1.1 General Background
1.2 Objective and methodology
2. Situation analysis
2.1 Geographic environment
2.2 Demographic development
2.3 Economic Development
2.4 Regional Development and Investment climate
2.5 Culture and Language
2.6 Summary – Key points
3. The Russian Education System
3.1 Educational background
3.2 Institutions of HE
3.3 Workforce in HE
3.4 Types of Study
3.5 Grades and diploma
3.6 State education expenditures
3.7 Private sector HE
3.8 Summary – Key points
4. Industry surrounding and limiting factors
4.1 Household spending on HE
4.2 Access to HE, tuition fees and grants
4.3 Most demanded Faculties by the labour market
4.4 Summary – Key points
5. Consumer perspective
5.1 Consumer incomes and spending
5.2 General Consumer Attitudes towards HE
5.3 Consumer attitudes towards Russian HE
5.4 Consumer attitudes towards spending on HE
5.5 Education preferences and consumer perceptions on professions
5.6 Consumer attitudes towards Germany and German HE
5.7 Summary – Key Points
6. Industry perspective – the German view
6.1 Student’s enrolment and mobility
6.2 Preferred destinations
6.3 Attitudes towards German HE
6.4 Summary – Key Points
7. Other players in the Market
8. Market access and barriers
9. Future perspectives
9.1 Future growth potential of HE in Russia
9.2 Future growth potential of HE-exchange with Russia and growth in mobility to Germany
9.3 Recommended response of German HEIs
Survey data Moscow higher education fair target group (ECS)
During the last decades the objective to internationalise German Higher Education (HE) has changed substantially. The idea of an internationalised world of science originates in the dictum, that the core of science is the free exchange of knowledge. This free exchange of knowledge has always been eo ipso international. Nevertheless not this idiom alone determined German HE internationalisation policy of the 20th century, but was partly superseded during the 70ies and 80ies by the idea of internationalisation of HE as development aid for underdeveloped nations. To support scientists mainly coming from third world countries, educate them and send them back to their home country to prevent the brain drain from these countries was the primary goal of HE internationalisation in those years. Yet, at the turn of the millennium these objectives changed again radically. While the free exchange of knowledge and the support of poorer nations might still play an important role in certain fields, international science is nowadays globalising as fast as the rest of our economies and is in the same way mainly depending on market forces.
Abbildung in dieser Leseprobe nicht enthalten
Source: own drawing, based on BMBF 2005:5
Nowadays not the concern about the brain drain is any longer in focus, but rather the brain gain by the host country. The underlying concept of “knowledge” as costly human capital, that should be acquired and – if possible – kept, has changed the instruments of internationalisation, too. Education at the same time has been getting a tradable good, or rather a service underlying market forces. Apart from the commercialisation of higher education systems indicated by the introduction of tuition fees, acquisition of so called free movers, cost-benefit-accounting etc., the growing market orientation of HE institutions is more and more indicated by active marketing in the source country.
Further more not only marketing of HE has become one of the central issues in internationalisation of HE but also the analysis of market potentials, to recruit students and scientists from foreign counties as well as to export HE products (e.g. to open university branches) in other countries. While Russia is an important market for German HE in both of these aspects, this study tries to identify the market potential of German HE on the Russian HE market.
1.1 General Background
Germany, German culture and especially German science used to be very well renowned in Russia during the 19th century. And still in the 80ies and 90ies of the 20th century, Russia was one of the education markets where the German language was widely spoken and learned and German science used to have a very good reputation.
Despite the good starting conditions beginning of the 90ies, at least the number of learners of German in Russia stagnated or just moderately grew compared to English since English took a quick upswing. Further more with the breakdown of the Berlin Wall and the collapse of the communist regimes in Eastern Europe many ties between former GDR HE Institutions and Russian HE Institutions were discontinued or at least cooled down.
Nevertheless many Institutions of German Higher Education are since several years targeting the East European Countries and South East Asia to market their Higher Education products. The German Marketing Consortium for Higher Education “Gate Germany” classifies Russia – along with some South-East-Asian Counties – as first priority country to market German higher education (May 2002:4).
