REPORT ON

PRESENTED BY:

Noman Aslam 12007

Samiullah Rana 12015

Asad Ali 12020

Sarmad Hussain 12034

Department of Business Administration

Government College University Faisalabad

1
Table of Contents (2)
Introduction ------------------------------------------------------------------------------------- (3)

Vision, Mission Statement ------------------------------------------------------------------- (3)

SWOT analysis ---------------------------------------------------------------------------------- (4-5)

Internal Factor (IFE) Evaluation ------------------------------------------------------------ (6)

External Factor (EFE) Evaluation ----------------------------------------------------------- (7)

Competitive Profile Matrix ------------------------------------------------------------------ (8)

Space Matrix ------------------------------------------------------------------------------------ (9)

The Internal-External (IE) Matrix ---------------------------------------------------------- (10)

Quantitative Strategic Planning (QSPM) Matrix --------------------------------------- (11-12)

Conclusion -------------------------------------------------------------------------------------- (13)

Recommendations --------------------------------------------------------------------------- (13)

2
Introduction
Pearson plc (Pearson), incorporated on August 12, 1897, is a learning company. The Company delivers
Learning through providing a range of educational products and services to institutions, governments,
professional bodies and individual learners. The Company operates through three segments: North America,
Core and Growth. The Company provides content, assessment and digital services to schools, colleges and
universities, as well as professional and vocational education to learners to help increase their skills and
employability prospects.

North America

The Company's North America segment includes Courseware, Assessments and Services businesses in the
United States and Canada. Its Courseware includes curriculum materials provided in book form and/or
through access to digital content. Its Assessments include test development, processing and scoring services
provided to governments, educational institutions, corporations and professional bodies. Its Services include
the operation of schools, colleges and universities, including sistemas in Brazil and English language teaching
centers as well as the provision of online learning services in partnership with universities and other academic
institutions.

Core

The Company' Core segment includes Courseware, Assessments and Services businesses in more markets
including the United Kingdom, Australia and Italy. The Company also offers digital products, such as Bug Club
and ActiveLearn.

Growth
The Company's Growth segment includes Courseware, Assessments and Services businesses. Its markets include Brazil,
China, India and South Africa.

About Pearson
We’re the world’s learning company, with expertise in educational courseware and assessment, and a range of
teaching and learning services powered by technology. Our products and services are used by millions of
teachers and learners around the world every day.

Our mission is to help people make progress in their lives through learning — because we believe that learning
opens up opportunities, creating fulfilling careers and better lives.

3
Strengths
 Pearson is one of the largest education companies and the largest book publisher in the world.
 USA accounted for 55% of revenues in 2012.
 Student registrations for MyLab grew 11% in 2012.
 60% of education sales are from North America, but Pearson operates in over 70 countries.
 Brand names include: Scott Foresman, Prentice Hall, Addison-Wesley, Allyn and Bacon, among others.
Each brand is generally tailored to specific field of study.
 Pearson’s Connection Education in the USA operates online K-12 schools and served more than 43,000
students in in 2012, up 31% from 2011.
 Revenues in Asia Pacific grew from £514 to £647 million or 25% from 2011 to 2012.
 Revenues in “other countries” (possibly Latin America) grew from £339 to £371 million or 9% from
2011 to 2012.
 Financial Times reported digital subscriptions increasing 18% in 2012.
 Pearson’s Research & Innovation Network consists of 5 research centers devoted to market research
techniques to improve the quality of education for students and teachers.

Weaknesses
 Pearson has no clearly stated vision or mission statement.
 Penguin group is now classified as held for sale after the loss of control from selling 53% of Penguin
group to Bertelsmann.
 A drop in operating profits from £55 M in 2011 to an operating loss of £124 M in 2012.
 Revenues in the USA only grew 3.4% in 2012 while revenues in the UK, Europe, Canada all declined
slightly.
 The Financial Times, while popular, only experienced revenue increases of 3% in 2012.
 Total equity for 2012 totaled £5,710 million. However, intangible assets accounted for £6,218 million
leaving for a negative equity position after subtracting out intangibles.
 Inventory turnover is 6.1 and the industry average is close to 10.
 ROA of 3.3% to McGraw Hill’s 14.6%.
 Asia Pacific only accounted for 12% of 2012 sales.
 Late entering the digital e-book and Blackboard type markets.

