Emerging countries: a land of opportunity or a long term threat to Western business schools?

By Professor Hamid Bouchikhi, ESSEC Business School

Western business schools have seen the development of an affluent segment of the population in emerging countries as a golden opportunity. Virtually, all are actively hunting for well-off candidates in Asia, Russia, and South America. Many are localizing programs in this part of the world, either alone or jointly with local players. Fewer have gone as far as to open campuses in emerging countries. While different schools have adopted different strategies, all are targeting individual candidates or corporate clients who can afford Western level fees and are ignoring the ‘low end’ of the market. To a few exceptions, Africa, the continent with the fastest growing population, is nowhere on their radar.

One could think of B-Schools’ current approach to emerging countries as sensible market segmentation. This may be true but only in the short run. Neglecting the low end of the market may actually be a threat, in the long term, to Western business schools. Why?

Recent economic history has taught us repeatedly that new players always enter a market through the low end but never stop there. As low cost, low quality, low price players gain experience and build brands, they inevitably target higher end market segments. Before long, they are able to challenge incumbents sitting at the top of the pyramid. According to Clayton Christensen, this process is at the core of disruptive innovation.

Fast growing medical tourism is here to show us that established Western B-Schools should not underestimate potential threats from emerging countries to their high cost business model. Patients are now traveling to Thailand, India, Hungary, Tunisia or Morocco where they receive world class treatment for a fraction of the cost in their home countries. If people are entrusting medical professionals in emerging countries with their bodies and lives, what would prevent local and foreign business education seekers from going to alternative providers in these countries when the latters will have a viable value proposition and will be able to deliver good instruction, on campus or online, for a fraction of the cost?

Business education entrepreneurs in emerging countries are already setting up shops at an amazing pace and deploying low cost business models fit for the needs and means of individuals and organizations who cannot afford standard Western tuition levels. In India alone, the total number of management schools doubled to 2,385 between 2008 and 2012, while total student intake rose from around 100,000 to 300,000[1].

Business education entrepreneurs in emerging countries do not have to invest in research since the teachable portion of knowledge is publicly available. They do not have to invest in course design either as course syllabi from leading business schools are also publicly available. With the growth of free MOOCs, they do not need to employ expensive faculty for course delivery and will only have to provide low cost tutoring and grading of exams. When they need to involve foreign experts in their programs, they can bring them online into the classroom thus saving on travel and related expenses. All business education entrepreneurs have to do is to bundle publicly available knowledge, create a context where learners are effectively engaged in the learning process, and certify the learning.

As is often the case, many of these schools will remain stuck in the low end of their home markets or go bankrupt, as is already happening in India, but a minority may be able to climb up the learning curve and threaten the dominance of Western business schools that are increasingly relying on demand from emerging countries. While elite institutions with strong global brands may not feel the threat before long, if ever, the majority of business schools may be affected sooner than their leaders may think.

For this reason, it is in the best interest of Western business schools to learn how to deliver quality education at a low cost in emerging countries. By doing so, they would not only make a positive contribution to the development of local people and organizations but also pre-empt competitive threats from the new breed of players that are popping up across the globe.

Ignoring or, worse, dismissing ongoing developments in business education in emerging countries may be our profession’s next big strategic mistake.

[1] http://www.businessbecause.com/news/mba-india/2558/hundreds-of-schools-forced-close-as-indian-business-bites

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