An analysis of the environment and competitive dynamics of ...

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An analysis of the environment
Dynamics of
management
and competitive dynamics of
education
management education
9
Howard Thomas
Warwick Business School, Coventry, UK
Abstract
Purpose – The paper seeks to identify the key environmental forces and competitive drivers
influencing the strategic management of a business school, and to give guidance about strategic
choices as the business school evolves in the new knowledge economy.
Design/methodology/approach – Analytic tools such as PEST analysis and competitive analysis
are used to provide a model and framework for dialogue about strategic choice.
Findings – The influence of demographic, technological, entrepreneurship and globalisation drivers
provides a series of implications for competitive action and strategic choice. In the current
environment it offers a school strategy of a rigorous academic research profile informed and guided by
practice. This is favoured over a more professional agenda.
Originality/value – The paper reviews and updates the literature on future strategies and scenarios
for business schools from an analytic perspective.
Keywords Competitive analysis, Demographics, Globalization, Entrepreneurship,
Strategic management, Business schools
Paper type Viewpoint
Introduction
Despite being acknowledged as one of the major success stories in higher education
over the last 30 years, business schools are at a crossroads in their development
(Pfeffer and Fong, 2002). They currently face an image and identity crisis and have
been subject to a wide range of critical reviews about their societal status as academic
and professional schools (Bennis and O’Toole, 2005; Ghoshal, 2005; Pfeffer and Fong,
2004; Mintzberg and Gosling, 2002). On the one hand they are seen as being out of
touch with the business world and on the other hand of doing irrelevant research and
failing to build ethical, global and team-oriented thinking into their curriculum. This
has led to a reappraisal of the role and value of business schools and the development
of an emerging literature projecting future choices and scenarios for business schools
and their deans (see, for example, Starkey et al., 2004).
The aim of this paper is to provide a framework that can be used to analyse the
future roles and strategic choices open to business schools and their administrators. It
first provides an environmental analysis of the business school environment, with a
strong European flavour, using the PEST (political, economic, social, technology)
framework (see, for example, McGee et al., 2005, p. 13) as an appropriate analytic
vehicle. With the PEST output as background the paper then highlights the key forces
Journal of Management Development
Vol. 26 No. 1, 2007
Thanks are due to conversations with many colleagues at Warwick Business School,
pp. 9-21
David Wilson at GMAC and particularly Professor Jagdish Sheth of Emory University. However, q Emerald Group Publishing Limited
0262-1711
the author remains responsible for both the content and the opinions expressed in this paper.
DOI 10.1108/02621710710720040

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and drivers influencing the future evolution of management education, namely
JMD
demographic, technology, globalisation and entrepreneurship drivers. In turn, these
26,1
forces impinge directly on the competitive dynamics of the business school market and
indicate both current competitive positioning strategies and future competitive
pathways which schools may choose to follow. While the paper recognises that not all
business schools have similar strategic foci and that diversity in strategic choice is an
10
important and enriching characteristic of business schools, it nevertheless suggests
that a range of strategic types describe the dominant strategic profiles of business
schools. It concludes by discussing which type of business school may best fit the twin
demands of academic rigour and practical relevance.
PEST analysis of the management education environment
The external context of strategic decisions is very broad-ranging. It can include
governments, competitors, technological and social change and the dynamics of buyer
and supplier markets. One way for managers to analyse their exposure to the set of
potential contextual factors is through the application of a PEST analysis (McGee et al.,
2005, p. 13). A PEST analysis of the business school education environment is provided
in Table I.
Among the key conclusions of the PEST analysis are the following:
.
Funding of higher education (see, for example, the introduction of so-called “top
up” fees in UK higher education (The Economist, 2005) is a critical issue across
the world. The consequences of continued under-funding of universities have
been the increasing use of part-time faculty, the relative unattractiveness of
academic careers and mounting evidence of financial failure (The Economist,
2005). Further, pressure from governments and regulatory bodies (such as (in the
UK) the QAA with its focus on teaching quality and the RAE with its focus on
research quality) will require business schools to balance quality education
against criteria of cost efficiency and organisational effectiveness.
.
The growth of the global economy creates new opportunities and challenges for
business schools. In parallel with the rapid development of quality business
schools in Europe and Asia (see, for example, the listing of the global MBA
programmes in the Financial Times annual ranking of global business schools),
successful competition with foreign schools will require a balanced global view
of business education and increased recognition of multi-national and ethnic
diversity in teaching methods, teaching materials and case studies.
.
Student demand patterns and the emergence of new learning technologies will
require schools to pay increasing attention to flexible learning and the blend
between face-to-face campus style learning and interactive e-learning
technologies.
.
Social factors including two-income families and increased life expectancy will
probably result in increased demand for innovative forms of life-long learning.
A more detailed exposition of environmental forces and drivers follows in the next
sections.

