PreARE: A Strategic Analysis
Ricardo Baca Mares
The PreARE Program was created to rehabilitate an architecture industry that has been deteriorating in both stature and credibility for the past few decades. Since 1990, a handful, percentage-wise, of architecture graduates have taken and passed the Architecture Registration
Exam (ARE), and sadly enough, even a smaller number of all architecture graduates do not even attempt a single section of the ARE.
What is the objective or goal of every academic institution that offers a degree in architecture? This is a question that I have been wondering since I graduated with a Masters in
Architecture back in 1999. I, much like any other architecture graduate, receive countless mailouts from my alma mater asking me for my new address and my new employer. Some even ask me if I am married and do I have kids, but never once have I been asked how I am doing in my licensure process. Shouldn’t the College of Architecture be held accountable for students who never become licensed in the degree they spent five years pursuing and not-to-mention getting in debt with? Students study law to become lawyers much like students study medicine to become doctors. Shouldn’t students study architecture to become architects? Without taking and passing the ARE, a student can never call themselves an architect. If architects want the respect from the community that they once enjoyed with doctors and lawyers, changes need to be made.
In sad consequence of such fact, we are now faced with an industry filled with thirty, forty and fifty year-old interns making between $45,000 and $65,000* a year for the rest of their life, while their licensed colleagues who have the same or even less experience than them are making a heftier salary and having the invaluable opportunity of starting their own firm. Derivative of such debilitating statistics is that qualified, talented professionals are being forced to leave the industry in its entirety in order to make a comfortable way of living somewhere else. Many go work for contractors or consultants but almost all of them will tell you the same thing: that they would have stayed at an architecture firm if the pay was better and had they become licensed.
That is where this program comes in. Architecture students are notorious for procrastinating and pushing back deadlines. Sadly enough, I speak from experience. Which is what makes the entire process that much harder for candidates. Currently, you have three major hurdles in order to become an architect:
Architecture Degree
Every candidate has to earn an architecture degree from an accredited institution. That is the easiest of all hurdles, and every student is in control of that element. Assuming you earn such a degree, you move on to the second hurdle.
Internship
While seemingly insurmountable, this three-year obstacle (minimum of 5,600 hours) is accomplished by the majority of candidates. Every candidate has a different path but almost every candidate seems to get the needed experience at a firm to satisfy the internship requirement in due time. If your firm is not offering the opportunity to satisfy the necessary internship requirements,
* Based on averages from West South region from the 2013 AIA Compensation Report copyright Hanley Wood LLC.
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it is simply time to move on to an employer that will. Once again, every student can control this element as well.
Architect Registration Exam (ARE)
Which leaves us with the final hurdle, passing the ARE. Years ago, every candidate had to wait until they finished the internship process before they became eligible to take the ARE. That requirement has since been reduced to six months after graduation and supervised experience. In my opinion, it is still six months too long. It is incredibly difficult to engage the mindset of that of a student for five years and then graduate and depart from such mindset for a minimum of six months and then retract to the student mindset and take the ARE. To add insult to injury, they give architecture students who are addicted to procrastination, that availability to take the ARE anytime they want after six months. Obviously, I cannot tell you how many times students postpone the exam every month and only fall further and further behind. Ever think the testing agencies are making a fortune on the cancellation fees alone?
So what happens? Life happens. In time, candidates get married, have kids, have responsibilities and financial obligations and no longer have the availability to sit down like a college kid and take the exam. Sad thing is that now they are in a tough predicament professionally because they are stuck with a degree that will never fulfill its potential.
PreARE Program
This program is created to put an end to this predicament and reverse the order of hurdles.
Doesn’t it make sense for candidates to prepare and study for the ARE while they are still in the student mindset? Of course it does. Our PreARE program is an intensive five-month course straight out of graduation that will prepare every candidate to take the ARE in its entirety in one week. No more of the “take a section here and take a section there” futility. All candidates in our program will sit for the ARE on the same week in a three-day span in December or June of each year and take the entire exam. No room for procrastination in our program. We require the discipline that every candidate needs to take this program seriously. You will take and pass the entire ARE six months after your graduation.
Further, since our PreARE program is offered every weekend for five months, excluding holidays, this will not take any time from your post-graduate employment. Employers will be happy to know that they control your supervised internship and that their new intern hires are on the ARE passage track.
The PreARE mission is simple:
To give all students who graduate from an accredited program the best opportunity to take and pass the ARE and allow them to maximize their hard-earned and costly degree to its fullest potential. The PreARE program will take you on the quickest path to success.

