EPGP 2010-2011

Assignment 2

Term 2

Strategic Management By Prof. D. L. Sunder

Scenario Planning For Management Education Industry

Date: 25/11/2010

By Group 1
Priyank Acharya (001epgp2010) Anupam Banerjee (003epgp2010) Manas Das (010epgp2010) Rupesh Pawar (024epgp2010) Sandeep K (026epgp2010)

Scenario 1: "Indian IT companies realized that the way they could save on cost by hiring
BSC/B.Com professionals in place of engineers and train them; they could as well train their employees in short-term (3 months) MBA programs and stop hiring MBA/E. MBA students. They started doing the same and eventually other sectors joined the band as well. Now, there no longer exists demand for PGP/EPGP students. IIM Indore needs to plan how to handle such scenario." Present Situation Management education institutes currently conduct 2 year Full Time, 1 year Full Time, Fellowship and correspondence courses (CPM) In addition, a several institutes run executive courses like management development programs which are normally of 3 to 5 days The full time courses are well recognized in industries and are the major source of management talent recruitment In general, students passing out from MBA colleges get placed as management trainees in industries with higher salaries as compared to other graduates on average Management development programs are tailor made courses and are generally for competency upgrade for junior and senior level managers Scenario: driving force and certainty Changing business conditions and effects in global economy are driving companies to revisit and improve their cost structures Managerial employees are a major source of Cost-to-company and a considerable overhead cost Under global economic recession started from 2008 and continuing till date, Indian IT companies found an option to manage costs through recruitment of Science and Commerce graduates and training them on computer skills This has lead to significant reduction in fixed costs of IT industry (having high percentage of fixed costs in overall cost structure) and has given them a strong resilience to recession and competitive advantage The Ripple effect of this may as well spread in the managerial talent held by each company The major advantages from the view point of companies include o Retention of existing talent o Reduced effort of induction both in work environment and in culture of the company o Better employee satisfaction due to increased opportunities in career growth

o No need to wait for recruitment cycle (generally done in March/April every year)s The requirements from the companies include o Tailor made Courses suitable to companys working o Short-term duration (3 months) as compared to 1-year or 2-year programs o Better co-ordination with institute on scheduling of the courses

Challenges faced by education industry Effective management of existing resources and classroom capabilities due to decreased lead time and varying batch size Significant level of customization to cater to each industry Hindered ability of participants in pre-class preparations and handling of workload due to shortened time line. Existing programs specially 2 year courses manage the same very well due to available time. Required level of competence designated by companies rather than as per selection done by management institutions Revenue to be earned as compared to revenues earned by existing programs Options a) Increase duration of existing Management Development Programs and customize as needed 1. Advantages i. Least effort involved as it just involves the expansion of existing structure ii. Existing capabilities can be utilized iii. Cater to the requirement with out affecting other courses specially FPM 2. Disadvantages i. Need to retire from other courses as they are no longer demanded by industry ii. Relatively less steady revenue stream as compared to existing full time courses iii. Too much customization may affect core competencies of the institute b) Convert current 1 year post graduate programs for executive into 3 months format 1. Advantages i. Utilize the program in a better way that is already designed for working professionals ii. Reduce selection effort and other admission formalities iii. Specialization may lead to better delivery of course contents iv. Cater to the requirement with out affecting other courses specially FPM 2. Disadvantages

i. Relatively less steady revenue stream as compared to existing full time courses ii. Reduction of 2 different products (MDP & Executive PGP) into one leads to opportunity loss of better coverage iii. Too much customization may affect core competencies of the institute c) Conduct part-time courses at individual locations of companies 1. Advantages i. Elimination of the need to increase in capacity of the institute as the resources utilized are of the company being served ii. Companies can save on their productivity as employees to be trained are available during business hours iii. Course scheduling of this type will not affect schedule of other courses 2. Disadvantages i. Too much transport may create alienation of professors and other teaching staff ii. Possible interference of management of company in delivery of the courses iii. Commoditization of the MBA education

Valuation (FCF or future revenues generated) PGP Duration Batch Size Sessions offered 2 years 250-450 6 terms 72 weeks 1440 sessions 11 lakhs EPGP 1 year 40-60 6 terms 36 weeks 720 sessions 18 lakhs MDP (Old Format) 3-5 days 20-30 15-20 sessions MDP (New Format) 3-6 months Company selected (10-20 expected) 500 sessions

Pricing

1.5 lakhs

10 lakhs (Estimated)*

* - Based on PGPMX course started recently by a leading management institute in Central India

The Chosen One Based on analysis of all options and their respective valuation, the option b) is the most attractive option. It will help MBA institute leverage their expertise in a constructive manner without affecting quality

