Master of Business Administration

Business Economic Dr. Doaa Salman

(Research paper about Accreditation Market)

Submitted By: Mohamed S. Farag Abdullah Msouti Hatem S. Farag Ibrahim El-oraby

Overview NAQAAE is the accrediting body for all Egyptian educational institutions (higher education, pre-university, and Al-Azhar education) (about 55,000 educational institutions). NAQAAE was established in 2007 by a presidential Decree. The Board is formed of a President, three Vice- Presidents and eleven board members selected from educational experts, businessmen and entrepreneurs.

Main Goal Raising awareness of educational quality assurance among the Egyptian Academic Institutes and the Egyptian Society Establishing an integrated system for accreditation Setting up educational standards and performance assessment indicators. Supporting the Egyptian Educational Institutions in their preparation of self assessment Asserting confidence and establish accountability in the educational outcomes.

Responsibilities of NAQAAE According to NAQAAE establishment law, the authority is responsible for evaluating more than 55,000 educational institutions to be accredited within 5 years, such institutions are categorized as follows:

A.

Higher Education: A Total of 623 institutions (34 universities,

589 faculties and institutes) with a total of approximately 4 million students.

B. Pre-University Education: A total of 49,640 educational institution hosting 18,482,872 students. These institutes include governmental schools, private schools.

C.

Al-Azhar Education: a. Al-Azhar University: 64 faculties and 420,000 students The 64 faculties are distributed among 16 governorates. b. Al-Azhar Pre-University Education: 8000 schools

distributed across Egypt.

D.

Technical education: A total of 2063 technical schools

Market Type Is a Monopoly because: It is the sole seller of its product by the presidential decree Its product does not have close substitutes.

Market Segment All educational institutes.

The Demand and Supply (Year 2009/2010): Month July August September October November December January February March April May June Price 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 22,500.00 22,500.00 22,500.00 22,500.00 22,500.00 22,500.00 Demand 0 0 0 139 195 83 0 95 349 700 73 0 Supply 500 550 605 666 732 805 886 974 1072 1179 1297 1427

The table above represents the demand and supply for the accreditation service among the educational institution. Demand is represented by number of educational institution applying for institutional accreditation. Supply is represented by the number of preview teams capable of doing previewing visits (each team consisting of a chairman and 3 assistants pre-selected and trained on the process of review by the Training Department of the Authority, representing capacity production of the Authority and is increased periodically through the admission and training). The following curves will give a better understanding for the effects on the demand and supply regarding duration and price .

Demand & Supply (Quantity Duration):

1600

1400

Quantity

1200

1000

800 Demand 600

Supply

400

200

0 May July August October December January March May June Duration

Demand & Supply (Price Quantity):

Demand & Supply
26,000.00 Price

25,000.00

24,000.00

Supply
Demand 23,000.00

22,000.00 0 200 400 600 800 1000 1200 1400 1600 Quantity

Factors affects demand & supply: Some of the factors which affect the Demand and Supply are Seasonality The demand effected by the academic year, which begins with the mid-September and ends mid-May as the process of technical support and accreditation process takes place during the study period and therefore we find that the holiday season (mid-term holiday or summer holiday) affect the demand. Price If there is an increase in prices will be offset by a decrease in The demand will occur (Surplus) and vice versa if there was a decline in prices will be offset by an increase in demand could lead to the occurrence of a gap between The demand and supply (Shortage).

The Elasticity: Point Point A Point B Q / P Price 25000 22500 Demand * 70 203 9.30 Supply * 643 1139 5.30

Price Elasticity

Elastic

Elastic

* We Calculate the Elasticity by taking the average quantity demanded and quantity supplied. The elasticity

Price Elasticity of Demand By calculating the price elasticity for the demand, we find that in the short run it is elastic, but in the long run it will turn into inelastic and that because the Government's decisions binding on educational institutions must obtain accreditation certificate.
25500 25000 Price 24500 24000 23500 23000 22500 22000 0 50 100 150 200 Quantity 250

Demand Elasticty

Price Elasticity of Supply By calculating the price elasticity for the supply, we find that in the short run it is elastic, but in the long run it will turn into inelastic and that because the supply will reach its full capacity.
25500 Price 25000

