There is a consensus that something needs to change in US business education. Applications for full-time MBAs are in decline, even at the leading schools. No longer can it be claimed that the overall drop in demand for this course over the past five years is because of a flight to quality at the top business schools.
Understanding the reason for the malaise is more difficult. One factor could be that record employment levels and a growing economy have led many potential applicants to decide against taking a career break to study.
What concerns schools most is the decline in overseas applications, down at 48 per cent of all US business masters degree programmes in 2019, according to the Graduate Management Admission Council, the body that administers the GMAT business school admission test. Among those non-US students who did apply to US schools, the percentage who said the US was their first choice of country in which to study fell from 44 per cent to 37 per cent between 2018 and 2019, the GMAC study found.
This decline in interest from overseas students is blamed on restrictions on the H1-B visas needed to work in the US after graduation. Concern also surrounds the anti-immigration rhetoric of President Donald Trump. A group of 50 deans was so upset that they signed a joint letter to the White House, asking for an easing of visa rules. Some schools are trying to find a way around the visa problem by having business masters courses certified as science, technology, engineering and mathematics (Stem) qualifications. Non-US graduates of Stem-certified courses can apply for an additional 24-month stay in the country.
There are some signs this is bearing fruit, according to the GMAC survey, which found 43 per cent of Stem-certified business masters courses had an increase in international applications, compared with 26 per cent of non-Stem programmes. However, given that 53 per cent of Stem-certified courses suffered declines in total applications this year, this approach clearly has its limitations.
Some US schools are taking a more radical approach. The University of Illinois at Urbana-Champaign’s Gies College of Business this year announced it would eliminate both its full-time and part-time MBA programmes to focus resources on its online MBA and specialist masters courses.
Economics is a big factor in such decisions. Applications for the full-time MBA at Gies had fallen by about a quarter since 2016. At $22,000, the school’s online MBA is also by far the cheapest online MBA from a major US university.
Predictions of MBA course closures have swirled around US business school campuses for several years. To date, however, barely any of the best-regarded degrees have been dropped. This is understandable, given the pressures from alumni associations as well as from the management of business schools to keep residential MBAs going. They might account for only a small proportion of the total student population on campus, but they are still seen as the symbol of business school success.
It should also be noted that while the US dominates the Americas market for business education, the picture for MBA applications looks very different to the north.
Canada is a much smaller MBA market than its neighbour, providing 43 masters programmes for the GMAC survey, compared with 804 in the US. But application growth here has been relatively strong, with 26 per cent of schools surveyed by GMAC reporting significant growth in international students. This contributed to a third consecutive year of more schools reporting application growth than decline. The US’s loss is its neighbour’s gain.
The countries of the Asia-Pacific region are home to a variety of MBA traditions, but the common characteristic in recent years has been growth. Now, a desire to remain at home, or at least close to home, can be added to that.
In contrast to the US, where demand has been falling, two out of three Asian schools attracted the same number of applications or more in 2019, according to the Graduate Management Admission Council, the MBA entrance exam administrator. On average, 55 per cent of applicants to Asian schools are from the home country and 90 per cent from the Asia-Pacific region, GMAC figures show.
This tendency affects schools in other regions, which have relied heavily on attracting overseas students. European and Canadian institutions appear to have mitigated this challenge by attracting Asian students, who might have gone to the US but have been put off by anti-immigrant rhetoric.
The evolution of Asian schools, particularly in China, is also likely to influence other parts of the world, with faculty contributing to a broadening body of research on the business landscapes in the region. This is extending to the availability of cases and course materials that focus on Asian companies and consumers.
Some organisations, such as the Association of Asia-Pacific Business Schools, and individual institutions, such as Dalian University of Technology in China, are running workshops for faculty on case writing. They are also providing publication outlets to disseminate Asia-Pacific cases for classroom use.
“Interest in partnerships with Asian business schools from schools in other parts of the world has been strong for some time, with no sign of waning,” says Tom Robinson, president and chief executive of AACSB International, the business school accreditation agency. “Such partnerships can enrich the educational experience for students around the world by bringing opportunities for international exposure and collaboration.”
Growth always comes with opportunities and risk, but these will vary dramatically across about 50 countries in a very diverse region, Robinson adds. This is clear in the GMAC data, which show total applications to Chinese schools were up 5.2 per cent, but international applications rose only 3.9 per cent. Among Indian schools in the GMAC survey, half had more applications this year, but 95 per cent of all applications were from the home market.
Both these markets have seen a rise in nationalist sentiment in the past 12 months. The Chinese government advised students against applying to schools in the US, and Narendra Modi, leader of the Hindu nationalist Bharatiya Janata party, was re-elected as India’s prime minister.
“The big risk continues to be the nationalistic rhetoric and regulatory environments that hinder a free market for talent,” says Robinson. “This could limit students’ ability to obtain the truly global experiences needed for a global business environment.”
The rise of China and India, and students choosing to remain at home, appears to be hitting neighbouring markets in the region as well, notably Australia. Three-quarters of the 24 Australian masters programmes in the GMAC research reported declines in total applications. International applications made up 74 per cent of the total for these courses and 36 per cent of those applicants were from east or south-east Asia.
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