4
Opportunities
 E-books are becoming more popular among students and are renewed more frequently, cutting out
the used book market substantially.
 E-books remove many production expenses such as shipping, paper, binding, etc.
 Professors and teachers are continually looking for online grading and programs to compliment in class
instruction.
 Emerging markets are going more rapidly than the USA and Western Europe.
 There remains a strong desire among teachers and professors to continue to use the traditional hard
back books.
 Teachers value up to date materials.
 Many students in the USA are on financial aid or receive scholarships that pay for their books. And k-
12 books are provided by the tax payers.
 Digital newspaper circulation as of Summer 2013 comprises nearly 20% of all newspapers.
 Moving forward, there will likely be increased demand for dependable information from trusted
authors.
 McGraw-Hill’s profits declined from $911 million in 2011 to $437 million in 2012.

Threats
 McGraw-Hill is a large competitor that has cornered the market with their Connect Software and
alliance with Blackboard.
 McGraw-Hill is operating much more efficiently on most financial ratios.
 There remains a strong desire among teachers and professors to continue to use the traditional hard
back books.
 Paper costs can increase as much as 10% per year.
 Increased risk of electronic piracy on e-books. By some reports, e-book piracy increased 50% in 2010
alone.
 Used book market significantly erodes into profits as many books are used multiple times with Pearson
only generating revenues from the initial sale.
 Print newspaper circulation has been falling rapidly for the last 10 years (although leveling out now)
and suffered another slight decline from the first 6 months of 2012 to the first 6 months of 2013.
 Up to 30% of all books are returned to the publisher unsold.
 New competitors, possibly even solo authors can emerge more easily with the e-book model.
 Recent laws in the USA allow books, not allowed by law to be initially sold in the USA, to leave port, be
purchased at sea (often only a few miles offshore) then legally returned to the USA market for sale at
reduced prices.

5
 IFE Matrix
Strengths Weight Rating Weighted Score
1. Pearson is one of the largest education companies and the
0.08 4 0.32
largest book publisher in the world.
2. USA accounted for 55% of revenues in 2012. 0.04 4 0.16
3. Student registrations for MyLab grew 11 percent in 2012. 0.04 3 0.12
4. 60% of education sales are from North America, but Pearson
0.04 4 0.16
operates in over 70 countries.
5. Brand names include: Scott Foresman, Prentice Hall, Addison-
Wesley, Allyn and Bacon, among others. Each brand is 0.06 4 0.24
generally tailored to specific field of study.
6. Pearson’s Connection Education in the USA which operates
online K-12 schools served more than 43,000 students in in 2012, 0.04 4 0.16
up 31% from 2011.
7. Revenues in Asia Pacific grew from £514 to £647 million or 25%
0.03 3 0.09
from 2011 to 2012.
8. Revenues in “other countries” (possibly Latin America) grew
0.03 3 0.09
from £339 to £371 million or 9% from 2011 to 2012.
9. Financial Times reported digital subscriptions increasing 18% in
0.03 3 0.09
2012.
10. Pearson’s Research & Innovation Network consists of 5
research centers devoted to market research techniques to 0.04 4 0.16
improve the quality of education for students and teachers.