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Rivalry
While many different competitors are continuously evolving, the issue in this industry is not that of rivalry but rather of the lack of rivalry. There is only one major heavyweight in the field that is not only dominating the industry but slowly working towards a monopoly. While customers can freely switch from competitor to competitor, the largest competitor, Kaplan, has saturated the market due in large part to its 75 years of success in the education field and never ending marketing budgets.
Despite this major giant as a competitor, it is important to point out that while Kaplan has secured over 50% of the pool of customers in this arena, over 40% of the potential client base remains untapped. What that means is that while Kaplan may be hands down the stronger force in this industry, a lot of the potential customers don’t seem incredible sold or impressed by what
Kaplan is offering. Why is this?
Kaplan can come across as too large, too commercial, too expensive and too much of a sales pitch. The potential customers, architecture graduates, are a much different breed of customers than that of law students or accounting students of which Kaplan also successfully tailors to. Architecture graduates demand more on a personal touch and one on one instruction.
Understanding the market and the needs of the customers is something that Kaplan or other smaller competitors are severely missing the mark on.
Threat of New Entrants
The threat of new entrants is a viable one. The difficulty will not be so much on the entry into the industry as much as what they are going to do once they are in. Only so many potential customers are out there and the retaining of clients will be based on the success of the programs they are offering. Any new entrants will have steep uphill battle to prove their legitimacy in the industry. They would need several years of success before attaining any respect of the client base.
Threat of substitutes
The threat of substitutes is a possibility. No one is reinventing the wheel here. It’s about setting up the best program, with the best faculty and resources that will in turn produce the best results.
Customers will move on to another substitute is results are the same and the cost is cheaper.
However, once you are in a particular market, it will make it difficult for a competitor to infiltrate the same pool of candidates.
Bargaining Power of Buyers
There are only so many customers out there for this industry. However, with every graduation class, another round of potential customers are created. This will continue every single year and while the demand will be predictable and static, it will also continue every year with no worry of deflation of demand. Therefore with healthy demand, a healthy supply will also be necessary. Buyers will not typically shop around for better prices in this industry. They will select the most reliable and efficient program that will give them the results they want as quickly as possible. Considering that only 15% of the potential client base is sitting for this examination means that graduates are seeing this process as an overly cumbersome one and have not found a test prep program of which they feel it is worth their time and money.
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Bargaining Power of Suppliers
This concern is reasonable low. The suppliers consist of the faculty and the production of materials. A lot of the marketing and advertising of these programs is the faculty that has been selected to teach these courses as well as the quality of the materials. Both of which are easily found in the industry. There is no shortage of qualified faculty that can teach these courses.
PreARE Strategy and Competitive Positioning
PreARE has created a program that focuses and is tailored to the individual architecture students for their admittance into the college of architecture, continuing through all 5 years of college up to graduation, and finally through the calendar year following graduation. Creating this
“Family – We are all in on it together” relationship upon their entrance into the architecture program will establish the relationship early on and before our competitors can try to market or advertise to them. By holding their hand through the entire academic and licensure process and offering a dynamic team of faculty, financial backing institutions as well integrating the colleges of architecture, all candidates will be on their path to being licensed as an Architect. Other competitors focus on the examination, PreARE focuses on the relationship with the student.
Internal Analysis
PreARE’s Value Chain consists of Early Research and Development, Integrated Sales and Marketing, Late research/Pre-service, Production, Service, and Follow-up. All six of these primary factors work in conjunction with each other to create the “family” and continuous ongoing relationship that will create the loyalty we need with the candidates.
Early Research and Development (ER&D), is the first integral factor in the value chain.
This phase focuses on two major elements:
1)
Research who are potential candidates and where they are located. PreARE will focus on one state at a time. Taking Texas as the example, the ER&D team will research the number of students in each college, how many potential graduates they have on a yearly basis, how many students they average entering the program every year, how many graduates from each college in
Texas are currently sitting for the exam and how many of those students are passing the exam.
2)
Developing the program for each state. This will include interviewing and contracting the best qualified professors for each section of the examination. Considering that there are 7 sections in the ARE, PreARE will need to find the seven best faculty for each area that in turn will be the most cost efficient for the company. Additional, in this phase, PreARE will need to establish the necessary third party relationships to make the program successful. Relationships will need to be created with Deans of Colleges, Presidents of local chapters, financial bankers, etc. A collaborative effort between students, graduates, alumni, professors, Deans, sponsors from other architecture fields (contractors, engineers, etc.) will be crucial.
Once the relationships have been established, Integrated Sales and Marketing (IS&M) will consist on marketing in those specific arenas. Considering that our company strategy will be to solicit our services to entering students of architecture programs, our sales and marketing will be steered directly to that genre. Other than the occasional global marketing promotion, all the

