Challenges and Opportunities of a Changing MBA Market

1. Managers at Fuqua Retreat – August 9, 2005 Challenges and Opportunities of a Changing MBA Market Based on the report by Bob Garda, Melanie Kahn, Kevin McCarl May 2, 2005

2. Fuqua daytime applications have also fallen off……Volume appears to be driven by GDP and mean salary trends at the top 22 business schools… MBA Task Force 2005

3. After a run-up in applications to Fuqua in the 1990s, applications from all regions have fallen sharply… MBA Task Force 2005

4. Applications fall from new height after 2002 Top 22 MBA Task Force 2005

5. Worldwide GMATs have fallen off, suggesting declining interest in business school… 233.3 221.2 202.0 198.7 194.6 175.8 168.1 Source: GMAC Profile of GMAT Candidates 1998-99 to 2003-04 …Vocal critics Pfeffer, Mintzberg, Tyson & Andrews, and Bennis & O’Toole have written articles highly critical of the MBA… • “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, 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. Given recent trends, the US MBA market will probably grow slowly……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 year International student growth at zero MBA Task Force 2005

8. Fuqua has seen the largest drop in student selectivity… …Since enrollment has remained relatively constant, the drop in acceptance rate is largely due to the fall-off in 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 yield… Source: Business Week Rankings – the most recent yield data available comes from BusinessWeek’s 2004 rankings. MBA Task Force 2005

10. Summary 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 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. 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 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. From 2000 to 2004, Fuqua lost ground in the BusinessWeek 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 BusinessWeek rankings in 2004 indicates Fuqua has many strengths from which to build… …But needs to shore up perceived weaknesses… * #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 strongly into rankings, the CMC today appears to be pushing Fuqua in the right direction… …Recruiters’ interest in Fuqua is on the rebound since the early 2000s recession lows… 208 164 140 New 116 115 119 Perennial Recruiters Returning Note: *Companies performed at least one recruiting activity on campus (SIP, FY interviews, SY interviews) Source: Fuqua CMC MBA Task Force 2005

17. Initiatives to Consider – 1 (as proposed by Garda 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 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 MBA Task Force 2005