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The key forces driving management education
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The key forces and drivers in the management education environment are illustrated in
26,1
Figure 1 and discussed in subsequent paragraphs.
Impacts and implications of demography
Hoare (2006) points out that “business schools say that the numbers of ‘grey MBAs’ are
12
rising and some schools are actively recruiting in the older age bracket as applications
from younger students fall away”. For example, the average age for MBA students at
Ashridge Management College and Lancaster Management School is reported as being
in the mid-30s. Reasons for the “greying” of the MBA market are not difficult to
discover. They include, inter alia, the following:-
.
The fact that people now have an increasing life-span as a result of health
advances and an emphasis on an appropriate balance between work and family
life. Consequently, education increasingly becomes a life-long commodity rather
than one consumed at an early age.
.
With the advent of increasing employee life-spans, employers are beginning to
recognise the need to invest in developing key individuals among their 40- and
50-year-olds, particularly since the numbers in full-time employment are falling
with the move to a less loyal, more flexible workforce.
.
The impacts of legislation and adequate pension provision are changing
employment patterns, leading to a rise in retirement age. For example, European
anti-age discrimination legislation is forcing employers to recognise, and adapt
to, the age distribution of their employees. And, in the political debates about
pension provision there is a clear view that adequate pensions can only be paid if
the retirement age increases.
.
The recognition that older employees have retraining needs but possess
considerable experience, well-developed individual qualities and a commitment
to the workplace. Such retraining may in turn require the development of more
flexible and customised business school approaches. The Economist (2006) notes,
Figure 1.
Impacts and implications
of demography

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for example, that 50 per cent of the employees in B&Q, a UK do-it-yourself chain,
Dynamics of
are over 50 years of age and one is 91 years of age.
management
The impacts of demographic change for business schools therefore include the need for
education
more flexible curricula, a greater emphasis on lifelong learning and a recognition of the
changing characteristics and skills required from business school graduates.
A recent issue of The Economist (2006) stresses the need to address this talent and
13
skill shortage, which has been labelled and described as “the war for talent” or “the
battle for brainpower”. It points out that with this generation of “baby-boomers”
retiring there will be a growing gap in employees aged 15-64 – most dramatically in
Europe and Japan, with projections about the decline of people in the age range 15-64
estimated at around 10 per cent. It questions whether there will be enough qualified
employees to satisfy the demands of growth markets in technology and other areas
and, particularly, the rapid growth of professional service firms. It quotes a recent
Corporate Executives Board survey indicating disquiet about the quality of recruits
and the time taken to find suitable job candidates. The problem for business schools
and the resulting challenge for curricular development is that recruiters increasingly
require higher level candidates who possess complex interactive skills (i.e. the ability to
link things together and frame complex problems) involving an enhanced judgemental
mind-set. Companies have partially adapted to this skill shortage by recruiting skilled
immigrants who in turn change the ethnic and cultural balance of the population. For
example, The Economist notes that the UK’s enlightened immigration policy has
resulted in the percentage of skilled immigrant arrivals rising from 7 per cent in 1991 to
32 per cent in 2001. While this clearly has had some influence on the talent mix at the
national level it can only begin to solve the underlying problem. The challenge for
business schools is to produce students who have the skills, flexibility and training to
compete in the new economy defined by globalisation and technological change and
populated by increasing numbers of professional service firms in developed economies.
In summary, the implications of demography for management education include the
following:
.
a greater number of older, more experienced students will require relevant
professional education;
.
project and team-based content and experiential learning is emphasised;
.
an increasing challenge for the development of culturally based teaching
materials;
.
continuous, lifelong learning becomes a core business;
.
curricula must become more flexible;
.
degree programmes will become shorter; and
.
affordability of management education is a critical issue.
Impacts and implications of technology
McCann (2006) questions whether we are preparing students for the “next economy”,
which is not driven by a manufacturing or service orientation but a science and
knowledge-based perspective. He believes that new industries are being built which
“revolve around the convergence of technologies such as computing, communication,
and engineering, and the growing importance of the life sciences such as physics,

