the military, where frequent transfers complicate pursuing a
degree. The U.S. Army awarded PWC Consulting a $453 million, five-year contract to create an
electronic university that allows soldiers to be anywhere and study at Kansas State University or
any of the 24 colleges involved in the program.
18. eArmyU already has changed the perspective of soldiers like Sergeant Jeremy Dellinger,
22, who had been planning to leave the Army to go back to school when his basic enlistment
ends. Then he enrolled in eArmyU to earn his bachelor’s degree from Troy State University in
Alabama. “Now I can get my degree and still do the work I love” as a supply sergeant, says the
Fort Benning (Ga.)-based soldier. Like Dellinger, about 15 percent of those who have signed up
so far have reenlisted or extended their commitment. By cutting turnover, “eArmyU could
almost pay for itself,” says program director Lee Harvey, since it costs nearly $70,000 to train
green recruits.
19. Corporations, too, see e-learning as a cost-effective way to get better-educated employees.
Indeed, corporate spending on e-learning is expected to more than quadruple by 2015, to $35
billion, estimates IDC. At IBM, some 500,000 employees received education or training online
last year, and 75 percent of the company’s Basic Blue class for new managers is online. The
move cut IBM’s training bill by $750 million last year, because online classes don’t require
20. Phoenix Online aside, the big e-learning winners so far are the traditional nonprofit
universities. They initially captured nearly 95 percent of online enrollments, figures A. Frank
Mayadas, head of e-learning grants at the Alfred P. Sloan Foundation. Most active are state and
community colleges that started with strong brand names, a faculty, and accreditation, says
Mayadas, as well as a tradition of extension programs.
21. By contrast, many elite universities have been far more cautious about diluting the value of
their name. Harvard Business School believes it would be impossible to replicate its classroom
education online. “We will never offer a Harvard MBA online,” vows professor W. Earl Sasser,
chairman of HBS Interactive, which instead develops e-learning programs for companies. MIT
faculty nixed teaching classes online, fearing “it would detract from the residential experience,”
says former faculty chair Steven Lerman.
22. That didn’t stop MIT from embracing the Internet in a different way. Over the next five
years, MIT plans to post lecture notes and reading assignments for most of its 2,000 classes on
the Web for free, calling the effort “OpenClassWare.” Lerman says “it’s a service to the world,”
but he says it’s no substitute for actual teaching, so faculty aren’t worried about a threat to
classroom learning.
23. A few other top schools see profit-making opportunities. Since 1996, Duke University’s
Fuqua School of Business has been offering MBAs for working executives. In these blended
programs, some 65 percent of the work is done online and just 35 percent in classes held during
required residencies that consume 9 to 11 weeks over two years. Duke charges well over $95,000
for these programs—vs. $75,000 for its traditional residential MBA. Yet they have been so
popular that by next year, “we’ll have more students in nontraditional programs than the daytime
program,” according to Fuqua’s dean. The extra revenues are helping Fuqua to double its faculty.
The Adult Education Market
24. The adult education market is a significant and growing component of the postsecondary
education market, which is estimated by the U.S. Department of Education to be a more than
$450 billion industry. According to the U.S. Department of Education, over 7 million, or 45
percent of all students enrolled in higher education programs are over the age of 24. This number
is projected to reach 6.7 million in 2011. The market for adult education in the United States is
expected to increase as working adults seek additional education and training to update and
improve their skills, to enhance their earnings potential, and to keep pace with the rapidly
expanding knowledge-based economy.
25. Many working adults are seeking accredited degree programs that provide flexibility to
accommodate the fixed schedules and time commitments associated with their professional and
personal obligations. President Obama, with the United States trying to gain traction coming out
of the “Great Recession,” said in his 2011 State of the Union address that having no degree is
really no longer an option: Many people watching tonight can probably remember a time when
finding a good job meant showing up at a nearby factory or a business downtown. You didn’t
always need a degree, and your competition was pretty much limited to your neighbors. If you
worked hard, chances are you’d have a job for life, with a decent paycheck, good benefits, and
the occasional promotion. Maybe you’d even have the pride of seeing your kids work at the same
company. That world has changed. And for many, the change has been painful. I’ve seen it in the
shuttered windows of once booming factories, and the vacant storefronts of once busy Main
Streets. I’ve heard it in the frustrations of Americans who’ve seen their paychecks dwindle or
their jobs disappear—proud men and women who feel like the rules have been changed in the
middle of the game.
