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Modern MBA Market Disrupted By Global Mobility And Technology

The business education market is being disrupted by new technology, as globally mobile students become savvier about their MBA study locations.

Tue Oct 7 2014

The business education market faces disruption from new technology and globalization as the rise of emerging economies has created a legion of globally mobile students who are savvier about their study choices.

As students have become more geographically mobile, and business schools have become more international, the modern MBA market is one of global and career diversity.

Driving the globalization of these schools are applicants from emerging economies who aspire to join the business elite. While local business schools have grown in stature, many young professionals still prefer an education in Europe and the US.

In Asia and Africa in particular, there has been a surge of investment from western business schools looking to tap into this demand. In fast-growth nations such as Kenya and China, there has been a scramble to set-up MBA and executive education centres.

This radical shift in business education is largely the result of the willingness of students to study abroad. Foreign students make up the majority share of most full-time MBA programs – up to 56% of the applicant pool – according to the latest GMAC data. In master of finance courses, foreign students account for 81% of the applicant pool.

Citizens of most Asian regions make up the majority of foreign candidates applying to MBA programs in the US and Canada, according GMAC research, while European programs receive their largest share from East and Southeast Asia.

For these traditional MBA markets, the surge in overseas demand could be seen as a saving grace. Technology has threatened their business models as the rise of distance learning and Moocs – massive online open courses – edges closer to a viable alternative to bricks and mortar education.

For one-year MBA programs which are favoured in Europe in particular, sluggish applicant numbers have dampened growth prospects, contrasting the growth of the US’ two-year courses.

“For schools, the rise over the last three years in two-year applications is welcome,” said Sangeet Chowfla, GMAC CEO.

In July, a report by leading US business school Wharton said that Moocs are a “Trojan Horse” that uses technology that may result in faculty sizes being cut by more than a third, and which has the potential to “destroy” full-time MBA programs. The authors noted that the architecture of business schools may “change fundamentally”, and hinted that Mooc tech poses a threat to business schools.

Western MBA markets are all too aware of this problem and many have made efforts to boost their appeal. Leading schools began by rolling out their own Moocs to funnel potential applicants into their expensive master’s programs, while many more flipped their MBA programs online, enabled by new learning technology.

It is thought that western governments also share concerns about their educational reputations. While the UK tightened visa laws last year, Australia has loosened its immigration policies for international students to attract applicants away from the two titans of business education – America and Britain – while Canada also has favourable immigration policies for MBAs.

“We are fortunate that we are situated in [a] country that welcomes and values international talent... Obviously this is a big factor for many students when deciding to study at RSM,” said Dr Milton Sousa, director of MBA programs at the Netherlands’ Rotterdam School of Management.

Yet in the UK, which is the second most popular destination for MBA applicants, visa curbs have proved damaging. The number of talented new migrants from outside Europe has dropped more than a third since the visa rules came into force, according to data from Oxford University’s Migration Observatory.

Clare Astley, Cass Business School’s MBA professional development manager, said: “It is more challenging for international students since the post study work visa was removed. MBAs are now being treated the same as undergrads, and there is a lack of knowledge among employers about what is involved in sponsoring.”

While revenue from overseas students has buoyed countries that are seen as emerging MBA destinations – including European countries such as the Netherlands and Belgium – the US still lags behind in terms of percentage of overseas students on its MBAs.

This is despite the fact that US attracts the largest share – 11% – of the 4.3 million globally mobile students, according to the Institute of International Education.

This may be due to a lack of hiring opportunities for international graduates. Even when US companies seek to hire overseas students, they can’t control whether they secure a visa because the quota system operates like a “lottery”, according to leading US business schools.

“This quota is exhausted at lightning speed... For this reason employers prefer the easier route – which is to invest in a domestic student who they can easily hire, retain and get a return on their investment,” said Gil Yancey, executive director of the GW School of Business career centre.

Emerging economies face different problems. Business schools in these economies have to compete with the established education markets like France which already have big reputations, while there has also been a shift to shorter, more specialized MBA programs, which have proved popular with globally mobile students.

“It is true that western business schools – particularly those in the USA, Canada, and Western Europe – have become popular for East and Southeast Asian applicants,” said Liansheng Wu, MBA program director at Beijings Guanghua School of Management.

Instead of fighting with them, emerging countries are partnering with western business schools that want to set-up campuses in their countries. Provision of business education delivered in English in China is surging thanks to partnerships between Chinese universities and the UK and US, but the trend is hot across much of Africa too.

In Africa, a period of robust economic growth – the IMF is forecasting 6% in 2014 – and a surge in foreign investment is shadowed by rising poverty and unemployment levels. A new middle class is emerging and there is huge demand for quality business education which has been lacking in the region on any great scale.

“There is huge market potential for business schools… As many international companies open offices, branches or plants in Africa, the demand for business education increases,” said Dr Barbara Drexler, director of Frankfurt School of Finance & Management's central African operations.

Technology is providing one route to capturing this globally mobile pool of business talent. Moocs are reaching the far corners of the globe while serving as marketing platforms for top western business schools – and some also sense that they will be able to charge for them soon.

Though there are fears that tech will steal their thunder, many schools do not yet see Moocs as viable alternatives to taught degree programs.

Régis Faubet, a digital manager at Grenoble Ecole de Management, said: “They are still far from representing a real alternative to traditional postgraduate programs. Moocs are an additional type of learning, rather than one that supplants existing educational frameworks.”

Régis reckons that by offering Mooc subjects which are close to an audience’s interests, they will reinforce Grenoble’s expertise in those areas. He said that they are “close to the perfect content marketing tools for higher education”.

For Grenoble, they moved toward Moocs to reach a more senior, professional audience. “We believe that the future of education lies in projects that mix pedagogical expertise, service and technology,” added Régis.