1.2 Objective and methodology
Market entry of German HE in Russia in this study is understood in two ways. First of all it is dealt with in a short term perspective, to market the individual German HE institution to recruit Russian students and post graduates for programmes conducted in Germany and in German, thus targeting on import of students and post graduates e.g. to increase revenue from tuition fees or from services rendered at the spot, to generate indirect revenue from scholarships or to increase international reputation. In this sense HE is different from most other products, as the consumer is expected to follow the product – or rather the service – and not the other way round. This involves much more interest and attention of the consumer than usually. Further more it involves much more customer retention than e.g. ordinary tourism. For this reason a large part of the study is very much consumer centred. In this sense Russia is understood as a source market.
Second the long term perspective of this study focuses on possibilities to develop special programmes targeting Russian students and universities and to export German study programmes to the Russian market and establish own programmes in Russia, either in cooperation with Russian institutions (Joint Venture, Cooperation) or as a fully owned subsidiary of the German institution. This will focus both on not-for-profit co-operations and commercial export of HE-Institutions (off shoring). For this part the local market environment in Russia and the legal circumstances are even more important. Thus another large part is focusing on the conditions on the target market.
The study tries to identify key factors influencing the future capacities of German HE in Russia in both of these aspects. The underlying concept of analysis is Porters five forces model of buyer and supplier power, entry barriers and threat of substitutes resulting in increased rivalry. Yet not all of these forces are looked at with the same intensity.
The paper first describes the Russian higher education market and tries to provide a comprehensive market review and description of the Russian higher education market, to assess the future market potential of German Higher Education Institutions (HEI) in Russia. It gives an insight view of household spending on education, attitudes towards Higher Education (HE) and studies in Germany in particular and the Russian HE system in order to identify the major opportunities to and threats of growth in import of students, scientists and other HE resources from Russia to Germany as well as export of German HE resources and concepts to Russia. Therefore a detailed analysis of the need and demand for education, especially higher education is necessary. Further more it tries to identify general attitudes towards marketing of education and HE in particular to explore successful marketing strategies in Russia.
Those parts dealing with Russian economy, the higher education system and legal as well as environmental barriers are mainly based on desk research using governmental data of the State Committee of the Russian Federation on Statistics Goskomstat, the Russian Ministry for Economic Development and Trade (MERiT), the German State Statistics Office and data of international organisation like the Worldbank, different UN-Organisations, the German Academic Exchange Service DAAD and others. These data are complemented by personal interviews with people working in the Russian higher education system.
Throughout the study to Hofstede’s five cultural dimensions is referred to, to make certain idiosyncrasies in Russian society and their effects on HE – as far as they concern this study – comprehensible to the reader. While certain developments and attitudes – not only in HE – are cultural bound, Hofstede’s model is used to explain different perceptions of these differences in Russia and in Germany.
Those parts analysing consumer habits and expectations of Russian HE consumers – the core of this study – make extensive use of market survey data of The Public Opinion Foundation, a renowned Russian market and opinion research bureau. These data are replenished by data of other market research institutions and by own survey data collected by the author.
The data for the own survey were collected on the Moscow education fair “Education and Career” between 3rd and 5th of March 2005. Respondents were asked to fill a questionnaire on this fair while they were informing themselves about study possibilities in Russia and abroad. They had thus just started their studies or were about to start. 77 questionnaires were returned back; the sample is thus quite small and can just indicate certain trends. Besides, certain data have to be analysed with great care because of the composition of the focus group coming mainly from Moscow. Interpretative reliability of the data is in certain fields thus weak as e.g. media use in Moscow is due to availability of certain media very different from the rest of Russia, attitudes towards international studies might be different in the capital due to more exposure to foreigners, and knowledge about international organisations mainly based in Moscow might differ from the rest of the country. Nevertheless, the data support the larger surveys used in this thesis and are therefore complementing the findings.
The thesis comprises four major parts. In the first part (situation analysis) the current economic situation and general environmental determinants relevant for marketing HE in Russia will be sketched mainly based on desk research. The second part (Russian education system and environment) focuses on the Russian HE system. The next part (Consumer Perspective) has a look at the future clients analysing consumer habits towards HE, financial spending on education etc. using survey data of The Public Opinion Foundation. The following part (Industry perspective) is assessing international mobility and the present marketing activities of the German Academic Exchange Service (DAAD) as one of the major catalysts of German HE marketing. Apart from desk research this part is using the above named survey among a target focus group in Moscow. Using the same survey in the part “other players”, the market position of German HE marketing will be analysed to compare the German market position with other HE systems targeting the Russian market.
2. Situation analysis
This part provides a general situation analysis on the state of the Russian economy and gives a broad outlook on future developments in Russia. Macroeconomic data and a general description of Russian culture, population and geography are incorporated in this part, since it is necessary for a deeper understanding of the Russian HE-Market and for the adequate assessment of the HE-situation in Russia.
