Challenges and Opportunities of a Challenges and Opportunities of a Changing MBA MarketChanging MBA Market

Based on the report by Bob Garda, Melanie Kahn, Kevin McCarl

May 2, 2005

Managers at Fuqua Retreat – August 9, 2005

MBA Task Force 2005 2

Fuqua daytime applications have also fallen off…Fuqua daytime applications have also fallen off……Volume appears to be driven by GDP and mean salary…Volume appears to be driven by GDP and mean salary trends at the top 22 business schools… trends at the top 22 business schools…

Fuqua Applications - Model Versus Actual

3,557

2,190 2,149

1,500

2,000

2,500

3,000

3,500

4,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Ap

pli

cati

on

s

Actual

Forecast(1990-2004)

MBA Task Force 2005 3

After a run-up in applications to Fuqua in the 1990s, After a run-up in applications to Fuqua in the 1990s, applications from all regions have fallen sharply…applications from all regions have fallen sharply…

Application TrendsFuqua Applicants by Region of Origin

902 828 7921,003

784 825

192 210 195157

116 116

300210 235

199

126 99

12192 102

106

86 92

1,8361,842

2,064 1,730

1,2741,016

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

Year

Ap

pli

cati

on

s

US

ROW

LatinAmerica

Europe

Asia

Source: Fuqua Admissions Data

3,351

2,386

3,195

3,388

3,182

2,148

MBA Task Force 2005 4

Trends in MBA ApplicationsTop 22 Programs

16.6 16.9 16.2 17.2 16.9 16.8 17.3 17.3

57.259.063.8

82.6 80.2 79.7 93.8

65.0

0.0%

5.3%6.7% 6.5% 9.0% 7.0%

2.5%

7.4%

-

20.0

40.0

60.0

80.0

100.0

120.0

1990 1992 1994 1996 1998 2000 2002 2004

Year

Ap

pli

cati

on

s (0

00's

)

-14%

-10%

-6%

-2%

2%

6%

10%

US

D$

(Tri

llio

ns)

FT Enrollment FT Apps GDP Growth Source: BusinessWeek Rankings

Applications fall from new height after 2002Applications fall from new height after 2002 Top 22Top 22

MBA Task Force 2005 5

Worldwide GMATs have fallen off, suggesting declining Worldwide GMATs have fallen off, suggesting declining interest in business school…interest in business school…

Source: GMAC Profile of GMAT Candidates 1998-99 to 2003-04

GMATs taken by academic yearUS v non-US citizens

98.9 101 106.9124.4 119.2 113.7 112.2

69.2 74.987.7

108.9102

88.3 86.5

0

50

100

150

200

250

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05projected

GM

AT

s (

in 0

00

s)

non-US

US

168.1 175.8194.6

233.3221.2

202.0

……Vocal critics Pfeffer, Mintzberg, Tyson & Andrews, and Bennis & Vocal critics Pfeffer, Mintzberg, Tyson & Andrews, and Bennis & O’Toole have written articles highly critical of the MBA…O’Toole have written articles highly critical of the MBA…

198.7

• “No one should be allowed out of a conventional MBA program without having a skull and crossbones stamped firmly on his or her forehead, over the words ‘Warning: NOT prepared to manage!’” – Mintzberg

• Business schools “stand accused of being too market driven, pandering to the ratings, failing to ask important questions, and…losing claims of professionalization as they "dumb down" the content of courses, inflate grades to keep students happy, and pursue curricular fads.” – Pfeffer

• “By allowing the scientific-research model to drive out all others, busienss schools are institutionaliing their own irrelevance.” – Bennis/O’Toole

MBA Task Force 2005 6

From Forbes, September 5, 2005From Forbes, September 5, 2005

• For the 90 full-time programs that completed a survey, only 3 saw an increase in applications last year (HEC, University of Alabama, and the University of Connecticut) and there was an average decline of 33% between 2002 and last year.

• Schools like Tuck, Kellogg, and Harvard saw better than 30% drops in applications.

• Last year, 42% of applicants were accepted across the schools in the survey.

• Top schools like Harvard are trying different strategies to increase applications. Harvard this year accepted 20 undergrads straight from school compared to 5 the previous year.