24500
24000 23500 23000

Supply Elasticty

22500
22000 0 200 400 600 800 1000 1200 Quantity

The Cost & Revenue Curve The Revenue Of the Market Quantity (Q) 0 73 83 95 139 195 349 700 Price * 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 Revenue (R) 0.00 1,825,000.00 2,075,000.00 2,375,000.00 3,475,000.00 4,875,000.00 8,725,000.00 17,500,000.00 Average Marginal Revenue Revenue (AR) (MR = R / Q) 0.00 0.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00

* Price to be determined annually by the Board of Directors of the Authority in the form of segments of a maximum of 50000 LE for a single institution, depending on the number of students and fees of the institution

Revenue 450,000.00 405,000.00 360,000.00 315,000.00 270,000.00 225,000.00 180,000.00 135,000.00 90,000.00

The Revenue Of the Market

Revenue Average Revenue Marginal Revenue

45,000.00
0.00 0 100 200 300 400 500 600 700 Quantity

The Cost Of the Market A. Fixed, Variable and Total Cost Quantity Fixed Cost 1 (Q) (FC) 0 73 83 95 139 195 349 700 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 Variable 2 Cost (VC) 0.00 1,022,000.00 1,162,000.00 1,330,000.00 1,946,000.00 2,730,000.00 4,886,000.00 9,800,000.00 Total Cost (TC) 480,000.00 1,502,000.00 1,642,000.00 1,810,000.00 2,426,000.00 3,210,000.00 5,366,000.00 10,280,000.00

1.

Fixed costs: consisting of wages for labor, rent for the main building and branches in the governorates and expenditures for administrative affairs.

2.

Variable costs: consisting of special pay external auditors for the audit, accommodation and travel allowances (wages and transport allowances to be determined annually by a decision of the Board of Directors - Accommodation is contracted annually with a group of hotels in all over Egypt)

Cost
1,000,000.00 900,000.00 800,000.00 700,000.00 600,000.00 500,000.00 400,000.00 300,000.00 200,000.00

Fixed, Variable and Total Cost

Fixed Cost Variable Cost Total Cost

100,000.00
0.00 0 100 200 300 400 500 600 700 Quantity

A.

Average and Marginal Cost Average Fixed Cost (AFC) 0.00 6,575.34 5,783.13 5,052.63 3,453.24 2,461.54 1,375.36 685.71 Average Variable Cost (AVC) 0.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 Average Total Cost (ATC) 0.00 20,575.34 19,783.13 19,052.63 17,453.24 16,461.54 15,375.36 14,685.71 Marginal Cost (MC = TC / Q) 0.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00 14,000.00

Quantity (Q) 0 73 83 95 139 195 349 700

Cost

Average and Marginal Cost

500,000.00 400,000.00 Average Fixed Cost

300,000.00
200,000.00

Average Variable Cost Average Total Cost Marginal Cost

100,000.00
0.00 0 100 200 300 400 500 600 700 Quantity

The COST and the Revenue of the Market A. Cost & Revenue Curve

Cost
10,000,000.00 9,000,000.00 8,000,000.00 7,000,000.00 6,000,000.00 5,000,000.00 4,000,000.00 3,000,000.00 2,000,000.00 1,000,000.00 0.00 0 100 200 300 400 500 600 700 Quantity Revenue Fixed Cost Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost

Marginal Cost
Marginal Revenue

A.

Snapshot of Cost & Revenue Curve

Cost & Revenue

30,000.00 27,000.00 24,000.00 21,000.00 18,000.00 15,000.00

Average Fixed Cost

Average Variable Cost Average Total Cost

12,000.00
9,000.00 6,000.00 3,000.00 0.00 0 100 200 300 400 500 600 700 Quantity

Marginal Cost
Marginal Revenue

Profit Maximization We all know that in the competitive market the price equal the marginal cost equal the marginal revenue So it will look like that 14000 (price) = 14000 (marginal cost) = 14000 (marginal revenue) But we are a monopoly so our price and marginal revenue most be greater than the marginal cost so that the institution can maximize the profit and it will be like that 25000 or 22500 (price) > 14000 (marginal cost) = 25000 or 22500 (marginal revenue) P = MC = MR

How much profit does the institution make? To see the institution's profit, recall that profit equals total revenue (TR) minus total costs (TC): we will take the quantity 140 as an average quantity to talk about Profit = TR TC = 3,500,000.00 - 2,440,000.00 = 1,060,000.00

Profit Maximization
Cost & Revenue 27,000.00

22,000.00

Demand

Marginal Revenue 17,000.00

Marginal Cost Average Total Cost

12,000.00 0 100 200 300 400 500 600 700 800 Quantity