2.1 Geographic environment
The Russian Federation emerged as one of the successor states of the USSR after the disintegration of the Soviet Union in 1991. Covering 17.075.400 km2 the remaining Russian state is still the largest national entity of the world. It stretches across ten time zones with Moscow time being two hours ahead of CET and an east-west expansion of approximately 9000 kilometres. The Country has a population of an estimated 143.420.309 inhabitants (July 2005, CIA The World Fact Book), among these 73,4% are living in urban areas (Statistisches Bundesamt 2005:1). Despite the vast landmass and an average population density of just 8 inhabitants per km2 (Germany: 231 per km2) the percentage of urban population is thus considerably higher than in most other countries of the former eastern block (where it is mostly ranging between 60 and 70%), not speaking about the other vast emerging education market China, where it is just about 40%. Russian urbanisation is indeed comparable to most highly industrialized nations (Statistisches Bundesamt 2005:1).
2.2 Demographic development
Russian population is sharply declining since 1992, when birth-to-death ratio for the first time got negative. Presently population is reduced by a minus of 6,2 per 1000 capita per year (Goskomstat 2004). Birth rates started to drop in 1988 (Canning et al. 1999:21), and were – unlike in Germany, that also suffers from declining birth rates – in recent years not sufficiently compensated by immigration. Even the high immigration figures for the 90ies were mainly accomplished through immigration of ethnic Russians from other CIS countries, thus not sustainable. This will have heavy influence on the Russian HE sector in the near future, as will be argued later in this paper.
Net migration of the Russian Federation has additionally been extraordinary high mid of the 90ies, fostering decline of population at that time even more. Nevertheless, emigration has again dropped from a high of 3,4 per 1000 in the mid 90ies to a low of 0,5 per 1000 capita in 2003, which might be attributed to the stabilized political and economical situation. Emigration to non-CIS countries fell too from a total of 54.586 in 2002 to 47.934 in 2003. (Goskomstat 2004: 9). Emigration from Russia to Germany, which was beginning of the 90ies for a good part fuelled by emigration of the Russian-German Minorities (the so called “Russlanddeutsche”) first slowed down considerably until the 1998 crisis. After the crisis emigration from Russia to Germany went up again till the turn of the millennium and is now again since some years declining.
Probably even more interesting is the internal migration trend within the Federation. While in Soviet times there was a clear drift of – especially highly educated people – moving from the west to the east and the northern and southern periphery, the disintegration of the USSR reversed this trend. These regions loose population while the big cities in the European part and the Ural region heavily gain. Canning et al. summarize this new trend and its importance for education, concluding that “those areas that have lost population have lost students in disproportionate numbers, while regions gaining population have received proportionately more school-age children than adults” (1999:23).
2.3 Economic Development
Russia’s GDP per capita is in 2003 amounting 3.025 US$ with a recent (2003) annual increase of 7,3%, bringing cumulative growth since the 1998 financial crisis till present (2005) to 38 % (Statistisches Bundesamt 2005:3). It is forecasted, that – in the positive scenarios – even in future years the growth will continue at about 6 % a year (MERiT 2005b:1). The Russian government even targets at doubling the GDP until the year 2010 (Astratova n.d.: 2). Much of this impressive growth is considered due to high oil prices and Russia’s major stake in the world oil and gas market. Russian economic forecasts thus rely strongly on future developments of the international energy resource markets.
Nevertheless growth is not as stable as it seemed in the early years of the Putin era. Inflation in 2004 for the first time did not decline but remained at 12% (DAAD 2005:129) and given the vast proceeds from extractive industries in that year more growth could have been expected. In case of a plunge of the markets for resources (which presently is rather unlikely) the MERiT still forecasts a growth of 4.5 to 4.6% in the coming years, since “intensive structural changes towards technology intensive and information sectors” (MERiT 2005b:1) are expected. There is a lot of wishful thinking in this, indeed, and the pessimistic figures proved to be closer to reality than expected when in 2004 growth rate fell to 4,8% (DAAD 2005:129). Nevertheless, major economic crisis like end of the 90ies are at the moment not to be anticipated.