MBA Task Force 2005 7

Student Source for US MBA Programs

22.2 23.6 26.4 33.0

71.3 73.578.6

91.0

7.012.1

20.0

9.2

11.3

16.2

16.2

5.3

9.0

9.0

6.7

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

1994

ES

T

1996

1998

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

ES

T

Year

Deg

rees

(00

0s)

Int'l PT

Int'l FT

ForProfit

Domestic PT

Domestic FT

Source: US News Rankings, AACSB, GMAC data, Estimated

108

142

131

169

Given recent trends, the US MBA market will probably grow slowly…Given recent trends, the US MBA market will probably grow slowly……International student growth will probably be hit hardest……International student growth will probably be hit hardest…

Underlying reasons for slow growth in domestic market

• Slowing economic growth• Falling MBA salaries• Poor image of US business• For-Profit siphoning off

part-time students due to cost and convenience

• Negative articles by Pfeffer, Mintzberg, and Tyson

• Price & ROI

Underlying reasons for no international growth

• Growth in number of top-flight international schools

• Popularity of 15-18 month programs

• Price versus int’l MBA• Tighter US work visa

restrictions• Stringent entry restrictions• Heavy marketing by English

speaking international schools

Key assumptions: Domestic student growth at GDP or 3% per yearInternational student growth at zero

MBA Task Force 2005 8

SchoolUS Rank

2006US Rank

2001Enroll 2006

Accept 2006

Enroll 2001

Accept 2001 DEnroll DAccept

Carnegie Mellon 17 19 194 28% 219 31% -11% 3%Indiana 27 20 225 33% 281 35% -20% 2%Yale 15 16 234 26% 216 24% 8% -2%Emory 18 21 177 37% 179 35% -1% -2%Harvard 1 1 893 14% 887 12% 1% -2%Stanford 2 1 377 10% 366 7% 3% -3%Columbia 9 6 598 15% 628 11% -5% -4%Haas 6 10 248 17% 245 12% 1% -5%Stern 13 14 378 22% 418 17% -10% -5%Sloan 4 4 393 21% 357 15% 10% -6%Kellogg 4 5 527 22% 599 16% -12% -6%Wharton 2 3 820 22% 773 13% 6% -9%UCLA 11 11 328 25% 329 14% 0% -11%Chicago 8 6 544 29% 504 18% 8% -11%USC 26 22 269 37% 286 24% -6% -13%Tuck 6 11 252 27% 189 13% 33% -14%Michigan 10 9 439 36% 431 20% 2% -16%Cornell 15 15 272 36% 297 19% -8% -17%Darden 14 11 315 38% 242 19% 30% -19%Kenan-Flagler 21 18 271 47% 261 27% 4% -20%Texas 18 16 353 43% 371 22% -5% -21%Fuqua 11 8 403 38% 332 15% 22% -23%

Mean 387 28% 382 19% 2% -9%

Fuqua has seen the largest drop in student selectivity…Fuqua has seen the largest drop in student selectivity… …Since enrollment has remained relatively constant, the …Since enrollment has remained relatively constant, the drop in acceptance rate is largely due to the fall-off in drop in acceptance rate is largely due to the fall-off in applications…applications…

Source: US News Rankings – please note US News rankings year leads publication by one year (i.e. 2006 rankings were published in April of 2005). Class enrollment estimate comes from dividing total student body size by 2.

MBA Task Force 2005 9

Fuqua has also seen a significant decrease in Fuqua has also seen a significant decrease in yield…yield…

School

BW Rank

2004

BW Rank

2000 DBW Rank Apps 2004

Accept

2004 Yield 2004 Apps 2000

Accept

2000 Yield 2000 DApps DAccept DYield

Michigan 6 6 - 2,068 35% 61% 3,923 21% 53% -47% 14% 8%Tuck 10 16 6 1,695 25% 59% 2,849 14% 52% -41% 11% 7%Harvard 5 3 (2) 7,139 13% 87% 8,124 13% 82% -12% 0% 5%Columbia 8 7 (1) 4,871 15% 71% 5,637 12% 69% -14% 3% 2%Chicago 2 10 8 3,492 23% 60% 3,271 25% 59% 7% -2% 1%Stern 13 13 - 3,403 22% 48% 3,910 22% 50% -13% 0% -2%UCLA 14 12 (2) 2,941 25% 45% 4,564 15% 48% -36% 10% -3%USC 27 24 (3) 1,693 36% 44% 2,485 27% 47% -32% 9% -3%Indiana 18 20 2 1,221 33% 48% 1,818 32% 51% -33% 1% -3%Stanford 4 11 7 4,697 10% 78% 5,431 8% 82% -14% 2% -4%Kellogg 1 2 1 4,299 23% 57% 5,802 18% 61% -26% 5% -4%Wharton 3 1 (2) 5,622 16% 68% 7,428 14% 73% -24% 2% -5%Cornell 7 8 1 1,826 36% 47% 2,305 25% 52% -21% 11% -5%Kenan-Flagler 16 15 (1) 1,500 47% 40% 2,601 22% 46% -42% 25% -6%Emory 20 28 8 1,083 37% 39% 1,144 34% 45% -5% 3% -6%Yale 22 19 (3) 1,998 25% 42% 2,446 17% 48% -18% 8% -6%Sloan 9 4 (5) 2,728 20% 66% 2,859 17% 73% -5% 3% -7%Fuqua 11 5 (6) 2,389 37% 45% 3,439 19% 54% -31% 18% -9%