Strategy for implementation 1. Identify core competencies of the institute and industries to be served 2. Identify competing institutes with dominant skills in the areas of core competencies 3. Focus on MBA courses offered specifically for certain area of the target industry and its demand E.g. one university in Singapore offers 6 months MBA course in telecom industry in an area called Revenue Assurance 4. Position itself in the education industry based on core competencies and brand value 5. Identify and consolidate existing resources and align them towards future goals 6. Free up additional resources including teaching staff and associates 7. Identify opportunity costs of each sector/industry/course area being served (including those with respect to PGP and EPGP) 8. Tailors course contents and the extent of the coverage as per customization needs for each sector being served 9. Determine the appropriate duration of the course as to utilize fully the existing resources without creating overheads or under serving the market 10. Enter into partnerships or alliances with major players in target industries being served

Scenario 2: If the economic growth rate in India remains on a higher side, resulting in a lot of
business opportunities and ultimately requires a lot of people in managerial roles. The demand of MBAs in this case will increase many times of what the current demand is. Since it is expected that the global economies will continue to sustain over next few years, around 8% growth over a period of next 10-12 years is a good possibility for India, thus business schools across India need to plan its expansion strategy in such a manner that they are able to cater to the demand without compromising on the quality of the education provided. Present Situation Currently there are about 2000 business schools in India offering two year MBA programs. All the institutes providing executive management education are part of these 2000 institutes. The students are a mix of fresh graduates without any work experience and people with good work experience. Management education institutes currently conduct 2 year Full Time, 1 year Full Time, Fellowship and correspondence courses In addition, many of these institutes also provide specific Management Development Programs (MDP) for people holding managerial position in their specific domain.

 Considering that the average number of students passing out every year from 1 institute is 200 (this includes 2 year as well as 1 year MBA program), the total number of students getting passed out from management institutes in India is close to 400000 per year. Management education in India is fast undergoing a radical change. Two most important current developments sweeping India are liberalization and globalization. These 2 factors are impacting the management education in India significantly.

Scenario: Optimal use of resources resulting higher return Taking the targets of the national-five-year plans, we have considered that the growth rate of 8% as the compounded annual growth rate of real GDP over the period 2010-20. We believe that this rate is unlikely to be surpassed by a big margin on a sustained basis and likely to be achieved at the same time. With the increase in growth rate of GDP, many new business opportunities are expected to be created and thus many new managerial positions are expected to be available in market over a period of next 10 years. (There may be many more requirements of managers in future beyond 10 years, however we have only considered next 10 years for our scenario planning, since we are considering next 10 years analysis for our scenario planning). With the increasing demand of managers, premier institutes like IIMs will be at more pressure of their expansion, since IIMs will have to expand (as well as change according to the market demand) without compromising on to the quality of education which they have been providing since last so many years. Challenges faced by education industry The biggest challenge in front of management institutes will be to expand. If some small institutes are not able to expand, many new management institutes are expected to come up in market to cater to the increasing demand. Institutes which are able to expand will have to make sure that they do not compromise on to the level of education which they have been providing over a period of time. Especially premier institutes like IIMs will have a greater responsibility to make sure that they maintain their benchmark set in the industry. Effective management of existing resources and classroom capabilities due to decreased lead time and increased batch size is going to be another of challenges. Options: a) Plan for the expansion of management institute(s) well in advance. 1 Advantages i. Management institutes will be able to meet the market demand.

ii. A planned program well before the expansion, will give sufficient time to management institutes for smooth and effective execution of expansion process. iii. Planning will help in identifying the requirements in a better way. 2 Disadvantages i. Planning is likely to be a failure if the GDP does not grow at the expected growth rate of 8% over next 10 years. ii. Quality of education is at stack, since the number of entrants is expected to be more. iii. Too much expansion may affect core competencies of the institute. b) Devise a plan to maintain the level of quality of education. 1 Advantages i. Plan the expansion in such a way that the resources are not less for the increased pool of students and more importantly these resources are utilized by the students/participants. ii. Maintain a pool of excellent faculty. iii. Make ties with different management institutes to get maximum benefit out of visiting faculty. 2 Disadvantages i. Some increased cost is expected to be involved with this activity. ii. A risk involved with this plan is that high level of devotion and efforts will be required for implementation of this plan.

The Chosen One and implementation Based on analysis of all options we find that we would need to implement both the options as both the options are complementary to each other and they go hand in hand. References:
http://en.wikipedia.org/ http://www.economywatch.com/ http://www.businessweek.com/ http://edition.cnn.com/ http://www.hindu.com/

Scenario 3: 1 year full time MBA (10 months to 16 months) can probably be the next buzz
word in management studies, with higher rate of return for the management institutes and effectively lower cost for the participants to pursue the course as compared to two-year full time MBA. The course offers the highest and optimum utilization of time and makes the most of it. Also it has rich and relevant industrial experience pool in its bucket in the form of participants. The scenario of 1 year full time MBA course substituting the two-year one in terms of demand is a probability. Present Situation The 1 year full time MBA is the newbie in the management education, across the globe as well as in India. Currently a handful of institutes are offering 1 year full time MBA program in India. Except only one premier institute in India, other premier institutes still have two year program as their flagship program. Pertaining to job placement, the market sentiments are still unclear i.e. MBA education industry seems to be still fuzzy about the demand of 1 year full time MBA graduates though directions are somewhat inclined towards adoption of the 1 year model.