Weaknesses Weight Rating Weighted Score

1. Pearson has no clearly stated vision or mission statement. 0.05 2 0.10
2. Penguin group is now classified as held for sale after the loss of
0.05 2 0.10
control from selling 53% of Penguin group to Bertelsmann.
3. Professional division reported a drop in operating profits from
0.05 1 0.05
£55 million in 2011 to an operating loss of £124 million in 2012.
4. Revenues in the USA only grew 3.4% in 2012 while revenues in
0.05 2 0.10
the UK, Europe, Canada all declined slightly.
5. The Financial Times, while popular, only experienced revenue
0.05 2 0.10
increases of 3% in 2012.
6. Total equity for 2012 totaled £5,710 million. However, intangible
assets accounted for £6,218 million leaving for a negative equity 0.07 1 0.07
position after subtracting out intangibles.
7. Inventory turnover is 6.1 and the industry average is close to 10. 0.06 2 0.12
8. ROA of 3.3% to McGraw Hill’s 14.6%. 0.08 1 0.08
9. Asia Pacific only accounted for 12% of 2012 sales. 0.05 1 0.05
10. Late entering the digital ebook and Blackboard type markets. 0.06 1 0.06
TOTALS 1.00 2.42
6
 EFE Matrix
Opportunities Weight Rating Weighted Score
1. Ebooks are becoming more popular among students and are 0.08 2 0.16
renewed more frequently, cutting out the used book market
substantially.
2. Ebooks remove many production expenses such as shipping, 0.02 2 0.04
paper, binding, etc.
3. Professors and teachers are continually looking for online 0.06 2 0.12
grading and programs to compliment in class instruction.
4. Emerging markets are going more rapidly than the USA and 0.05 2 0.10
Western Europe.
5. There remains a strong desire among teachers and professors to 0.04 4 0.16
continue to use the traditional hard back books.
6. Teachers value up to date materials. 0.05 3 0.15
7. Many students in the USA are on financial aid or receive 0.05 3 0.15
scholarships that pay for their books. And k-12 books are
provided by the tax payers.
8. Digital newspaper circulation as of Summer 2013 comprises 0.02 3 0.06
nearly 20% of all newspapers.
9. Moving forward, there will likely be increased demand for 0.04 4 0.16
dependable information from trusted authors.
10. McGraw Hill’s profits declined from $911 million in 2011 to $437 0.10 3 0.30
million in 2012.

Threats Weight Rating Weighted Score

1. McGraw-Hill is a large competitor that has cornered the market
0.09 3 0.27
with their Connect Software and alliance with Blackboard.
2. McGraw-Hill is operating much more efficiently on most financial
0.07 2 0.14
ratios.
3. There remains a strong desire among teachers and professors to
0.04 3 0.12
continue to use the traditional hard back books.
4. Paper costs can increase as much as 10% per year. 0.02 2 0.04
5. Increased risk of electronic piracy on ebooks. By some reports,
0.04 3 0.12
ebook piracy increased 50% in 2010 alone.
6. Used book market significantly erodes into profits as many
books are used multiple times with Pearson only generating 0.07 2 0.14
revenues from the initial sale.
7. Print newspaper circulation has been falling rapidly for the last
10 years (although leveling out now) and suffered another slight
0.03 2 0.06
decline from the first 6 months of 2012 to the first 6 months of
2013.
8. Up to 30% of all books are returned to the publisher unsold. 0.03 2 0.06
9. New competitors, possibly even solo authors can emerge more
0.04 3 0.12
easily with the ebook model.
10. Recent laws in the USA allow books not allowed by law to be
initially sold in the USA, to leave port, be purchased at sea
0.06 2 0.12
(often only a few miles offshore) then legally returned to the
USA market for sale at reduced prices.
TOTALS 1.00 2.59
7
 Competitive Profile Matrix

Pearson McGraw Hill John Wiley

Critical Success Factors Weight Rating Score Rating Score Rating Score
Market Capitalization 0.10 3 0.30 4 0.40 1 0.10
Market Penetration 0.07 4 0.28 3 0.21 2 0.14
Revenues 0.10 4 0.40 3 0.30 1 0.10
Stockholders' Equity 0.07 4 0.28 1 0.07 2 0.14
Debt/Equity 0.07 4 0.28 2 0.14 3 0.21
Quick Ratio 0.07 3 0.21 4 0.28 2 0.14
Reference Works (Journals, etc.) 0.09 1 0.09 2 0.18 4 0.36
College Textbook Market 0.11 3 0.33 4 0.44 2 0.22
Primary School Textbook Market 0.11 4 0.44 3 0.33 2 0.22
Professional Certifications 0.06 1 0.06 2 0.12 4 0.24
Intangible Asset Burden 0.07 1 0.07 3 0.21 2 0.14
Digital Products 0.08 2 0.16 4 0.32 1 0.08
Totals 1.00 2.90 3.00 2.09
Pearson is competing well with rivals McGraw-Hill and John Wiley, but needs to devote increased resources
to MyLab products.