Yet high oil prices have stimulated domestic demand in previous years, which is now the main engine of growth – contrary to the mid 90ies when especially the demand of Russia’s upper and middle class for imported goods was destabilising Russia’s import-export balance substantially and therefore heavily contributing to the 1998 crisis. The then changed attitude of Russian consumers towards domestic products has lead to a stable trade surplus in recent years, 74,7 billion US$ in 2003/2004 (VDW 2004:23, fig. Sept. to Sept.). Further more president Putin has streamlined fiscal policy, consolidated state expenditure and repaid foreign debt. Yet the shadow economy and capital flight is still a big problem to the economy withholding tax income from the state. For 2005 a budget surplus of 5.6 percent of GDP is estimated, supposed to fall back to no less than 2 percent of GDP in the coming years, as Russia’s Economy Minister German Gref recently announced.
Germany is since 1997 already the most important trade partner of the Russian Federation accounting for more than 10% of all Russian imports and heading for 13% in the year 2005. Nevertheless according to Goskomstat the UK is Russia’s leading investment partner with 15,5% of foreign investment, followed by Germany with 14,5% of all foreign investment (Goskomstat 2004:39, figures for 2003). Figures of the state statistics office Goskomstat should be treated with care though. The VDW sees Germany on position four behind The Netherlands, Cyprus and the US concerning FDI.
The number of Russians unemployed is declining and in February 2005 at an (by ILO methodology) estimated 8.8% of the economically active population (MERiT 2005a:29). The figures are nevertheless likely to be lower, since according to estimates up to one third of activity on the labour market is not registered – neither with tax authorities nor with any other authorities. Official figures, just counting the registered unemployed, indicate a 3% of unemployment (MERiT 2005a:29). Real figures are likely to be somewhere in between and are not very meaningful anyhow, because a lot of Russians are living below subsistence level even if they are working. For international HE marketing it is thus worth to have a look at the Russian urban middle and upper class, which is much better off than the rest.
2.4 Regional Development and Investment climate
According to an independent ranking of Russian regions undertaken by the Economic Magazine “Expert”, which is often referred to in literature, the regions with the highest investment potential are Moscow and the Moscow province, St. Petersburg, Yekaterinburg province and Khanty-Mansiysky. The regions with the lowest investment risk are Novgorod province, Yaroslavl province, St. Petersburg, Belgorod province and Orel province accordingly. Concerning overall investment attractiveness both Moscow and St. Petersburg get just a 1B risk rating (high potential - moderate risk) with no Russian region rated with an A. Other regions with a good investment climate for 2004 are Yekaterinburg province and Khanty-Mansiysky as well as Belgorod province for 2003 (Expert 2005:e-source). Regions with a 2B (Medium potential - moderate risk) investment climate are Yamalo-Nenetsky AO, Volgograd province, Kemerovo province, Krasnodar territory, Krasnoyarsk territory, St. Petersburg province, Nizhny Novgorod province, Perm province, Bashkortostan, Sakha (Yakut) Republic, Tatarstan, Rostov province, Samara province, Saratov province, Khabarovsk territory, Chelyabinsk province. Since 1998 the Expert-rating is also taking legislation and cooperativeness of local administration into consideration to analyse attractiveness of a region. This is especially important for HE, relying strongly on good ties to the local governments.
The German Business association (Verband der Deutschen Wirtschaft in Russland, VDW) comes to a slightly different rating, putting Moscow as first priority region for German investment followed by St Petersburg, the Nishni Novgorod region and the Moscow region and the Sverdlovsk Region (see Table I). In general in these regions German Investment is also very high, this might be important for future employment perspectives of university graduates with qualifications in German coming from these regions.
2.5 Culture and Language
To describe Russian culture in comparison to German culture, Geert Hofstede’s cultural dimensions are used in this chapter. While Hofstede’s dimensions (cf. Hofstede, Hofstede 2005) are usually used to reflect on intercultural marketing, it will be used here and later on in this study also, to describe certain attitudes towards HE in general and German HE in particular. This is mainly done to point at certain incompatibilities of German and Russian HE-system reflecting different styles and values towards education in society and to assess market potential towards cultural differences.
Having a look at Hofstede’s model (cf. Table II), one can recognise large differences in all four main dimensions of Hofstede’s model with the biggest differences in Power distance. Power distance (PDI) is extremely high in Russia (93), while PDI in Germany is relatively low with 35. For this reason, according to Hoftstede, students can be expected to rather have few desires and rather follow the middle way. Powers are easily accepted, which might be interpreted as lacking discussion culture by Germans. Further more in PDI+ cultures, children are expected to be obedient to their parents. The parent’s view on their children’s education plays an important role and is heavily influencing decisions on the children’s education. This does not only play an important role if it comes to the subject of study, but also, whether children are “allowed” to study abroad.