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marketing and advertising efforts will be earmarked to the schools and architect chapters and organizations. In the first two phases, candidates have been informed about the program and signed up for the PreARE program for a minimal deposit. In the Late Research/Pre-Service phase, PreARE will now look at every candidate on a one to one basis. PreARE will train representatives that will be selected for each college of architecture. Such representative will be in charge of creating big brother – little brother relationships that will include coaching and instruction on each candidate staying on track toward licensure. PreARE will look at every candidate’s personal file and see exactly where they stand on the PreARE licensure track. Have they started the internship hours necessary to be eligible for the exam? If so, how many hours do they have, are they documenting such hours properly and have they initiated the proper filings with the governing boards to submit such hours? Have they applied to take the exam and submitted all the necessary background documentation to be eligible? Have they secured the necessary funding to be able to not only pay for the exam, pay for the PreARE program but also enough to pay the cost of living expenses while preparing and taking the ARE? These are all very important and integral steps to make sure that all candidates are on track to sit for and pass the ARE on the first try. Once you are signed up with
PreARE, as soon as freshman orientation, you will forever be a part of the PreARE Family.
The Production component is probably the most straightforward of all the phases. In this phase, the lectures, manuals, online courses and any other learning tool that will need to be created for the program is made. This phase will primarily include the integration of materials and previously prepared course outlines from the now retained faculty. Additionally in this phase, the classrooms for the lectures will need to be selected and scheduled with accordingly. Again using
Texas as an example, we are looking at teaching each course simultaneously in all the greater metro areas in Texas (El Paso, Lubbock, Dallas, San Antonio, Austin and Houston) with having one live speaker in one of the venues and live digital feeds at the other locations.
The next phase consists of the Service component. As mentioned in the Production section, the courses will be taught on campus of one of the universities in each of the greater metro areas in Texas (i.e. Texas Tech College of Architecture in Lubbock or Rice University in Houston).
Each class of approximately 30-40 candidates will attend weekend courses every weekend for Five
(5) months straight. Upon completion of the Five (5) month program, PreARE will coordinate with the Texas Board of Architectural Examiners to enable all candidates to sit for the entire exam during the same 3 day span (identical to how the BAR exam is currently conducted in the legal field). The program will leave no room for procrastination. The candidates will sit for the entire exam on the week following the program.
The final factor will be the Follow-Up phase. In this phase, PreARE will monitor the passage rate of each candidate and will facilitate additional tutoring classes to help each respective candidate retake and pass the sections of the exam they may have failed. Additionally, PreARE will continue to monitor the progression of each PreARE alumni to make sure they are continuing with their internship and completing the final steps necessary for licensure.

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Competitive Advantage
When looking at a competitors’ possible value chain, it is easy to see not only where
PreARE will likely prevail but also what limitations it has and will have. Other competitors will likely focus on the following primary factors in their value chain:
1)
2)
3)
4)

