When thinking about becoming an ESL teacher or when current teachers plan their careers, an objective examination of the industry and how it operates can help these individuals make better decisions.

The world-wide ESL industry is an industry and is shaped by market forces, and language school owners, DOSs, and educational managers need to take financial as well as educational factors into consideration when making all types of decisions which include deciding on the number of students to put into each class and the pay rates for teachers.

Wishing otherwise and ranting about it does not change this fact.

One of the most common tools used to analyze an industry's attractiveness is Porters Five Forces Model developed by the famous Harvard professor and management guru, Michael Porter.

A look at the ESL industry from the perspective of an ESL teacher using this framework might be an interesting and thought-provoking exercise.

Porters Five Forces include:

Supplier power
Barriers to entry
Buyer power
Threat of substitutes
Degree of Rivalry

Supplier power. Low power of suppliers makes an industry more attractive and high power of suppliers makes an industry less attractive. Suppliers have almost no power in the ESL industry.

Barriers to entry.

Low barriers to entry make an industry attractive for those outside the industry, but for existing firms, or in our case, existing teachers, low barriers to entry make the industry less attractive and less profitable as the low barriers to entry keep competition for jobs and customers high even when demand rises.

In many professions, such as being a brain surgeon or a nuclear engineer, the barriers to entry into the professions are very high which limits the number of new individuals entering the professions, at least in the short term. Assuming the demand for these professionals is high, these high barriers to entry usually result in higher salaries as competition between employers for hiring these individuals is high.

In general, the barriers to entry for ESL teachers are low. The primary requirement for becoming an ESL teacher is a good understanding of the English language, which includes most native English speakers and many others. For many, one can go from a totally unrelated profession to become an ESL teacher in a matter of days. If a 4-week training course certificate becomes a mandatory qualification, it would only raise the barrier to entry slightly as one could still go from a totally unrelated profession to becoming an ESL teacher in less than 2 months.

Without wanting to engage in the endless debate as to whether teachers should be required to have a degree or not, existing teachers who advocate that all teachers should be required to have a degree are probably less interested in the education of the students as they are in raising the barriers to entry to the profession which is intended to benefit those currently teaching. It is speculated that raising the barriers to entry of the profession will not have much impact on teachers' salaries due to the other three forces we will exam next. Whether or not raising the barriers to entry by increasing levels of qualifications required in the profession would result in better education for the students is a debate for others more qualified than I to engage in.

Buyer power

In general, the more options for buyers, the more power they have and the less attractive is the industry. The fewer options that buyers have, the more attractive the industry as sellers can get away with charging higher prices. For students going to public primary and high schools, the "customer" may have little choice and has to accept the teachers presented to them. But in much of the ESL industry, buyers have substantial choices which increases competition, brings down prices and therefore limits the salaries schools can pay. The relatively high bargaining power of the buyers generally puts downward pressure on salaries paid to ESL teachers.

Threat of substitutes

When there are multiple ways to meet specific needs, the greater the threat of substitutes and the less attractive the industry. There are varying degrees of substitutes. Substituting a meal of pork and rice for a meal of chicken and rice is a pretty close substitute to end hunger for many people. But, while substituting riding the bus for putting gasoline in one's car does satisfy one's need for transportation, it is a fairly distant substitute. .

There are many substitutes, both close and distant that limit the attractiveness of and the ability to pay high wages in the ESL industry. For native English speaking teachers, a close, but imperfect, substitute is non-native speaking teachers of English. Whether or not native English teachers are better than non-native speaking teachers of English is a debate I am neither qualified nor interested in engaging in, but we do know the market values native English speakers over non-native speakers of English in the ESL industry. However, the willingness of the market to pay native over non-native speakers is limited. Students may be willing to 1.5 or 2 times as much to learn with native English speakers, but few students would be willing to pay 3 to 5 times as much. The availability of this substitute will always limit the salaries of the majority of native speaking ESL teachers.

There are many other substitutes for students instead of paying money to take English lessons. An important substitute and one that is likely to increase with improvements in technology is self-study. But the most important substitute is the option to not study English at all. For most students, studying English is not an absolute requirement, instead it is often an investment in one's future. However, if the current costs are too great, forgoing English lessons is an option available to many students and this substitute will always limit the amount all but the most elite schools can charge and which of course limits the amount schools can pay teachers.

Degree of Rivalry

In some industries companies fight tooth and nail for every customer resulting in low profits for almost everyone in the industry, the current airline industry is a good example of this. In other industries, competition is less fierce and competitors do not try to run others out of the industry resulting in higher overall profits and ability to pay higher wages for most organizations within the industry.

The degree of rivalry in the ESL industry probably averages out as moderate, at least in Thailand. In the private school and university sectors the rivalry for students does not generally appear to be very intense, but in the language school and corporate training sectors the degree of rivalry might be considered fairly high.

There are many ways ESL schools, teachers and businesses compete. First is price. Price matters to the vast majority of the customers. Although this does not mean customers automatically seek out the lowest possible price, but there is only very limited space in the top end of the market and the vast majority in the business need to maintain competitive prices to attract business. This need to maintain competitive prices results in downward pressure on profits and ability to pay high salaries.

Educational quality is very difficult to measure, therefore customers often take into consideration the institution's reputation when making purchasing decisions. Therefore competition by reputation is an important factor in the industry. Reputation is a very important selling point in the university and private school sectors. We also see some of the most successful language schools remain successful year after year and much of this can probably be attributed to the reputation of these institutions. How can a positive reputation be created? It appears it can be done through a combination of appearance of the school, the perceived quality of instructors and a campaign of brand building.

It is important to mention, quality of teaching staff is very difficult to measure, and it is the perception of the customers of the quality that really matters from a financial standpoint. Therefore it is not surprising the personality of the teacher is often more important than qualifications is creating the perception of quality. Schools gain a reputation for being good schools by providing teachers that students perceive as being of high quality. The golden rule of business is the customer is always right and customers determine what is quality, not the service providers. Schools who provide teachers the students don't like are not likely to stay in business for long.

Conclusion

Looking at these five forces, we can see the ESL industry is not the most attractive choice of occupation from a financial standpoint and the low barriers to entry, the relatively high bargaining power of buyers, the substantial threat of substitutes and the moderately intense level of rivalry will always limit the financial rewards one can expect from teaching English or otherwise becoming involved in the ESL industry.

But what the use of Porters Five Forces Analysis does not identify are the intangible benefits of joining the profession. Being an ESL teacher allows one to travel the world while getting paid. Also there is the joy one gets from helping students achieve their goals and watching the students grow personally. For most, teaching English is a fairly low stress occupation and many are willing to trade some income for this lower level of stress. While not being a high paid profession, teaching English in foreign lands does have a number of attractive features.

The purpose of this article is neither to encourage nor discourage individuals from becoming or remaining ESL teachers, but to provide some food for thought so each individual thinking of becoming an ESL teacher, making a decision about staying in teaching or thinking about how to advance within the ESL teaching profession can make a more informed choice.

Scott Hipsher often teaches strategic management, as well as other subjects, at a variety of universities and is the author of Expatriates in Asia: Breaking Free from the Colonial Paradigm,
The Nature of Asian Firms: An Evolutionary Perspective,
Business Practices in Southeast Asia: An interdisciplinary analysis of Theravada Buddhist countries

as well as numerous book chapter, academic journal articles, conference papers and other articles on international business and other topics.