Cost Benefit Analysis of Doing a MBA Course -NirmalM Runner Up

8/10/2019 Cost Benefit Analysis of Doing a MBA Course -NirmalM Runner Up

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Worthiness of Pursuing MBA in India

Nirmal M

National Institute of Technology, Trichy

February 2014

Dissertation submitted for

Crisil Young Thought Leader


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Table of Contents

Executive Summary .............................................................................................................. 3

1 Introduction ...................................................................................................................... 41.1 Scope and Objectives ............................................................................................... 4

1.2 Method and Data ...................................................................................................... 4

2 Dissertation ...................................................................................................................... 4

2.1 Ranking of Colleges ................................................................................................. 4

2.2 Grouping of Colleges ............................................................................................... 5

2.3 Fee Struscture ........................................................................................................... 5

2.4 Salary Packages ........................................................................................................ 5

2.5 Breakeven period ..................................................................................................... 6

3 Cost Benefit Analysis ....................................................................................................... 6

3.1 Group 1 Colleges ...................................................................................................... 6

3.1.1 Monetary Benefits ............................................................................................... 6

3.1.2Non Monetary Benefits ....................................................................................... 6

3.1.3 Analysis ............................................................................................................... 7

3.2 Group 2 Colleges ...................................................................................................... 7

3.2.1 Analysis ............................................................................................................... 7

3.3 Group 3 Colleges ...................................................................................................... 7

3.3.1 Analysis ............................................................................................................... 8

3.4 Group 4 Colleges ...................................................................................................... 8

3.4.1 Analysis ............................................................................................................... 8

3.5 Group 5 Colleges ...................................................................................................... 9

3.5.1 Analysis ............................................................................................................... 9

4 Comparative chart ............................................................................................................ 9

5 Conclusion ..................................................................................................................... 10

References ........................................................................................................................... 11


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Executive Summary

This paper deals with the monetary benefits as well as the social benefits attained by

the students doing MBA from varying universities in India. More specifically, it is

intended to determine whether to do an MBA from Top 100 colleges in India. Average

starting salaries for graduates with a Masters degree in business were obtained from asurvey of Digital Mailers at 2011. The average program cost was obtained from

learnhub and careeranna surveys. By comparing these numbers and taking into

consideration the possibility of scholarships, student loans, reimbursement by

employers, promotional opportunities and pay raises associated with newly acquired

MBAs, a cost-benefit analysis is done. But whenever a student acquires a degree he is

also acquiring a set of extra benefits from the institution which also has been included

in calculating the cost of benefit by monetizing the non monetary benefits. By doing

so it reveals that there are only a handful of colleges are worth pursuing a degree for

the fee structure and the benefits provided in return within India. Top 100 colleges are

analysed the results are provided in the following dissertation.


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1. Introduction

An MBA indicates that one have mastered a certain level of knowledge in business

management, which provides them the ability and confidence to speak on equal terms

with top executives on business problems. But in recent times there has been a spurt in

the number of institutes offering MBA courses. The fees charged by these MBAinstitutes are steep and most aspirants are forced to take loans to finance their

education. Adding to this cost is the loss of opportunity cost if the students were to

take up employment. However, many recruiters feel that the education provided by

most institutes does not meet their requirements and the compensation offered by these

companies is substantially lower than the fees paid by students. This study deals with

the monetary benefits as well as the social benefits attained by the students doing

MBA from varying universities in India. More specifically, it is intended to determine

whether to do an MBA from Top 100 colleges in India.

1.1.Scope and Objectives

The objective of the study is to find out whether the cost benefit analysis of doing an

MBA is worth the fee structure many colleges demand based on the average starting

salary paid and the social benefits obtained during the course.

1.2. Methods and Data

To begin my study, I gathered information regarding tuition fee for full-time MBA

programs, opportunities for financial aid, starting salaries for MBA graduates, and

increased earnings and promotional opportunities associated with obtaining an MBA

degree. Primary data are obtained from the official sites and the secondary data arefrom various surveys conducted by bschool ranking agencies. To narrow my search, I

used several controls, upon which I will elaborate as I proceed. After obtaining the

necessary information from a variety of credible sources, I performed a cost-benefit

analysis to compare the different MBA program available in India by the net monetary

benefits and social benefits attained by completion of a MBA degree. Data are

collected from reliable sources of various surveys conducted by Business Week,

Browning University, and Forbes for understanding world scenario. The data of

various colleges within India surveys of topbschoolsinindia.com, careeranna.com,

tcyonline.com and official sites of IIMs and few top ranked colleges.

2.

Dissertation

This paper deals with finding the worthiness of doing MBA in top 100 colleges in

India. The colleges are grouped and then the worthiness are evaluated based on the

data available.