8
 SPACE analysis
FP
Conservative Aggressive
7

5
X = 2.0
4 Y = 1.0

CP IP
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1

-2

-3

-4

-5

-6

-7
Defensive Competitive
SP

Internal Analysis: External Analysis:

Financial Position (FP) Stability Position (SP)
ROE 3 Rate of Inflation -2
Debt/Equity 6 Technological Changes -6
Net Income 4 Governmental Regulations -2
Revenues 6 Competitive Pressure -7
Company Worth 7 Barriers to Entry into Market -4
Financial Position (FP) Average 5.2 Stability Position (SP) Average -4.2

Internal Analysis: External Analysis:

Competitive Position (CP) Industry Position (IP)
Market Share -2 Growth Potential 5
Product Quality -2 Financial Stability 5
Customer Loyalty -2 Ease of Entry into Market 5
Technological know-how -4 Resource Utilization 4
Control over Suppliers and Distributors -3 Profit Potential 4
Competitive Position (CP) Average -2.6 Industry Position (IP) Average 4.6

Pearson is well positioned within the SPACE Matrix. Key strategies to undertake are expanding the Asian
market and developing a better MyLab package for professors.

9
 The Internal External (IE) analysis
The Total IFE Weighted Scores
Strong Average Weak
4.0 to 3.0 2.99 to 2.0 1.99 to 1.0
4.0 I II III

High

3.0 IV V VI

North American Education

The
EFE Financial Times Group
Total Medium
Weighted
Scores
International Education

Professional

2.0 VII VIII IX

Low

1.0

Segment 2012 Total Sales 2012 Operating Profits

(in millions)
North American Education £2,658 £463
International Education 1,568 135
Professional 390 (124)
FT Group 443 41
Total £5,059 £515
Pearson needs to decide what actions to take with its Professional segment, moving forward. The firm needs
to rapidly develop new MyLab and electronic services for its USA market and continue expansion into Asia and
Latin America.
10
 QSPM analysis

Provide
Double
Outstanding
Electronic
Authors a 2%
Offerings by
Royalty Raise
2016
Annually
Strengths Weight AS TAS AS TAS
1. Pearson is one of the largest education companies and the
0.08 3 0.24 4 0.32
largest book publisher in the world.
2. USA accounted for 55% of revenues in 2012. 0.04 0 0.00 0 0.00
3. Student registrations for MyLab grew 11 percent in 2012. 0.04 4 0.16 1 0.04
4. 60% of education sales are from North America, but Pearson
0.04 0 0.00 0 0.00
operates in over 70 countries.
5. Brand names include: Scott Foresman, Prentice Hall, Addison-
Wesley, Allyn and Bacon, among others. Each brand is 0.06 0 0.00 0 0.00
generally tailored to specific field of study.
6. Pearson’s Connection Education in the USA which operates
online K-12 schools served more than 43,000 students in in 2012, 0.04 0 0.00 0 0.00
up 31% from 2011.
7. Revenues in Asia Pacific grew from £514 to £647 million or 25%
0.03 0 0.00 0 0.00
from 2011 to 2012.
8. Revenues in “other countries” (possibly Latin America) grew
0.03 0 0.00 0 0.00
from £339 to £371 million or 9% from 2011 to 2012.
9. Financial Times reported digital subscriptions increasing 18% in
0.03 4 0.12 1 0.03
2012.
10. Pearson’s Research & Innovation Network consists of 5
research centers devoted to market research techniques to 0.04 0 0.00 0 0.00
improve the quality of education for students and teachers.

Weaknesses Weight AS TAS AS TAS

1. Pearson has no clearly stated vision or mission statement. 0.05 0 0.00 0 0.00
2. Penguin group is now classified as held for sale after the loss of
0.05 0 0.00 0 0.00
control from selling 53% of Penguin group to Bertelsmann.
3. Professional division reported a drop in operating profits from
0.05 0 0.00 0 0.00
£55 million in 2011 to an operating loss of £124 million in 2012.
4. Revenues in the USA only grew 3.4% in 2012 while revenues in
0.05 3 0.15 4 0.20
the UK, Europe, Canada all declined slightly.
5. The Financial Times, while popular, only experienced revenue
0.05 3 0.15 1 0.05
increases of 3% in 2012.
6. Total equity for 2012 totaled £5,710 million. However, intangible
assets accounted for £6,218 million leaving for a negative equity 0.07 0 0.00 0 0.00
position after subtracting out intangibles.
7. Inventory turnover is 6.1 and the industry average is close to 10. 0.06 4 0.24 1 0.06
8. ROA of 3.3% to McGraw Hill’s 14.6%. 0.08 4 0.32 3 0.24
9. Asia Pacific only accounted for 12% of 2012 sales. 0.05 0 0.00 0 0.00
10. Late entering the digital ebook and Blackboard type markets. 0.06 4 0.24 2 0.12
TOTALS 4.26 2.74