Scenario: Driving forces and certainty The USP of the 1 year full time MBA is the better and more intense utilization of the tenure towards securing an MBA degree Participants have an opportunity to convert their work experiences into management education hours, thus enabling them obtain MBA degree at a shortened time frame The 1 year program comes with on an average less opportunity cost from the perspective of the participants The 1 year course facilitates minimum career interruptions and less discontinuity from the industry. The participants as well as the industry might be interested in the same The Course being highly customized for leadership building, companies start taking interest in the same The fees are higher where as the duration is shorter, hence higher rate of return can serve as an incentive for the institutions Planning the availability of the quality faculties and engaging these highly significant scarce resources in a properly predicted and scheduled manner become assuredly achievable for the institutions for a shorter course Challenges faced by education industry

 Initial conflict with present flagship program, may result into directionless effort Taking the first step against conscious parallelism. Coming out of inertia is a challenge Options: a) Survey the exact expectations from the industry as well as participants and fine tune the 1 year full time program. a. Advantages i. Will be able to readily meet the increasing demand. ii. Will be among the fast movers in catering to the need of shortened MBA degree. iii. Delivering education dovetailed to the industry requirement b. Disadvantages i. The effort of design and implementation becomes sunk in case the 1 year program cannot create the anticipated demand ii. The balancing of the scarce resources may go against the present flagship program iii. Being focused and condensed, participants may miss few tertiary managerial concepts

The Chosen One and implementation The option before the institutes for the scenario has been stated above. Reference:
http://www.kellogg.northwestern.edu/ http://www.gsb.stanford.edu http://www.isb.edu The Economic times, 25th October edition, article One-year MBAs, the way to go by RT
Krishnan & J Ramachandran

http://www.wikipedia.org http://www.topmba.com

Scenario 4: With the advent of the availability of global management study offered by the
premier institutes as the likes of Harvard, Stanford in India, the supremacy of the top B-Schools of India is likely to face a fierce competition.

Present Situation The present scenario of management education with respect to the types of institutes operating in the country is outlined below: 1. Premier institutions setup by the Government of India: This group includes reputed Institutes of national prominence like IIMs. This group of institutions has maintained the high quality in their teaching and research of management education. 2. Departments of Management studies of different Universities: This group includes departments of universities that are dedicated to management studies and research. E.g. FMS Delhi. 3. Colleges affiliated to the recognized universities: This includes numerous colleges offering bachelors and masters programs in business management. Typically these colleges do not have a management research facility. The quality of education imparted at such colleges can at best be rated as average. 4. Autonomous business schools: This group includes institutes that are started by industrial houses, private institutes and state level educational institutes. MICA, SPJIMR, JBIMS, Symbiosis and so on, which offer quality management education at par with these reputed institutes. 5. Distance learning institutes: This groups includes a set of institutions that target working professionals and entrepreneurs by providing management education through correspondence, distance and part-time. From the set of institutions described above, currently we do not have any institution that is completely non Indian. Scenario: driving force and certainty The most important driving force for this scenario is the passing of Foreign Educational Institutions (Regulation of Entry and Operations, Maintenance of Quality and Prevention of Commercialization) legislation by the cabinet on March 15 2010and is now tabled before the Parliament. The bill has a very high change of being approved by the parliament as it is focused not only on FDI in education but also on social aspects surrounding it i.e. regulating the entry, operation and maintenance of foreign education providers in India. This will ensure that institutions do not come to India for monetary benefits only. Due to the huge demand for quality management education in India and the cost involved, the first industry segment that would attract this FDI would be business education.

Challenges faced by Indian business education industry

 Foreign universities such as Harvard, Wharton, and Yale etc. have a long history in the field of management education and using this experience they will be able to provide high quality education and teaching faculty to prospective students. Many foreign Universities have large endowments which they can use to lure the academia from the existing top b-schools. Some foreign universities have a globally established brand name and this will help them to attract the best talent. Options a) Customize course content for Indian students and Indian scenario 1. Advantages i. This will act as differentiating factor for Indian institutes and will help them to leverage the knowledge they have acquired as they have been in the system for a long time. 2. Disadvantages i. Students might not get a holistic view vis-a-vis what they could have acquired with a global curriculum 3. Valuation b) Develop a low cost business education model 1. Advantages: i. This will enable Indian institutes to be more affordable to all sections of the society and thus draw more aspirants 2. Disadvantages: i. With more financial options being available to students they are in a position to afford expensive programs also. 3. Valuation c) Develop stronger ties with corporate and customize programs for large Indian corporate 1. Advantages: i. This will enable Indian institutes to create a steady income source which can be used to discount the rates of other programs offered by the institute. ii. This will help the institutes develop a stronger rapport with the industry and thus help their students to leverage on learning from the industry. iii. Industry interfacing will enable institutes to update the syllabus of their academic programs as per the latest breakthroughs in the industry. 2. Disadvantages: i. Too much focus on corporate might dilute the academic focus of the institution.

References 1. IIM Indore Official Website http://iimidr.ac.in