How should universities respond to rising costs, declining demand, and the emergence of cheap alternatives?

The classic strategy case is one in which a firm's external competitive environment shifts, and the firm must decide what to do. This article in the economist documents the rising internal costs of education and the diminished ability of customers to pay.

Many universities' first instinct will be to batten down the hatches and wait for this storm to pass. But the storm is not going to pass. The higher-education industry faces a stark choice: either adapt to a rapidly changing world or face a future of cheeseparing. It is surely better to rethink the career structure of your employees than to see it wither (the proportion of professors at four-year universities who are on track to win tenure fell from 50% in 1997 to 39% ten years later). And it is surely better to reform yourself than to have hostile politicians take you into receivership.