MBAs still top class amid global crisis

(CHANDRA BALAN)   

 
Most institutions of education, even those that deal with professional courses such as engineering, architecture, journalism, teaching and medicine, function in isolation.

The events of the world, especially economic upheavals, do little to immediately disturb their peace, fortunes or the future of their students. Business schools, however, are much more sensitive to developments in the business world.

From the time business schools began, their fortunes have been inextricably linked to the global economy, the economy of the region they operate in and stock markets. In fact, the success of a business school relates as much to the current economic environment as it does to the faculty and the facilities available.

The year 2008 has seen a lot of upheaval in terms of lower interest rates, the sub-prime crisis, volatile stocks and a downturn in the global economy. This is enough to cause worry lines to appear on the foreheads of business school students as they prepare to graduate and enter the job market.

It must also be raising the spectre of 2001-2002 in the minds of business schools, when recruiters withdrew job offers and applications plummeted, when following the September 11 attacks in 2001, stock markets the world over fell sharply. After a slight recovery, they started sliding again in March 2002, with dramatic declines in July and September leading to lows last reached in 1997 and 1998.

Emirates Business spoke to business schools in the UAE to find out what they think of the current global economic downturn, if it is having an impact on them and if they are worried about their future and that of their graduates.

Fortunately, they seem all set to weather the storm with diversified portfolios and feel this recession is a temporary phenomena and the world economy will recover soon.

Talking about how business schools in the UAE view the global economic downturn the world is witnessing right now, Dr Ashok Kumar Srivastava, professor and programme co-ordinator for Skyline College, Sharjah’s MBA program, said: “The global economic downturn engineered by the deep recession in the US economy is not a cause of concern from the point of business schools because this recession is a temporary phenomena and the world economy is going to bounce back in the near future.

“However, the ups and downs in the economy at a local, regional or global scale definitely puts the business environments under pressure and it might result in slow economic growth and low employment opportunities for business graduates. But, such trends are cyclical in nature and they do not have long-term impact on the prospects of business schools.”

Zeger Degraeve, professor of Decision Sciences and faculty director at the Dubai Centre of the London Business School, said business schools have a diversified portfolio that helps them to weather the storm. Degraeve told Emirates Business: “Like most global businesses, the world’s top business schools such as the London Business School, have a well diversified portfolio of activities.

 

This diversification manages global economic risk to some extent. For example, our full-time MBA programme is typically countercyclical while our executive MBA programme, which allows continued employment during management studies is typically cyclical. In an economic recession, the applications to our full-time programmes typically go up, while the applications to our part-time programmes go down.

“In an economic recession, salary rises are contained and bonuses are rather low, as a result we see  people decide to leave their workplace and study full-time in the hope when they come out of school, 15 to 20 months later, the economic conditions will have improved.”

However, even though business schools do equip themselves against economic recession, they are not totally immune and do get affected. Degraeve said: “The London Business School operates and recruits on a global scale. While economic ups and downs in a specific country do not affect us much, like all global businesses we are affected by global economic ups and downs. While the applications risk is diversified away to some extent, our executive education activities and our customised company specific programmes business as well as our fundraising activities are affected by a downturn. Also, as the participants for part-time programmes are sponsored by their organisations, during a downturn,  sponsorship is much harder to get.”

However, while business schools in the UAE agree that ups and downs in the economy do affect them slightly, it does not have a major impact on the number of students seeking admission.

Srivastava said: “The demand of MBA graduates will always be there, because they are always the first choice of companies, and therefore, students will always look to the business schools as a gateway for good industry placements, decent salaries and highly competitive work environments. Our MBA programme is in the launch phase, and we have generated good interest from prospective students. In fact, we hope to meet or exceed our targets right from our first batch.”

For his part, Degraeve echoed the sentiment. “We are seeing an enormous demand for all our programmes across the board. Also London Business School’s new executive MBA programme in Dubai is successful beyond expectations. Our inaugural executive MBA class in Dubai has 78 participants, representing 30 nationalities of which 18 per cent were women and 10 per cent were Emiratis. For our second class in September 08, at this time, we have already more than 220 applications in progress, and 26 have  confirmed their place.”

Business schools in the UAE seem confident this economic recession, and falling stock prices, are  a temporary phase and students do not have to worry about a 2001-02 scenario repeating itself when recruiters withdrew job offers.

Srivastava said: “It may have some impact in the short-term, but MBA students will always have a bright future because some sectors of economy always move fast and companies know they have to hire qualified business graduates to bounce back in a competitive scenario. MBA graduates are always in  demand by the industry because of their sound business knowledge, positive attitude to handling challenges and professional skills.

“Business schools prepare business managers to face the challenges of the future and managing the tough business environments. Business schools equip their students to scan, evaluate and monitor business situations carefully and design appropriate responses in all possible scenarios. This knowledge is crucial to running a business successfully – so demand for MBAs can never go down.”

Degraeve added: “Graduating students will find it harder to find jobs but it will not be a very grim scenario as business schools with well diversified portfolios attract employers from all sectors. In a downturn, our students will be employed by companies in the more non-traditional sectors such as manufacturing. In good economic times, they find employment in the professional services industries and banking and finance.”

The two educators also stressed students in the UAE do not have to worry as the economy of the country has been witnessing all-round growth. Srivastava said: “The UAE’s economy has good growth and it is supported by strong fundamentals. All economic sectors such as marketing, finance, international business, tourism, real estate, etc, have shown brisk growth that will  result in demand for MBA graduates in the UAE.”