Strategy and Planning
Sales and Marketing
Development
Management

They will first look at potential markets in each area followed with an incredible aggressive marketing and advertising campaign. Kaplan, for example, will promote their 75 years of innovative success and cast themselves as the leader and pioneer of the test prep industry. Students will surely be lured in by the commercials, slogans and never-ending marketing incentives.
PreARE’s strategic model is anchored in most part on the relationships it hopes to foster not only with the students but also with the academic institutions and third parties like the local architect chapters and student loan institutions. This strategy is not protected and can be easily imitated. Additionally, the pool of potential customers is capped and that will leave the same competitors vying for the same customers. Though never attempted before, it wouldn’t be long after PreARE enters the market at a collegiate level, that competitors like Kaplan will be quick to follow (if they so desire to).
Sustainability and Threats
Imitation: As mentioned above, imitation by competitors and newcomers is likely but not certain.
There is nothing protected under law or contract and there will be no impediment that keeps other competitors in entering the collegiate recruitment level. PreARE’s value chain, however, does incorporate different features and opportunities that other competitors may decide not to invest the time and or money on. PreARE is seeking to be the leading and innovation program to revitalize a career path that has been spiraling downhill for decades. The possibility of raising the bar and allowing more architecture graduates to sit for the exam will not only improve recruitment to colleges with higher passage rates but also revamp salary and compensation models for all newly licensed architects and PreARE Alumni. While PreARE sees this not only as an economic opportunity, it also appreciates the benefits this program will bring to the students as well as to the architecture industry as a whole. This is a relationship of trust and loyalty that is being built between each student and PreARE. Other competitors, such as Kaplan, are so diversified in the test prep industry that it will not want or care to foster relationships. They only care about the text prep program after college and is indifferent if the student passes or not. Additionally, they will never put in the time and effort to make sure each respective student has all the qualifications completed that he or she would need in order to be eligible to sit for the exam.
Substitution: This is limited in that this model is the first of its kind and incorporates client pools that are not on the radar right now for competitors. Again, once PreARE goes public and competitors realize that graduates are no longer signing up or buying their programs, the substitution issue becomes a hurdle.

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Hold- Up: Is a possibility for several reasons. Currently, there are third parties that govern the licensing process. The National Council of Architecture Registration Boards (NCARB) is the national organization that governs and maintains each student’s file and determines when a student is eligible to sit for the exam. NCARB has been known to create many unnecessary delays and this in turn might create issues when trying to make 200-300 students eligible to sit for the exam in one week. Once NCARB has given the greenlight to the student, they contact the next entity which is the state regulation board for each respective state, and informs the state board that the student is eligible per NCARB’s standards to sit for the exam. This still does not get you where you need to be because each state has their own list of requirements before giving each student the final approval to sit for the exam. In Texas, the Texas Board of Architectural Examiners (TBAE) is the final say on when candidates are ready to sit for the exam. This board consists of a very small office and everything is done in an incredibly slow rate. Again, getting this governmental entity prepared to approve 200-300 applications in one week might be a daunting task.
Recommendations
My analysis suggests that PreARE should prove to be a successful venture and we should embark on this venture with the strategic model herein discussed. PreARE, however, needs to be ready to adapt quickly should its competitors decide to imitate such model. Relationships desperately need to be cultivated at all levels of the value chain. In order to maintain a competitive advantage, PreARE must continuously keep improving its business model. While relationships will foster the growth of PreARE, only the proven results of ARE Passage rates will sustain such growth. If PreARE does not invest in the right faculty and teaching materials and the candidates fail any or all sections of the ARE, then it won’t matter what relationships they have created.
Lastly, considering that the competitors currently saturate most of the test prep industry, it will be imperative for PreARE to resist urges of expanding to other fields. PreARE, to be successful, must stay committed and loyal to the architecture field if PreARE has any hope of having the architecture field be loyal to them.

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Exhibit 1 – Worksheet

WORKSHEET ON INDUSTRY PROFITABILITY
(from the perspective of a large incumbent firm)

I. Barriers to Entry and/or Mobility
Yes
(Profitable)
Do large firms have a cost or performance advantage in your segment of the industry? Do costs decline significantly with volume? (called scale economies.)

No
(Unprofitable)

X

Are there any proprietary product differences in your industry?
For example, are products protected by patents?

X

Are there established brand identities in your industry?
X
Do your customers incur any significant costs in switching suppliers? X

Is a lot of capital needed to enter your industry?
X
Is serviceable used equipment unavailable/expensive?
X
Would a newcomer to your industry face difficulty in accessing distribution channels?