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biology and chemistry”. As a consequence, linkages between business schools and
JMD
science faculties will become increasingly important and curricula must embrace a
26,1
clear
understanding
of
how
radical
technological
innovations
and
competence-destroying innovations (McGee et al., 2005, p. 702) change the nature of
the competitive market place and require the development of new competences, skills
and capabilities. Understanding of technology and technological change should thus
14
go far beyond the possession of computer skills and require an appreciation of general
engineering and scientific principles and advances. This has traditionally been the
domain of specialised technology management programmes such as those offered, for
example, by MIT, RIT and Carnegie Mellon Universities in the USA but the implication
is that these issues should probably be brought into the mainstream of all curricular
offerings in business schools.
An example of a disruptive technology (Christensen, 1997) for management
education is the advent of electronic markets for learning resulting from the growth of
information and communication technologies (ICT) associated with e-learning.
Hawawini (2005) indicates a growing client demand for “blended” programmes that
combine “on-campus” instruction with learning in the workplace facilitated by ICT,
particularly in the areas of lifelong learning and executive education. The growth of
ICT has, in turn, prompted the search for new forms of learning in business schools as
they transform from “brick and mortar” conventional campus-driven institutions faced
with an increasing cost structure to “click and mortar” schools that embrace e-learning
alongside their traditional campus offerings in the physical world.
Recently, the Financial Times (2006), in a special issue devoted to e-learning,
reviewed the growth of the technology in management education. It concludes that it
has acted as a catalyst for the creation of electronic markets for management education
(Ha¨ma¨la¨inen et al., 1996) through the convergence of digital technologies and the
growth of the internet. This, in turn, has enabled the parallel development of digital
libraries, just-in time on-the-job training, lifelong learning and purely virtual “click”
universities. Ray Irving, a Warwick Business School (WBS) colleague specialising in
distance and e-learning states (Financial Times, 2006) that “new technology has
allowed us to take the distance out of distance learning and has changed the nature of
distance learning for our students. It has given us tremendous opportunities for
building global networks”. As a consequence, in the 20 years of its distance-learning
MBA offering WBS has grown from 15-20 students per year to 350 students per year
across 80 countries and has blended elements of compulsory campus teaching with
quality online delivery facilitated by web-based chat rooms and instructor-enabled
electronic interaction. Indeed, the flexibility of ICT now available allows for such
innovative elements as asynchronous and synchronous video, video streaming, VOIP
and instant messaging to enrich “distance” and “blended learning” programmes. This,
together with the evolution of extra bandwidth, which improves both course content
and interactive delivery, has stimulated business school educators to increasingly use
their imagination and creativity in designing new improved “blended learning”
programmes. In future, the strategic question for business school deans may be in
finding the optimum balance between “brick and mortar” and “click and mortar”
activities.
In summary, the implications of ICT for management education include the
following:

