For better or worse, it is evident that competition for rankings currently drives the MBA industry. Universities expend vast resources in the pursuit of being highly ranked or even ranked at all. Rankings drive how students, faculty, and employers perceive the MBA program. In turn, how students, faculty, and employers perceive the MBA program drives rankings. However, rankings do not necessarily equate to the value of the education.
Just because one person went to the Harvard Business School and another went to a small, non-ranked school doesn’t mean the education was less valuable. In fact,
the education. All rankings reveal is what the average GPA and GMAT score is for its students, how many applicants the program turned away, average salary upon graduation for its graduates, how much research is published by the faculty, etc. Nowhere in the rankings is there a category for “quality of the education.” The reason, many argue, is that an MBA has similar “real” intellectual value no matter where it comes from. MBA programs differ, without question. But in the end, many observers suggest that an MBA is an MBA.
Unfortunately for the students who attend a non-ranked school, there is a strong perception that a difference in the quality of the education exists. It is this perception that drives schools to compete as hard as they do for rankings in effort to establish themselves as “value leaders.”
The Top 20 schools in any published ranking generally stay the Top 20, although the order may shift slightly from year-to-year. It is primarily the legacy of these schools that keeps them at the top. In recognition of this relative permanency in the rankings, some publications have even been accused of changing the weighting of their criteria slightly each year simply to create small changes in the rankings that could help sell more magazines.
The static and impenetrable nature of business school rankings therefore leaves little room for newcomers or small schools to make a big splash. Non-ranked programs thus do all kinds of things to set themselves apart from the rest of the pack, especially small programs that do not have access to the vast resources that the larger schools
have. The reason is because, ultimately, whether they are ranked or not, they have to get students in the chairs.
As mentioned above, a few tactics exist to do this. Some have begun to revamp their curriculum, trying to offer more of what students want. Some have reduced “education” in favor of “training” to offer more of what employers want. This is because MBA programs are torn between meeting the desires of the students that want to gain knowledge that will help them throughout their management career and the employers that want MBA graduates to hit the ground running with basic applied business skills appropriate for an early-career position.
Other schools have decided to specialize in a particular profession, creating a niche market inside the broader MBA market. As mentioned, Thunderbird is ranked first among MBA programs offering MBAs in international business and Babson College is ranked second in the field of entrepreneurship. Other schools specialize in medical MBAs or IT MBAs. Still others have decided to seek a regional strategy to create a brand. They seek to be the university for the local students that do not want to travel too far from home or are working professionals that have to work the MBA around their careers. Whatever the case, since breaking into the Top 20 (or even the top 50, in most cases) is virtually impossible, these programs have sought other avenues to set themselves apart.
The other aspect of the MBA industry that stands out is the fact that it is an expensive business. The rising salaries of professors and the rising costs of research are key contributors to the increasing costs. Tuition alone
primary source of funding is donations and endowments from alumni. The schools that are the most successful are those that have been around a while and have long lines of alumni that are willing and able to give back to their alma maters. Even then, the big schools still utilize executive education, consulting services, and research projects to provide additional revenue. New programs or small ones do not have the lineages that may allow them to supplement their revenues in these ways and thus, consequently, they are even more at a disadvantage. These new and small MBA program also pursue additional avenues of funding but also must compete with other small schools for government funding that is diminishing year by year. Raising necessary funds is a problem that all MBA programs must deal with, and it will continue to compound.
To be a player in the MBA industry, a MBA program needs access to adequate revenue sources. Without it, it will be difficult to put together a program that carries any credibility. The next step is to earn accreditation. After that, it is necessary to decide if the program will compete for rankings in the overall MBA industry or if the program will seek out a niche strategy through specialization or a regional focus. Once that decision is made, it is simply a matter of hiring faculty and getting students to apply and come to the program. A program must maintain a long-term mindset. Being competitive in the MBA industry is not a sprint; it is a marathon. A program cannot be Harvard or Dartmouth in a year. It is about paying dues and making a name for the program with quality education and research.
IV. BUYERS
Depending on your perspective, the buyers of graduate management education are either the students, employers, or both. No matter the classification of these two different stakeholder groups, however, an effective industry analysis requires understanding the incentives and leverage of both groups.