Education is seen as an important good in Russia, especially higher education. According to Hofstede (2005:54) “Large power distance countries spend relatively more on university-level education and less on secondary schools, maintaining a polarization between the elites and the uneducated” – unlike small-power-distance counties, which spend lot on secondary school education and less on HE as well as educational policy rather focuses on schools in PDI– Countries and on universities in PDI+ countries.
Another extreme difference – not as significant as the PDI though – is according to Hofstede’s dimensions the Collectivism-Individualism-dichotomy. With a score of 67 Germany is a pretty individualist country while Russia’s score of 39 points at a rather collectivist country. Concepts of life long learning (LLL) are popular in individualist (IDV) countries while people in collectivist (COL) countries are rather averted to LLL and see learning as something for the young (Hofstede 2005:98). According to Hofstede, also diplomas play a different role in IDV and COL-societies, with improving in IDV the holder’s “economic” worth, while in COL it “entitles the holder to associate with members of higher-status groups” (Hofstede 2005:99). Further more occupational mobility is lower in COL countries, too. In it’s annual report on Russia the VDW concludes, that the average Russian tends to value the manifestation of German “allowed individualism” and the corresponding diversity of opinions as negative (VDW 2004:33).
Also on masculinity-femininity Germany scores much higher towards masculinity (MAS) than Russia, Germany having a relative score of 66 and Russia of just 36 on Hofstede’s scale. Femininity (FEM) of a society should neither been mistaken with feminism nor with Hofstede’s dimension of collectivism. According to Hofstede, gender differentiation is much higher in MAS than in FEM societies, which are much more egalitarian, if it comes to the sexes. Concerning education, Hofstede states, that “in masculine countries job choices by students are strongly guided by perceived career opportunities, while in feminine cultures students’ intrinsic interest in the subject plays a bigger role” (Hofstede 2005:139). Equally important might be that men and women more often study the same faculties in FEM societies, which can be easily proven, if one looks at the gender distribution across faculties in Russia. Faculties that would be typical “male” in Germany (e.g. engineering) are studied at least by relatively more women in Russia than in Germany. Yet Russian males are just studying in certain female domains, not in all.
On uncertainty avoidance (UAI) Russia scores 95 and Germany 65. Though the German score is not exactly low, it has to be noted, that the Russian score is at the far upper end of the scale. Thus respect for teachers and a very structured study programmes are, according to Hofstede, in particular important.
While this paragraph can just shed a little light on cultural differences the interpretations should be kept in mind, reading the following chapters.
2.6 Summary – Key points
- Russia has despite its vast landmass and low population density a high grade of urbanisation, which is positive prerequisite for higher education in general.
- Demographic changes are expected to have effects on HE in the near future resulting in declining students’ numbers.
- There is a clear trend of migration to the western part within the Federation with brain drain effects at the periphery and in the east.
- The economy heavily depends on resource prices, but state finances are consolidated under Putin and debt was repaid. Growth is nonetheless lagging behind expectations. Major crisis are not to be expected but the countries growth has no strong base yet.
- Germany is the most important trade partner of Russia, which might influence investments in HE positively.
- Regional differences are large, with local administration playing a very important role for investment climate.
- Certain cultural factors to be expected in Russia have impact on HE marketing.
- Parent’s decisions play an important role in decision for a certain HE system and subject.
- Spending is more concentrated on HE than on secondary level.
- HE is to large extend a matter of satisfying status needs.
- LLL is not popular and education is something for the young.
- Education choices are based on intrinsic interest not career objectives.
 Education and Career Survey, abbreviated in this study as “ECS”.
 For Data on China and the former states of the Warsaw treaty see the “Länderprofile” for these countries accordingly.
 For a Map of Russia c.f. Annex A.
 Expert, http://www.raexpert.ru/ratings/regions/index.php3?Op=2&inc=5&css=1&path=3&ClimType=
 For an in depth explanation of Hofstede’s cultural Dimensions cf. Hofstede, Hofstede 2005. A quick overview can be obtained on http://www.geert-hofstede.com/.
 Long-term-orientation (LTO), the fifth dimension was added later on to the model and wasn’t yet measured for Russia.
 The range is usually given from 1 to 100, nevertheless some dimensions range slightly above 100 due to countries surveyed at a later stage scoring higher.