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.
growth of real-time, internet-based interactive education;
Dynamics of
.
a significant rise in self-study programmes;
management
.
impacts on information-gathering and research – the rapid growth of electronic
education
libraries and databases;
.
changing role of faculty as video-professors;
.
changes in distribution channels – distributed delivery; and
15
.
value-chain thinking makes obsolete conventional economic concepts such as
scale economies, vertical integration, etc., in the context of management
education.
Impacts and implications of globalisation
Cabrera and Bowen (2005) quote World Trade Organisation (WTO) data to show that
global trade grew from 20 per cent of world GDP in 1990 to more than 30 per cent in
2003. And, foreign direct investment grew over the same period from 4 per cent to 11
per cent. Consequently globalisation is an established fact of life neatly encapsulated in
the popular title The World is Flat by Thomas Friedman (2005) and in the writings of
Michael Porter (1990) and Bartlett and Ghoshal (1989). As a result of globalisation
economic power is now spread across the world. The growth of trading blocs (Ohmae,
1985), such as the EU in Europe and NAFTA in the Americas, and the growing power
of China and India in Asia, point to a rapidly changing geopolitical order. As McCann
(2006) says, “global competence is a core competence; knowing how to confidently and
competently work across cultures is essential in a global economy”.
What are some of these global competencies and skills? Laura Tyson, the current
Dean of London Business School (LBS), together with colleagues at LBS, has recently
carried out a survey of global business capabilities based on interviews with around
100 global business executives. She concludes (see Hoare, 2006) that from a list of about
40 capabilities the skills of “flexibility, cultural sensitivity and integrity” topped the
preferred list of managerial attributes. Cabrera and Bowen (2005) further believe that,
in addition to Tyson’s key capabilities, a global manager is a citizen of the world
possessing a global mindset as the unique, value-added competence. This global
mindset requires fusion of global business, international studies and cross-cultural
proficiency enhanced by a set of core ethical values and professional conduct norms.
From a strategic perspective the issue for a school is how to build knowledge of
internationalisation and global capabilities into the curriculum. Indeed, surveys
suggest that less emphasis is often paid to the teaching of international business in
many schools. As Hawawini (2005) points out, the typical internationalisation
strategies are the import model of internationalisation (“bringing the world to the
school” through attracting global students and faculty); the export model of
internationalisation (“sending abroad faculty and students” either through faculty
sometimes delivering courses off-campus in selected locations or by students attending
foreign alliance schools) or the network model of internationalisation involving the
creation of a multiple-site institution with fully fledged campuses across the world (a
more pure “brick and mortar” strategy). Hawawini clearly favours the network model
as the model of a truly global school – one with complementary and interconnected
campuses across the three major economic regions of the world (i.e. the Americas, Asia
and Europe). The strategic question here surrounds the degree to which the

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globalisation of business and education will favour the adoption of a mixed “click,
JMD
brick and mortar” approach rather than a network model in creating the future global
26,1
business school.
In summary, the implications of globalisation for management education include
the following:
.
the growth of multinational student diversity;
16
.
the need to understand global competitive rules and regulations (e.g. NAFTA,
EU, etc.);
.
cross-cultural content becomes critical in teaching;
.
the growth in customised executive education programmes for MNC
(multi-national corporation) clients;
.
the requirement to form cross-functional teams to manage global accounts;
.
business education operating in a “think global – act local” mode;
.
business education offered on a global basis; and
.
strategic alliance partners become important and critical.
Impacts and implications of entrepreneurial enterprise
There has been a profound change in business school thinking away from a
concentration on big business and the rise of the multi-divisional firm towards a
greater focus on the entrepreneur and entrepreneurship as legitimate areas of study.
The strong economy and the growth, and speed, of technological change has created
many self-made millionaires including the founders of Amazon.com and Google.
Further, many entrepreneurial role models exist on both sides of the Atlantic, from
Phil Knight at Nike, Frederick Smith at Federal Express and Bill Gates at Microsoft in
the USA to Alan Sugar at Amstrad and Philip Green at BHS in the UK. Their success
has led many recent graduates to harbour entrepreneurial ambitions and set up their
own businesses rather than settling for more conventional careers as corporate “civil
servants”.
Vesper and Gartner (1997) measured the progress in entrepreneurship education
through the 1990s and report that 311 business schools (about one third of the overall
population of schools at that time) had some form of entrepreneurship programme –
233 of them were US schools, 16 were Canadian schools and 62 were from schools in
other countries. The top rated US school was Babson in Wellesley, MA, which has
developed entrepreneurship as a “niche” area of strength. It was closely followed by
Harvard Business School and the Wharton School at the University of Pennsylvania. In
addition, guides to business schools such as those published by US News and World
Report, Business Week and The Economist also more recently report that a majority of
MBA programmes now offer entrepreneurship concentrations and elective courses for
potential entrepreneurs. Also, they are adopting a range of innovations such as
endowed entrepreneurial research centres, venture-capital funded prizes for the best
entrepreneurial business plans and seed capital financing for students with innovative
ideas and promising business plans.
Entrepreneurship, however, is not just the preserve of Western developed
economies. For example, Infosys Technologies, set up in 1981 by seven young Indian
entrepreneurs, is now a $2.2 bn software company with 58,000 employees and a