X

Would a newcomer face difficulty obtaining the necessary skilled people, materials or suppliers?
Does experience (not volume) help you to continuously lower costs? Experience effects mean incumbent firms have figured out how to do it better and cheaper; and it would be difficult for less experienced firm to gain this knowledge without going through the same process. (i.e., The experience advantage is path dependent.)

X
X

Is the industry growing slowly?
X
Are there accepted product standards or specifications? Is there is an industry standard setting or certification body?

X

Are there any licenses, insurance, or qualifications that are difficult to obtain?

X

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Exhibit 1 –Worksheet

There is no obvious point of entry. Potentially viable strategies have either been attempted by, or are currently being executed by incumbent firms.

X

II. Bargaining Power of Buyers:
(to what extent are your customers locked into you)
Yes

No

(profitable)

(Unprofitable)

Is there a large number of buyers/customers relative to the number of firms in the business? Do you have a large number of customers, each with relatively small purchases?

X

Your product is a small part of the cost but critically affects the value of your customers’ end product.

X

Does the customer face any significant costs in switching suppliers? X

Does the buyer need a lot of important (technical) information to inform their purchasing decision?

X

Is there anything that prevents customers from taking your function in-house? (i.e. backward integration)

X

Are customers relatively insensitive to price?
X
Products in this industry are unique, or there are accepted brands? X

My customers’ businesses are profitable?
X

III.

Threat of substitutes:
(some other product or service which performs the same job as yours)
Yes
(profitable)

Substitutes have performance limitations which do not completely offset their lower price, or their performance advantage is not justified by their higher price.

No
(Unprofitable)

X

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Exhibit 1 –Worksheet
My customer will incur costs or critical uncertainties in switching to a substitute.

X

My customer has no real substitute.
X

IV.

Bargaining power of suppliers:
Yes
(profitable)

My inputs (materials, labour, supplies, services, etc) are commodities, rather than unique or differentiated.

No
(Unprofitable)

X

The quality of inputs is not critical to my finished product.
X
I can switch between suppliers quickly and cheaply.
X
My suppliers would find it difficult to enter my business, or would find it difficult to perform my function in-house. (i.e. forward integration) X

I can substitute inputs readily.
X
I have many potential suppliers.
X
My business is important to my suppliers.
X
My cost of purchases does not have a significant influence on my overall costs.

V.

X

Determinants of rivalry among existing competitors
Yes

No

(profitable)

(Unprofitable)

My industry is growing rapidly.
X
There are few incumbent competitors.
X

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Exhibit 1 –Worksheet
My competitors are all of approximately the same size as me.
X
The industry is not cyclical with intermittent over-capacity.
X
The fixed costs of the business are a relatively low portion of total costs. X

There are significant product differences and brand identities between the competitors.
My manufacturing or distribution processes have unique or proprietary features that give me lower costs or a higher value product? X
X

My competitors are diversified rather than specialized.
X
It would not be hard to get out of this business because there are no specialized skills and facilities or long term contract commitments, etc.

X

My customers would incur significant costs in switching to a competitor. My product is complex and non-standardized. It requires a detailed understanding on the part of my customer.

X
X

Overall industry rating:
Profitable
(yes)

Moderate

Unprofitable
(no)

Barriers to entry/mobility.
X
Bargaining power of buyers.
X
Threat of substitutes.
X
Bargaining power of suppliers.
X
Rivalry among competitors.
X

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Exhibit 2 –PreARE Value Chain

VALUE CHAIN – PreARE
SUPPORTING FACTORS

Business Development
HR Management
Administration (legal, finance etc.)
IT Support and Infrastructure

PRIMARY FACTORS

Early
Research and
Development
- Research
Market
- Develop relationships with Deans of colleges -

Sales/
Marketing
- Advertise at colleges
- Advertise to firms
- Advertise to local organizati on

Late
Research
Pre-Service
- Research individual licensure stage - Help candidates sign up and be eligible to sit for the
ARE

Production

Service

Followup

- Create study manuals for courses

- Weekend courses - Online courses - Exam week - Monitor retakes - Monitor
Intern
status

- Create online framework and courses

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Exhibit 3 – Chart Comparison between Law School Graduates and Architecture Graduates

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Exhibit 4 – Salary Comparison of Interns and Architects

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Exhibit 5 – Industry Rivalry Chart

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