MBA schools lure local students despite training budget freeze

Newsroom 25/05/2009 | 16:01

Experts foresee a slight fall in the market due to a lower number of applicants.”I see this figure staying constant or decreasing slightly. The change will be from a decrease in the number of new students,” predicts Oliver Olson, country manager at CEU Business School. “Taking into account the number of programs on the local market, five EMBA and seven MBA programs, we are still at the beginning,” says Bianca Ioan, marketing manager of the Executive MBA program with Asebuss. However, she goes on, there are countries in the region that have only had Executive MBA programs since 2007.
“We don't have information about the other markets. What we can say with certainty is that our market is far from mature and the growth pace is higher than in other mature markets,” says Adriana Dutescu, director of the Bucharest School of Management, which offers the Romanian-Canadian MBA Program. “I would suspect that the Romanian market is larger than in Hungary and Bulgaria. Perhaps a bit smaller than the other Visegrad states (the Czech Republic & Poland),” says Olson. For comparison, on the Polish market, for example, the biggest MBA programs make up a EUR 7.5 million annual market. The tuition fees are, if anything, lower than in Romania. The Kozminski University, with fees of EUR 20,000 for a four-semester program, had 238 graduates last year.

Decision making gets
slower, budget
are frozen
In November last year, the future looked brighter for MBA programs in Romania, but the lack of financial predictability has made both companies and individuals delay their decision on whether they should apply for a program. “What is different from the autumn of last year is the speed of decision-making. Most of the indicators, like requests for information and participation in presentation programs, are at the same level as last year or down by only 10 percent, but budgets have been frozen, without having decreased. There is a protracted lack of decision,” Ioan of Asebuss explains.
And this change may impact the take-up of MBA programs, at least on the short term. “Our maximum class size is always 45. The last cohort which started this April reached about half of this occupancy rate. Our admissions criteria have become even tougher and many who apply are not accepted onto the program,” says Olson.
But expectations are positive. “Our class size will be limited to 45 in the next cohort that starts February 25, 2010. We are expecting full occupancy… but only if we find enough applicants that meet our strict admissions criteria,” he adds.
Individuals who are considering MBA programs have a longer-term view, while the company is looking only at the year's budget. If they start an MBA program in 2009, individuals may value their access to case studies about this tough period and be able to accelerate their learning process. They can get new ideas. Finally, they will finish the course in 2011, when all prognoses point to a better time – that's the sort of thinking, says Ioan.
In order to give a boost to their program sales and ensure a steady cash flow in these tough times, some schools have decided to extend special offers. This was the case with Asebuss, which started to offer discounts to those who pay the course fee in advance in full or to those companies that have more than two employees on one of the Asebuss MBA programs.

Financing burden shifts from employer to student
At the moment, local and regional professionals can choose from among 10 MBA and Executive programs locally, with costs ranging from EUR 6,000-40,000. Lately, courses have become on average 12 percent more expensive. Most of the schools are in full admission periods now and a new admission session will follow at the end of the summer, when schools expect more students to enroll than in this first session.
Despite high course prices and an average ROI period of three-four years, MBA schools say it pays to follow such a program. Rodica Maria Radulescu, of the Open University Business School offered in Romania by CODECS, says there is clear evidence that MBA graduates earn 20-25 percent more than average. “Romanians' salaries increase by 50-100 percent once they get their MBA degree,” says Radulescu. She expects MBA programs to be more appealing during the crisis, citing the case of Great Britain which went through a financial crisis in 1990. Business schools were taken by storm since people saw in the MBA a sort of “insurance policy,” she says. At the moment, about 60 percent of trainees receive financing from the companies they work for and the remaining 40 percent pay from their own pocket. “I foresee a downward trend in the number of people who are financed by companies and a surge in the number of self-financed ones,” says Alina Vasile, country manager at City University of Sheffield. MBA students generally come from domains such as FMCG, IT&C, the pharma industry, banking & insurance.
Bianca Ioan of Asebuss shares the view that employers will not be so generous with their cash. “Even in the years of economic growth we saw the trend from other countries, where fewer students were supported by their employees. They want to have freedom from their employer. In Romania we have seen a drop in financing from companies, from 90 percent or even full payment in the 90s, when we started the program, to around 70 percent. The downwards trend will continue and this year more students will decide to pay for themselves,” Ioan predicts.
It is the same picture elsewhere. “We have definitely seen a decrease in employer financing of MBAs in the last year. We expect this to rebound slightly in the coming year,” says Oliver Olson, who reveals that under half of the CEU Business School Students have their employers pay for their training program. “Employer financing schemes vary considerably. Some are 100 percent sponsored while some have 25 percent sponsorship. Others must pay themselves, but the employer pays the fee up-front and the employee has the cost
deducted monthly from their salary,” he adds.
On the Romanian-Canadian MBA, less than 10 percent of the students are sponsored by their companies, according to Adriana Dutescu.
“The number of students receiving financial support from their companies has declined dramatically in the last couple of years. Actually there was a noticeable shift regarding this matter. Two years ago, the proportion of students receiving support from their companies was about 90 percent. Now, the situation is quite the opposite,” says Dutescu.
Students' own money, either their equity or bank financing, or employer financing are not the only ways to pay for an MBA or an EMBA program. EU funds could cover portions of the necessary amounts, if applicants have access to information on how to access these funds. Some schools have already received demand from small and medium enterprises, which have been encouraged by the possibility of using such funds. “But it is hard to get information on structural funds and it doesn't help anybody, either training companies or individuals. There are funds given to training companies to offer free courses, or funds given to individuals and companies which are allowed to choose the courses they want and pay the training company for those courses,” explains Bianca Ioan. Another trend she has seen on the market is the number of students from banking and finance decreasing, as “these companies are currently undergoing restructuring, which makes decisions about MBA programs slower,” she says. Many students also now come from the energy sector.
Schools which offer MBA and EMBA programs in Romania are either private institutions, usually non-profit, or work in partnership with a public university here in Romania.
For those private schools, financing comes entirely from the school fees paid by students, but in other countries, the revenues of such an institution may be increased through additional sponsorship.”We would like to see such grants in Romania too, but the country hasn't reached that stage yet,” concludes Ioan.

By Corina Saceanu

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