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campus on the outskirts of Bangalore (The Economist, 2006, p. 9). Further, ethnic and
Dynamics of
minority business owners have grown many successful businesses in the UK,
management
particularly in the food and hotel industry. Consequently, the study of ethnic family
business has become important to business schools in cities such as Bradford, Leicester
education
and Nottingham, which have strong minority interests and a range of successful
businesses reflecting their cultural heritage and characteristics.
Business schools must therefore recognise that demographic factors such as age
17
and cultural/ethnic background are interacting with the growth of entrepreneurial
activity to create a much stronger focus on the role of the small and medium-sized
enterprise in economic growth. In addition, with the increasing pace of technological
change they may also need to provide entrepreneurship training for graduates from
strong technical and scientific background whose ideas, if properly implemented, may
themselves generate significant technological innovation and change.
In summary, the implications of entrepreneurial enterprise for management
education include the following:
.
amall businesses (new ideas, disruptive technologies) become increasingly
important as engines for economic growth;
.
a new focus on linkages between technology (IT, engineering, etc.) and
management;
.
enhanced teaching of entrepreneurial and emerging business skills;
.
making new business start-ups and ideas the focus for real-time projects in
entrepreneurship education; and
.
linking incubators and university start-ups to business schools.
Competitive forces and dynamics for business schools
The main elements in the competitive environment are illustrated in Figure 2 and
discussed in succeeding paragraphs.
The competitive landscape in management education is clearly changing with the
advent of increasing competition from quality schools in Europe, the Americas and
Asia and engineering and science-based management programmes offering substitutes
(e.g. Sciences PO Paris or Imperial in the UK) for conventional business school
Figure 2.
Competitive forces and
dynamics for business
schools

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programmes. As Hawawini (2005) notes “top business schools will either transfer
JMD
themselves to meet the demands (of a more complex environment) or cede some of the
26,1
terrain to alternative providers of business education”. Some of those providers are
illustrated in Figure 2 and include the types discussed below.
Corporate universities
18
The best known example of a corporate university is General Electric’s Crotonville
campus, often dubbed Harvard-on-the Hudson. According to The Economist (2006, p. 6)
Jack Welch, the former CEO, spent half of his time on “people development” and visited
Crotonville every two weeks. Crotonville was seen as the engine for developing and
strengthening GE’s corporate talent. Other companies such as Goldman Sachs and
EON in Europe have also developed their version of corporate universities. Such
“universities” compete, but sometimes collaborate, with the customised executive
education programmes developed for corporations by leading business schools
worldwide.
Faculty as competitors
Leading academics gurus such as Michael Porter at Harvard, Henry Mintzberg at
McGill, C.K. Prahalad at Michigan, Jagdish Sheth at Emory and Gary Hamel at LBS
have become quasi-competitors and almost industries in themselves. For example,
Michael Porter was one of the founders of The Monitor Consulting Company, while
Gary Hamel was similarly one of the founders of Strategos Consulting. Often
companies view such faculty gurus and stars as key strategic resources and approach
them to provide training, consulting and coaching services which might otherwise be
provided through executive training from leading business schools.
University alliance programmes
Any issue of The Economist magazine offers examples of alliance programmes in its
advertisement section. Examples include the TRIUM Global Executive MBA, which
offers a collaborative programme using faculty drawn from NYU in the US, HEC in
Paris and LSE in London to produce an MBA degree with an international flavour.
Other programmes such as the Berkeley-Columbia Executive MBA Programme and
the Queens-Cornell MBA offer the best of two MBA programmes, and thus attempt to
enhance the career prospects of students. The aim in such alliances is typically to
enhance the perceived reputation and brand image of each school in the alliance and
strengthen its competitive positioning. A further objective is often to build global
identity and strength for each partner at the expense of other rivals.
Non-traditional competition
An increasing number of universities, but also for-profit providers, are offering
distance learning education programmes off-campus generally using online resources.
The largest of these, the Apollo Group (traded on NASDAQ), which owns the
University of Phoenix, caters for 40,000 MBA students according to the Financial
Times survey of distance learning education (Financial Times, 2006). This compares
with Universitas 21, a for-profit alliance of 18 universities, and Thomson Learning,
which has only 1,300 students.

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