11
 Provide
Double
Outstanding
Electronic
Authors a 2%
Offerings by
Royalty Raise
2016
Annually
Opportunities Weight AS TAS AS TAS
1. Ebooks are becoming more popular among students and are
renewed more frequently, cutting out the used book market 0.08 4 0.32 1 0.08
substantially.
2. Ebooks remove many production expenses such as shipping,
0.02 4 0.08 1 0.02
paper, binding, etc.
3. Professors and teachers are continually looking for online
0.06 4 0.24 1 0.06
grading and programs to compliment in class instruction.
4. Emerging markets are going more rapidly than the USA and
0.05 0 0.00 0 0.00
Western Europe.
5. There remains a strong desire among teachers and professors to
0.04 1 0.04 4 0.16
continue to use the traditional hard back books.
6. Teachers value up to date materials. 0.05 3 0.15 4 0.20
7. Many students in the USA are on financial aid or receive
scholarships that pay for their books. And k-12 books are 0.05 2 0.10 3 0.15
provided by the tax payers.
8. Digital newspaper circulation as of Summer 2013 comprises
0.02 4 0.08 1 0.02
nearly 20% of all newspapers.
9. Moving forward, there will likely be increased demand for
0.04 1 0.04 4 0.16
dependable information from trusted authors.
10. McGraw Hill’s profits declined from $911 million in 2011 to $437
0.10 0 0.00 0 0.00
million in 2012.

Threats Weight AS TAS AS TAS

1. McGraw-Hill is a large competitor that has cornered the market
0.09 4 0.36 2 0.18
with their Connect Software and alliance with Blackboard.
2. McGraw-Hill is operating much more efficiently on most financial
0.07 3 0.21 2 0.14
ratios.
3. There remains a strong desire among teachers and professors to
0.04 1 0.04 3 0.12
continue to use the traditional hard back books.
4. Paper costs can increase as much as 10% per year. 0.02 3 0.06 1 0.02
5. Increased risk of electronic piracy on ebooks. By some reports,
0.04 0 0.00 0 0.00
ebook piracy increased 50% in 2010 alone.
6. Used book market significantly erodes into profits as many
books are used multiple times with Pearson only generating 0.07 4 0.28 2 0.14
revenues from the initial sale.
7. Print newspaper circulation has been falling rapidly for the last
10 years (although leveling out now) and suffered another slight
0.03 4 0.12 1 0.03
decline from the first 6 months of 2012 to the first 6 months of
2013.
8. Up to 30% of all books are returned to the publisher unsold. 0.03 4 0.12 2 0.06
9. New competitors, possibly even solo authors can emerge more
0.04 4 0.16 2 0.08
easily with the ebook model.
10. Recent laws in the USA allow books not allowed by law to be
initially sold in the USA, to leave port, be purchased at sea
0.06 4 0.24 1 0.06
(often only a few miles offshore) then legally returned to the
USA market for sale at reduced prices.

12
Conclusion
Focusing on expanding MyLab, e-books, and electronic versions of the Financial Times wins out of providing
outstanding authors (based on sales) a 2% raise on royalties each year. The growing need to be electronic is
an overwhelming issue facing Pearson and many in the publishing industry. However, attracting quality
authors is likely to be just as important, moving forward, as quality information will become harder to find as
the quantity of information increases.

Recommendations
 Increase e-book sales by 100% by 2019.
 Increase MyLab sales by 100% by 2019.
 Expand the Financial Times electronic version by 50% in the USA and offer as a part of My Lab to
students taking strategic management courses.
 Double sales of traditional books in Asia and Latin America by 2020.
 Increase authors royalties by 2% annually to attract the best authors and reward outstanding current
authors.
 Spend £200 million to hire top qualified people to develop MyLab content for all Pearson books.
 Begin an annual renewal cycle for all textbooks.
 Offer 3 free months for anyone signing up for a 12 month electronic subscription to the Financial
Times.
 Develop an improved vision and mission statement.

13