New Oriental, one of China's largest tutoring institutions, is facing controversy after recently unveiling plans for its business transformation. During a live-streaming event in November, founder and Chair Yu Minhong said the company would set up an online platform to sell agricultural products. Previously best known as a provider of tutoring in English and other academic subjects, New Oriental will also begin offering art courses, and will expand its Chinese teaching business to foreigners.

New Oriental's change of tack has drawn mixed opinions. While some admire Yu's courage, there are doubts that whether New Oriental can meet the challenges of selling and transporting perishable fresh produce, as well as debates about the possibility of an inexperienced newcomer to succeed in China's increasingly tense live commerce market.

In response, Yu said companies in the education and live-streaming sectors both see great difficulties as they develop from scratch and his experience in starting an education firm will be useful for creating a new business venture. During the transformation, New Oriental seeks not only to explore new markets, but also to contribute to rural vitalization and help improve farmers' quality of life, he added.

"Live-streaming is unlikely to become the core competence of New Oriental in the long run. The company still sees room for growth in the education industry after its business transformation," Pan Helin, Executive Director of the Digital Economy Academy at Zhongnan University of Economics and Law in Wuhan, Hubei Province, told Beijing Review.

An unbeaten path

Founded in Beijing in 1993, New Oriental started with teaching English to students in preparation for overseas studies and later grew to provide tutoring to students around the country. Its recent radical shift in business focus came in response to nationwide policy changes. In July, education authorities issued new guidelines to reduce the excessive burden from homework and off-campus tutoring on primary and junior middle school students, and to ensure equal access to educational resources, known as the "double reduction" policy. According to the company, it will no longer provide courses for students in compulsory education, which once contributed nearly half of its total revenue. It will also close around 1,500 learning centers across China, and donate about 80,000 sets of new desks and chairs, worth 50 million yuan ($7.85 million), to village schools.

Like New Oriental, many other tutoring service providers have also begun shifting their focus to adult education or non-academic subjects for children, or expanded into new areas. In July, TAL Education Group launched its new service brand called Qingzhou, which focuses on preparation for postgraduate examinations and qualification exams for studying abroad, including TOEFL and IELTS. Yuanfudao has already launched a brand-new science education program based on artificial intelligence (AI).

Chinese teaching is also gaining traction. Data from the Ministry of Education shows that as of late 2020, Chinese language was being taught in over 180 countries and regions, and more than 70 countries taught Chinese language within their national education systems. As the number of overseas Chinese learners has exceeded 25 million, the market is expected to be worth over 100 billion yuan ($15.7 billion).

In August, New Oriental established its overseas business, Blingo, which aims to provide Chinese learning courses for Chinese children in other countries. VIPKID, an online English tutoring company, has also announced that it would upgrade its international Chinese teaching platform Lingo Bus, which was established in 2017. According to the company, Lingo Bus already has nearly 100,000 users, making it a key sector in its future business reshuffle.

Other providers are also developing bold new experimental business models to match New Oriental's foray into fresh produce. Xueda Education has started trials in coffee production and in the food and beverage industry. A Yuanfudao-affiliated firm acquired a clothing retailer in late September with plans to begin manufacturing down jackets.

Meanwhile, many education firms have turned from targeting individual customers to providing services for schools, public institutions and businesses by developing education technological, or EdTech, solutions. Developing EdTech businesses is nothing new for education firms, as the application of new technologies has continued to spread in recent years. Squirrel AI Learning, an EdTech subsidiary of Yixue Group, was established in 2014 and focuses on intelligent education. The platform has developed a system based on big data and AI that provides targeted courses for students, identifying their weak points in learning through customized tests and instructions.

Increasing numbers of education firms are exploring the opportunities brought by new technologies. New Oriental established DongFangChuangKe, a technology-focused education service provider, in June. The new company is working on developing smart education systems based on programming, the Internet of Things and AI, and is aiming to cooperate with primary and junior middle schools in providing off-campus courses on topics ranging from AI to aerospace exploration and mechanics on its platforms.

"Chinese education firms have made notable progress in applying technologies such as AI and big data to their products and services. Although they are shifting to new businesses, they will remain strong driving forces," Liu Lin, President of the China Association for Non-Government Education, told 21st Century Business Herald.

Re-routing

Just like any large ships, China's education giants will be prudent in changing their courses. Challenges remain and a complete business transformation requires time and learning. Offering art courses is a new source of income for many companies. However, according to Pan, delivering these courses needs experienced teachers and relies heavily on offline, face-to-face instruction. On the short term, it can be hard for companies to earn as much as they did from academic tutoring operations.

The intelligent educational service sector is not an exclusive playing field for education firms. Many tech companies such as Alibaba and Tencent have also entered the market by developing digital school management and teaching systems, creating increasing competition. However, Liu believes education firms still maintain advantages in this sector, brought by high-quality teachers and courses, and a large amount of data on students' learning.

Study tours and vocational courses also bear the potential to be a significant source of new income for education companies. According to Economic Daily, firms such as New Oriental are well-placed to tap into the field with their experiences and resources.

In October, the government released guidelines on promoting the high-quality development of modern vocational education, which stress that primary and middle school students should receive related courses to help with their career planning. Priority should be given to preparing high-caliber workers for emerging industries, including advanced manufacturing, modern agriculture and AI.

"Education firms such as New Oriental will see great potential in developing vocational education businesses. Education for improving professional skills is a fast growing market as people are increasingly willing to pay for knowledge," Pan said.

(Print Edition Title: A New Course of Action)

Copyedited by G.P. Wilson

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