26. His point: the rules of the game have changed. And, it would seem, the for-profit (industry
participants prefer “proprietary”) collegiate education sector has grown to reflect the new reality
that access to a higher education is no longer the province of the privileged few, but a
prerequisite to “owning our future” as individuals, or as he sees it, a country.
27. The need for more options in higher education to ensure more people gain the education
necessary in a knowledge-based economy is greater today than ever before. Demographics, and a
changing global economy, say it is a need that will only grow.
28. Dr. Bruce Chaloux, president of the Sloan Consortium, estimates that there are more than
50 million working-age adults with some college credit but no degree, or who have a high school
diploma but never entered college. Chaloux says that many of these adults would like to get their
college degrees, but only if they’re given practical “adult-friendly” alternatives to traditional,
campus-based programs. He identified eight key factors that influence an adult learner’s decision
to attend college:
• Convenient time and place for classes
• Flexible pacing for completing the program
• Ability to transfer credits
• Reputation of institution as being adult friendly
• Need the degree for current or future job
• Receive credit for life/work experiences
• Financial aid or employer assistance
• Child care
29. The Southern Regional Education Board in turn offers four guiding principles it finds
essential to meeting the needs of adult college students:3
• Online or blended delivery
• Accelerated (or compressed) terms
• Adult-friendly policies
• Supportive credit transfer and prior learning assessment
30. Traditional colleges and universities have been slow to address the unique requirements of
working adult students. First John Sperling, and now a global chorus of observers, has cited the
following attributes of traditional, not-proprietary education institutions:
• Traditional universities and colleges were designed to fulfill the educational needs of
conventional, full-time students aged 18 to 24, who remain the primary focus of these
universities and colleges.
• This focus has resulted in a capital-intensive teaching/learning model in typical state and
private colleges and universities that may be characterized by:
• a high percentage of full-time tenured faculty with doctoral degrees;
• fully configured library facilities and related full-time staff;
• dormitories, student unions, and other significant plant assets to support the needs of
younger students;
• often major investment in and commitment to comprehensive sports programs;
• major administrative overhead for all the various university functions;
• politically-based funding;
major resistance to change in any academic programs, even in the face of rapid global change
across disciplines and professions;
• an emphasis on research and the related staff and facilities; and
• faculty with PhDs and a research focus but limited practical experience, even in key
programs like business and other working-related professions.
• The majority of accredited colleges and universities continue to provide the bulk of their
educational programming from September to mid-December and from mid-January to May. As a
result, most full-time faculty members only teach during that limited period of time.
• While this structure serves the needs of the full-time 18- to 24-year-old student, it limits
the educational opportunity for working adults who must delay their education for up to five
months during these spring, summer, and winter breaks.
• Traditional universities and colleges are also limited in their ability to market to or provide
the necessary customer service for working adult students because it requires the development of
additional administrative and enrollment infrastructure.
31. Traditional colleges and universities, born out of a centuries old academic model and
tradition, have seen adult and continuing education as awkward institutional fits for their
mission—ancillary, less rigorous, yet subtly necessary activities to serve their state or local
population needs but not rooted in the institution’s core academic tradition.
32. The UOP’s format since its inception has focused on working adult students by providing
an accredited collegiate education that enables them to attend classes and complete class-work in
a schedule and manner more convenient to the constraints their work life imposes on their ability
to obtain a college or advanced degree. It may well be that proprietary schools such as the UOP
have proved more adaptable, if not more creative, in responding to this 21st century, knowledgeeconomy adult student reality.
33. Undergraduate enrollments in the United States increased by more than a third to 17.6
million in the first decade of the 21st century, with the most dramatic growth occurring at
proprietary colleges. It was the fastest decade of growth since the 1970s. Proprietary colleges
enrolled 10 percent of all undergraduates in 2010, up from 3 percent in 2000. Proprietary
enrollments increased fivefold to 1.2 million at four-year colleges, and nearly doubled to 385,000
at two-year institutions, according to Jack Buckley, Commissioner, National Center for
Education Statistics. The Chronicle of Higher Education says it is even higher—10 percent of all
students enrolled full-time in degree-granting institutions, and rising by an average rate of 9
percent annually over the last 30 years. “We are seeing a shift” that has “created additional
opportunities … (and) brought to light differences in how students pursu …
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