Haas 17 18 1 2,858 17% 47% 3,109 14% 56% -8% 3% -9%Darden 12 9 (3) 2,110 38% 39% 2,510 19% 52% -16% 19% -13%Carnegie Mellon 15 14 (1) 1,194 28% 45% 1,265 31% 61% -6% -3% -16%Texas 19 17 (2) 1,647 43% 45% 2,753 25% 61% -40% 18% -16%

Mean 2,840 27% 54% 3,622 20% 58% -22% 7% -4%

Source: Business Week Rankings – the most recent yield data available comes from BusinessWeek’s 2004 rankings.

MBA Task Force 2005 10

Summary of Market SituationSummary of Market Situation

• After a run-up in applications to Fuqua in the 1990s, applications from all regions have fallen sharply through 2005.

• Worldwide GMATs have dropped, signaling a declining interest in the MBA.

• Given recent trends, the US MBA market should exhibit slow growth– International student growth will probably be

hit hardest, largely due to many overseas schools considered to be on par with those in the US.

– The one exception in the near term may be increased applications from Asia.

MBA Task Force 2005 11

It may no longer be enough to be very good.

Fuqua may need to be (and be seen as) better than our competitors.

MBA Task Force 2005 12

Competitive SummaryCompetitive Summary

• In US News, Fuqua dropped from #5 to #11 over a 3-year period due to its precipitous drop in relative salary and employment after graduation.

• From 2000 to 2004, Fuqua lost ground in the BusinessWeek rankings due to poor corporate, graduate, and peer rankings.

• Fuqua has seen the most dramatic fall-off in student selectivity

• Fuqua appears to have many strengths from which to build and is currently shoring up its weaknesses

• With employment figures and corporate scores figuring so strongly into rankings, the CMC today appears to be pushing Fuqua in the right direction.

MBA Task Force 2005 13

SchoolUS Rank

2006US Rank

2003 DUS Rank

DPeer Rank

DRecruit Rank

DAccept Rank

DGMAT Rank

DGPA Rank

DSalary Rank

DEmployment Rank

DEmployment +3 Rank

DModel Rank

Haas 6 10 4 (1) 1 - 4 3 3 15 18 7 UCLA 11 15 4 2 - (1) 3 (1) 7 7 3 2 Emory 18 22 4 (1) 1 4 4 11 - 2 (10) 1 Tuck 6 9 3 - (1) (1) 2 2 - (2) 10 1 Harvard 1 2 1 1 - - (1) 1 1 7 (6) 1 Wharton 2 3 1 1 - (1) 2 1 - 7 1 - Kellogg 4 5 1 (2) 3 1 (3) 1 6 7 10 2 Cornell 15 16 1 - 4 1 - (4) (3) (3) (5) - Carnegie Mellon 17 18 1 - 1 7 6 5 (1) (8) 8 3 Sloan 4 4 - (2) - 4 (8) (3) (1) 12 8 (1) Michigan 10 10 - 1 - (2) 1 (1) (3) 6 4 2 Stern 13 13 - 2 (3) 6 2 2 5 9 6 1 Texas 18 18 - (1) 1 - (5) - (3) (7) 4 - Stanford 2 1 (1) - - - (1) (2) (1) (9) 1 (1) Columbia 9 8 (1) (1) (2) - (1) 2 (2) (2) (2) (2) Chicago 8 6 (2) - - 6 (6) 9 1 (3) (5) 2 Yale 15 13 (2) - 4 3 1 (1) (2) (13) (19) (6) Darden 14 10 (4) - 3 (11) (3) (7) (1) (17) (14) (4) Kenan-Flagler 21 17 (4) 2 (4) (7) (4) (2) (1) 7 7 (1) Fuqua 11 6 (5) (1) (2) (7) 4 - (6) (8) (3) (6)

USC 26 20 (6) 3 (4) 3 2 2 - (3) (18) (1) Indiana 27 21 (6) (1) (2) 2 (1) (3) 1 (4) - -

Weight 25% 15% 1% 16% 8% 14% 7% 14%

In In US NewsUS News, Fuqua dropped from #5 to #11 over a 3-year , Fuqua dropped from #5 to #11 over a 3-year period due to its precipitous drop in relative salary and period due to its precipitous drop in relative salary and employment after graduation statistics…employment after graduation statistics…

Source: US News Rankings – please note US News rankings year leads publication by one year (i.e. 2006 rankings were published in April of 2005)