2.1 Ranking of Colleges

There are numerous different rankings available in the market based on various

criteria. But I am sticking to the ranking given by Business Today 2013(latest as per

today). They have considered parameters like Learning experience, living experience,

Placement, selection process and future orientation.
http://www.cs.stir.ac.uk/~kjt/research/conformed.htmlhttp://www.cs.stir.ac.uk/~kjt/research/conformed.html


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2.2 Grouping of Colleges

Instead of analysing each college the data are grouped under six categories and

analysed. The groups are Group 1 consists of Top 5 colleges; Group 2 includes

colleges from the 5-15 ranks of colleges by Business Today. Group 3 consists ofcolleges from the ranks of 15 to 30 rankings while Group 4 have colleges of ranks 30-

50 within them and the remaining colleges belong to Group 5.

Group 1: Top 5 colleges

Group 2: Rank 5-15

Group 3: Rank 15-30

Group 4: Rank 30-50

Group 5: Rank 50-100

Hereafter whenever a group name is mentioned it will denotes the colleges within the

group.

2.3 Fee Structure

The fee structure of all the colleges were collected and studied closely. Mostly they

fall at the range of Rs.7,00,000 15,00,000. This includes two year full time tuition

fee, hostel if residential, mess and food and also common charges for using labs,

examination and other resources within a school. In few colleges it also includes a

laptop, Blazer and basic materials and few reference books which are mandatory.

Apart from it the cost will go higher for other reasons like Travel expenses in this two

years, study materials, medical expenses, living expenses, parties, gift and clothing.

Adding to this cost the important opportunity cost to be taken is the loss of income that

could have been earned if the students were to take up employment. Approximatelythe overall cost is to be calculated at the range from Rs.10,00,00020,00,000 for the

overall period of two years.

2.4 Salary Packages

From the data collected it is evident that only a handful of colleges are having

international placements. Even in those colleges only very few are been selected under

international placements. The starting salary packages vary from Rs.3, 00,000 to

16,00,000 based on the college .The top 15 colleges are having averages from Rs.

10,00,00017,50,000. Whereas the average salary packages of next 15 colleges vary

from Rs. 4,50,000 10,00,000. And the good thing is they are giving 100 percentplacements as like top 25 colleges. But the status of next 60 colleges is more or less

similar and the placement trend is not always positive.

When the lowest and the highest salary packages are taken into consideration for the

Top 15 colleges it varies from Rs. 4,50,0006,50,000 and Rs. 14,00,00024,00,000

(International placements apart). But in the group 4 colleges the lowest may go as low

as Rs. 2,00,000 which is much lower than the bachelors starting salary. Few of group 3

and group 4 does not place all the students that means after spending around 15 lakhs

he gets nothing out of it. In Group 5 placements are very low and even those who gets

placed go for a second tier role which mere salary.


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2.5 Break Even Period

Doing MBA itself is kind of doing a business. One invests money in MBA to get more

out of it. Thus calculating breakeven is evident. Forbes has already done the

breakeven analysis for foreign top universities and the approximate time found to be 4

years minimum. It is done for the top 100 colleges in international level where noteven one college from India is ranked. It is calculated after deducting the basic

expenses for living from the salary they start to work with. The same methods will be

followed in our analysis also.

3. Cost Benefit Analysis

There are numerous factors to be included when we are about to do the cost benefit

analysis of a MBA and its worthiness. I have taken the ratio between the cost of doing

an MBA and the benefits he obtains from it. Benefits considered here include both

monetary and non monetary values (values obtained because of the degree and college

and not because of curriculum).And also cost benefit analysis is done for each groupseparately and compared together to obtain at the final result.

3.1 Group 1 Colleges

Costs include Tuition fees, opportunity cost, living expenses and other expenses. From

the data collected it is given as tuition fee varies from Rs. 8, 50,000 14,50,000

except Faculty of Management studies where the fee is just Rs. 20,960. Taking FMS as

exception as it is falling way beyond in the normal distribution range. All these

colleges are located in places where the yearly expenses comes around Rs. 1,50,000

and other academic related costs gather another Rs. 1,00,000. Thus the overall

expenses involved in the obtaining a MBA degree after proving to be the brilliant 1

percent in India will be around Rs.12,00,000 at the lowest. It may sore up to Rs.

16,00,000 to pursue a degree of MBA from Indias Top college.Moreover a student of

that stature is spending his precious time by two years in this institutions either by

opting not to take a job offer or by abandoning his job if an experienced professional.

This cost varies with the job offers they leave or the positions they held. An average

amount of Rs. 4,00,000 is included as opportunity cost lost. This increase the overall

cost to Rs. 16,00,00020,00,000 for a MBA degree.

3.1.1. Monetary Benefits

From the records the monetary benefits range from 1 crore to several lakhs if

international placements are taken into consideration. But not everyone is going to end

up with an International placement. So the returns by placement on campus fall in the

range of Rs. 15,00,000 17,00,000. And also other values as such conglomerate of

top students giving a competitive environment. Many students are given dual or three

placements from which they can choose the company of their interest.

