Five years ago, U.S. citizens alone took 23,000 more GMATs than the rest of the world combined. But in 2009, on the back of 12-percent growth, the world ran past the U.S. for the first time ever. And it’s likely to be the same story later this summer when GMAC releases its new report. Not surprisingly, Asia spearheaded this growth; the number of Chinese and Indian test-takers exploded over the second half of the decade, rising 175 percent and 126 percent respectively. Nations flying under the radar like Vietnam, Nepal and Kazakhstan displayed more than 100 percent growth between 2005 and 2009, too.
The shift has been occurring, of course, over many years and is reflected in the actual enrollment of international students at American business schools. Twenty years ago, for example, only 13% of the MBA students at Northwestern’s Kellogg School of Management were from outside the U.S. Today, a full third of the students are international. During that same time span, Harvard went from 16% to 36%, Dartmouth from 13% to 30%, Wharton from 21% to 37%, and Stanford from 19% to 33%. If anything, American business schools are now beginning to feel the impact of international competition for the first time.
Asia’s business potential is growing, and it’s increasingly being reinvested locally. In 2005, 77 percent of Asians sent GMAT score reports to American business schools. Last year, it was 67 percent according to GMAC research. Test-takers can send five reports for free, so it’s an indication of interest rather than a full-on application. Still, the emergence of legitimate competition to U.S. schools from newer institutions in Asia and Europe is being felt. Derrick Bolton, director of MBA admissions at Stanford Graduate School of Business, says, “We’re having to compete harder for the best international students because they have better alternatives at home.”
This is the new deal created by international economic growth rather than a blip spurred by America’s recession. In June, the Paris-based Organisation for Economic Co-Operation and Development found that purchasing power parity of non-OECD countries (“developing” nations) hit 49 percent of the global total. In 2000, it was only 40 percent, and the OECD Development Center forecasts the purchasing power parity to hit 57 percent by 2030. In the present, emerging markets raised more money for initial public offerings than industrial markets for five straight quarters according to Bloomberg data. As Nobel Prize-winning economist and former Stanford Dean Michael Spence noted earlier this year, the global economy has given way to almost unlimited demand.
This much larger market challenges American business schools to recruit even more diversely than they already are. At the same time, they need to build lasting relationships abroad – all the more important now that European B-Schools are setting up shop in the States.
Admissions officers are finding out, that’s not always easy. Only 19 percent of the University of Minnesota’s Carlson School of Management Class of 2010 was internationally born. And, applications from overseas dropped this year according to Ed Joyce, associate dean for MBA programs. Joyce cites a difficult job environment for non-residents as well as education alternatives closer to home. It’s simply cheaper for American firms to hire domestically, and despite being host to 19 Fortune 500 companies, Minneapolis is more than 3,000 miles away from four of the six continents open for business. In September, Carlson’s admissions team is going on an Asian tour to ratchet up interest, mobilize alumni in Japan and pitch prospective students in Tokyo, Beijing and Shanghai.
At the Graziadio School of Business and Management at Pepperdine University, on the other hand, international interest increased for the second straight year. Latin American applications jumped from “practically nonexistent” to five prospective Class of 2012 members. Not earth shattering, but enough for Graziadio’s director of student recruitment Paul Pinckley to say they’re going south in order to propel the nascent growth. Over the past few years, budget concerns had killed on-the-ground recruitment in Latin America. Meanwhile, full-time programs saw a doubling in students from Asia bumping the overall international percentage of the class to 32 percent.
Randall Sawyer, director of admissions at Cornell’s Johnson School, points to a Latin American growth as well that’s spearheaded by Brazilian applicants. Typically, there might be 20 submissions, but the Class of 2012 saw more than 50. Meanwhile, Johnson experienced a decrease in Indian and Japanese applications. “Japan is way down as the result of stronger local schools and less sponsorships,” Sawyer says.
It’s not about filling quotas (although admissions officers enjoy an international cut around 30 percent). Students want to hear the first-hand perspective from classmates who worked in developing markets. And now that there are so many, there are so many necessary perspectives. “15 years ago, you would [dismissively] say ‘yeah, yeah, yeah’” about the value of a diverse classroom, says Bolton. “Now,” hypothetically, “if you are a student from China, your voice is the most important in the class.”
Attracting diversity to campus is one thing, but creating and strengthening relationships throughout the world is increasingly vital. In 2008, GSB launched the Reliance Dhirubhai Fellowship in partnership with Reliance Industries, an Indian energy and infrastructure company. The fellowship pays tuition and expenses but requires graduates to work in India for at least two years after graduation. This will begin to cement the connection between a far-off grad program and India’s private and public sectors. At the same time, Stanford will send a steady flow of graduates wearing Cardinal red back to their country.
Thirty years ago, Spence wrote about the powerful financial signal a graduate degree communicates to potential employers. Now MBA programs find themselves having to more powerfully communicate their value to prospectives in emerging markets. There’s perhaps no more significant signal than a successful local alumnus.
Last summer, Kuwaiti-born Saleh Shaya was visiting family with his wife at the same time as Wharton admissions officer Jackie Zavitz, who oversees Middle East recruitment. Shaya, Wharton Class of 2011, worked on business development for Alshaya, the Middle East’s largest retailer, before returning to Wharton and knows the culture and market well. This summer, he’s at New Jersey-based Quidsi, the parent company of Diapers.com and Soap.com but says he plans to return to the Middle East in the future. Zavitz, of course, roped Shaya in to talk to prospective students as part of a Wharton panel.
Another way to signal value to prospectives is by bringing on faculty with a life-long passion for improving developing countries. Like, say, Spence, who chairs the Commission on Growth and Development. This fall, he’ll teach a class at NYU’s Stern School of Business and undoubtedly help advice another school planning its next steps.