MBA Task Force 2005 14

School

BW Rank

2004

BW Rank

2000 DBW Rank

DCorprate

Rank

DGraduate

Rank

DIntellectual

Rank

Cumulative

Score

Chicago 2 10 8 3 19 (7) 9.2 Emory 20 28 8 7 6 13 7.2 Stanford 4 11 7 5 14 - 8.6 Tuck 10 16 6 6 6 5 5.9 Indiana 18 20 2 2 2 (7) 1.1 Kellogg 1 2 1 (1) (1) (5) (1.4) Cornell 7 8 1 2 - (1) 0.8 Haas 17 18 1 3 1 15 3.3 Michigan 6 6 - 2 (4) (3) (1.2) Stern 13 13 - 1 2 (2) 1.2 Columbia 8 7 (1) (1) 2 2 0.7 Carnegie Mellon 15 14 (1) (1) (6) 11 (2.1) Kenan-Flagler 16 15 (1) (1) (6) 13 (1.9) Wharton 3 1 (2) (4) - 2 (1.6) Harvard 5 3 (2) 1 (7) 6 (2.1) UCLA 14 12 (2) (8) (4) 9 (4.5) Texas 19 17 (2) (5) (1) (6) (3.3) Darden 12 9 (3) (4) (5) (18) (5.9) Yale 22 19 (3) (5) 1 (12) (3.0) USC 27 24 (3) (4) (4) (1) (3.7) Sloan 9 4 (5) (7) 3 - (1.8) Fuqua 11 5 (6) (4) (2) (9) (3.6)

Weight 45% 45% 10%

From 2000 to 2004, Fuqua lost ground in the From 2000 to 2004, Fuqua lost ground in the BusinessWeekBusinessWeek rankings due to poor corporate, graduate, and peer rankings…rankings due to poor corporate, graduate, and peer rankings…

Source: BusinessWeek Rankings – weightings are 45% on corporate, 45% on graduate, 10% on intellectual capital

MBA Task Force 2005 15

An analysis of An analysis of BusinessWeekBusinessWeek rankings in 2004 indicates rankings in 2004 indicates Fuqua has many strengths from which to build…Fuqua has many strengths from which to build…

Category BW Ranking – Top 30

Recent Initiatives

Student quality (i.e. GMAT) 2

Responsiveness of faculty & administration

7

Intellectual capital 10* Dean’s push for publications

Facilities - New buildings

Faculty numbers - Almost 100 faculty

……But needs to shore up perceived weaknesses…But needs to shore up perceived weaknesses…Teaching quality (core) 28 Teaching changes in core

Value of investment 22

Career management center 21-24 CMC management changes

Network and connections 24 New alumni director

International business 23

Selectivity 18

Teaching quality (electives) 15 Teaching changes

Ethics 14

Yield 14 PhD CRM project

* #1 in 2000 BW rankings, highlighted rows are included in the graduate survey

MBA Task Force 2005 16

With employment figures and corporate scores figuring so With employment figures and corporate scores figuring so strongly into rankings, the CMC today appears to be pushing strongly into rankings, the CMC today appears to be pushing Fuqua in the right direction…Fuqua in the right direction…

# Companies Recruiting at Fuqua

91 9474 82 81 90

117

70

42 33 3850

0

30

60

90

120

150

180

210

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Source: Fuqua CMC

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05Total companies with any on-campus recruiting activity* 161 208 164 116 115 119 140New since previous year - 117 70 42 33 38 50Returning since previous year - 91 94 74 82 81 90Lost since previous year - 69 114 90 34 34 29

Note: *Companies performed at least one recruiting activity on campus (SIP, FY interviews, SY interviews)

New

208

164

116 115 119

140

Returning

Perennial Recruiters

……Recruiters’ interest in Fuqua is on the rebound since theRecruiters’ interest in Fuqua is on the rebound since the early 2000s recession lows… early 2000s recession lows…

MBA Task Force 2005 17

Initiatives to Consider – 1 (as proposed by Garda Initiatives to Consider – 1 (as proposed by Garda et al.)et al.)

• Boost marketing effort across all Fuqua programs to increase pool of qualified applicants and to improve yield

• Create an alliance of top business schools to promote the value of the MBA degree

• Focus on the growth sector of the MBA market: EMBA• Develop sector-specific curriculum to address popular

student interests, as Fuqua has done with HSM and as other peer schools have done to varying degrees

• Develop joint programs with top international schools as other top US schools have already done with top-tier international schools

• Launch an accelerated 15-18 month MBA program as many international schools and some top US schools have done

MBA Task Force 2005 18

Initiatives to Consider – 2 (as proposed by Garda Initiatives to Consider – 2 (as proposed by Garda et al.)et al.)

• Raise the academic bar for students and recognize individual achievement

• Improve placement• Enhance integration of international students• Improve faculty research productivity• Use the BOV more effectively