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American Public Education, Inc.
Instructor’s Guide
Case Summary
This case provides an interesting “strategic” overview at two points in time of one of the
rising stars in the proprietary [for-profit] collegiate education industry, and particularly
the exclusively-online segment of that industry. American Public Education, Inc.
[APEI]’s forerunner, American Military University, was started in West Virginia in 1991
by retired USMC Major Jim Etter. It enrolled its first students in 1993, formed a second
university [American Public University] to better appeal to civilians [public service like
police, emergency responders, firemen, etc.] in 2002, and consolidated both as APEI
universities and then went public in 2005.
The case is presented in two Parts. Part I gives a basic assessment of APEI by Investor’s
Business Daily in 2009 that also includes a summary of enrollment trends, and overview
of its rather unique business model which emphasizes low costs, convenience, overhead
tied to student enrollment, primarily an active duty military-student focus, and limited
The case also provides financial information on its operations since 2004; with detailed
financials for 2006 through 2010.
Key points
The importance of internal assessment (Chapter 6)
The importance of financial analysis (Chapter 6)
Related Chapters
Chapter 1: Strategic Management, Chapter 2: Company Mission, Chapter 5: Forecasting,
Chapter 7: Long-term Objectives and Strategies, Chapter 8: Business Strategy, Chapter
11: Organizational Structure, and Chapter 14: Innovation and Entrepreneurship
How to use the case
into numerous other similar niche educational area.
This APEI case works quite well as a two-case set with the case on the Apollo Group
(University of Phoenix) and the Adult Education Market. You could spend 2-3 class
regulatory background in discussing APEI.
Conducting Class and Case Discussion
or “how is it different …” in the most recent period [aka Part II].
1. A initial basic set of questions with this approach could start with:
a. “What was unique about APEI as a university offering pre-2009 [Part I]?”
Students should describe its focus on active duty military personnel; its growing focus on
It sought to serve working adults, & their spouses, with a particular focus as noted above.
It was inexpensive; intended to cost exactly what military personnel get as course &
Completely online. Little promotion; relied mostly on word of mouth marketing; it had
minimal Title IV participation, and that was mostly through it civilian APU.
b. “How has that changed at APEI by 2012 [Part II]?” Little …….
Students still majority active duty military; but growth in civilian side; professors still the
same backgrounds and practical emphasis, although more hype about academic profs too;
Still targets working adults with a particular focus on active military and public service
c. What do the financial numbers suggest?
1. AEPI is doing an excellent job on several revenue and cost fronts:
i. Revenues have increased 500% since 2006; doubling since 2008
vs. 38%].
2. AEPI’s only rise of note, selling and promotion, went from 12.2% of 2006
revenue to 17.3% of 2010 revenue, a rise from approx. $5million to $34million.
It represented a 67% increase from 2009, the previous year. They had this to say
about that rise in their AR2010:
“This increase was primarily due to an increase in internet advertising expense targeting
So you need to point out here that AEPI’s efforts to promote the civilian school
resulted based on their concern about the decline in growth from new active duty
Related to this, the case points out that UOP’s 2010 adv/promotion expenditure is
powerful competitor and industry leader!
3. Balance Sheet wise, APEI looks strong
i. Cash position is strong, up 7Xs since 2006; almost 2Xs since 2008;
ii. ARs have only doubled since 2006; well managed apparently
4. How about enrollments in Part I vs. Part II?
A graph from IBD in the case summaries APEI’s impressive growth in the 2003-2008
time frame. And, a key point to make from the case is marketing – they have little and
rely on word of mouth! That can give UOP pause for concern, at least a little bit.
2009 and 2010 show continued enrollment [net course registrations] growth overall,
You might then ask: “How has enrollment growth translated into revenue and
profitability?” These two sets of charts provide you with an easy summary of the same
information in the case’s financials for Part I, 2002-2008; and Part II, 2009 – 2011..
APEI experienced steadily growing revenue and profitability in Part I through 2008, even
Overall, profitability during this Part I, 2002-08 period was very impressive too.
Revenues in Part II, 2009-2010 continued a pattern of impressive growth. $107M to
$198M in this period.
2. The next set of questions primarily focus on Part II, 2009-2011.
“Conducting a strategic analysis on APEI, what would you consider their strengths
to be going forward?”
As was noted in Part I, the number of active duty military personnel has held steady
sectors.
Exclusively Online – Increasingly expert in offering an acceptable online alternative
to traditional class approaches; and that compete with existing online leaders – UOP
….. Three other strengths mentioned in the case as reported by APEI management
make sense and are as follows:
Scalability. Operating fully online, and able to fairly easily add or cut back on
Proprietary IT system. Online education is convenient, but not necessarily
engaging in a timely manner. It is not typically set up to monitor the weekly
behavior/engagement of students, and so forth. APEI’s system has developed more
sophisticated features that make it more interactive, student friendly, student
Commitment to Academic Excellence. APEI makes a clear effort to have
Title IV related thresholds are favorable. AEPI is well below regulatory
thresholds that would mean noncompliance on all these new regulations. Others,
Size? As pointed out earlier, UOP’s 2010 adv/promotion expenditure is almost $1.2
billion, or 6Xs APEI’s total revenue; 24Xs APEI’s PBTax; AND 35Xs APEI’s
selling and promo expenditures the previous year. APEI has a powerful competitor
and industry leader that appears increasingly interested in the military market! UOP
Regulatory dependence. APEI’s future is very dependent upon multifaceted legal,
Overall, APEI seems to be in a good position of strength .. mostly strengths;