3.1.2. Non Monetary Benefits

The most important benefit to be included when doing from Group 1 colleges is the

Brand Value. Students from top colleges are recognised by the college and not thedegree. The brand value of the college like IIM can do wonders. If they are hired it


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will be at high package of salary with allowances and straight into the top

management. If they have an idea to be implemented venture capitalist thrive on those

ideas. So it is important to evaluate this asset which is higher than the degree and the

knowledge it give. Brand value cannot be monetized and there is no proper measure to

do so. But it is such an important aspect which will increase the overall benefit of a

student who pursues degree from Group 1 colleges. Apart from it these colleges openup a wide career pathin front of students to choose which is the prime reason student

choose to do MBA. The third benefit is the Network it creates for each student with

alumnus, experts from the area of interest, top industrialist, teachers, professors will

add as a value that cannot be valued by money.

3.1.3. Analysis

Overall Cost Involved in Pursuing MBA from Group 1 colleges: 16 lakhs20 lakhs

Average Salary Package: 15 lakhs17 lakhs

Break even period: 18 months

Worthiness of an MBA (5 point likert scale, 5 being highest): 5Other Benefits: Brand value and Network

Negative (Compared to Indian Standards): None

3.2. Group 2 Colleges

Colleges in this group include few IIMs and other old and famous colleges in the

country. These colleges are more or less similar to that of Group 1 colleges but yet to

reach their full potential and reach the Top category. The cost involved in Tuition is

lesser than the group 1 colleges as well as the return packages. These colleges try to

follow the same pattern as that of group 1 colleges and sometimes succeed also. The

ranking trend proves it as few colleges gain rank into Group 1 colleges over the

period. The average fee varies from Rs. 8,00,00012,00,000 and including the other

expenses as discussed earlier the cost of pursuing will be from Rs. 12,00,000

15,00,000. The monetary benefits of average starting salaries also varies from Rs.

9,00,000 - 15,00,000. The non monetary benefits are same as that of group 1 but at the

lower rate. Brand value is lesser when compared to group 1 colleges and network will

be not as big as Group 1. These are compensated by the reduced fee structure which

will have the same breakeven as such group 1.

3.2.1. Analysis

Overall Cost Involved in Pursuing MBA from Group 1 colleges: 12 lakhs15 lakhs



Worthiness of an MBA (5 point likert scale, 5 being highest): 4

Other Benefits: Network

Negative (Compared to Indian Standards): No Brand Value


These include colleges from the rank of 15- 30 in the list. Most colleges in this

category are just departments of management studies and not b-schools. It includesDepartment of Management Studies (DoMS) from top engineering colleges like IITs,


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NITs etc., Also sister concerns of Group 1 and Group 2 colleges and their branches

will fall under this category. It also includes many private colleges which work to

excel as a business. Newly started IIMs also fall under this category. The fee structure

ranges from Rs. 3,50,000 - 12,00,000. The normalised range of fee structure is Rs.

5,00,0009,00,000.

The returns on benefit in terms of monetary are around the range of Rs. 6,00,000-

10,00,000. Eventhough roughly seeing the ROI is good in group 3 colleges the

students are not recruited for the top roles. They mostly end up working for a group 1

college student as an assistant. From the faculty strength to infrastructure and mainly

the students knowledge will be lesser than above two groups leading to the

downgrade in the placement scenario. The Repetitive companiespercentage is lower

in group 3 colleges. Companies are not satisfied with the ability and knowledge of the

students in these colleges. These colleges have (atleast in words) 100 percent

placement in their prospectus. They drive students based on their placement track and

also using their parent concern.

3.3.1. Analysis

Overall Cost Involved in Pursuing MBA from Group 1 colleges: 5 lakhs 9 lakhs




Other Benefits: Placements

Negative (Compared to Indian Standards): Career Growth is limited


It comprises of last 20 colleges of Top 50 in India. The fee structure widely varies

from 1,25,00011,00,000 in this category. But the normalised range of fee structure is

Rs. 3,50,000 7,50,000. Adding the additional expenses the cost of pursuing two

years program from this colleges will be Rs. 6,00,000 10,00,000. Colleges in this lot

are mostly deemed or private and they primly concentrate on low scorers in

competitive exams. The candidates failing to make it to the top colleges but yet

determinant to do an MBA degree choose these colleges. These colleges primarily

concentrate on placements and drive students primarily focused on it. Faculty and

infra are not of sound in nature. Not much emphasis is given for student

empowerment. Monetray benefits are low when compared to other three groups.Placements scenario varies from college to college in this group. Most of the colleges

boast 100 percent placement but from the comments in various public forums it is

clear that they fall short of that feat. Even those who get placed are opted for low

salary packages when compared to other groups. Average salary packages varies from

Rs. 3,00,000Rs. 7,00,000. These colleges doesnot give any non monetary benefit as

network or brand value. Thus no CBV can be done but only ROI.

3.4.1. Analysis


Average Salary Package: 3 lakhs 7 lakhsBreak even period: 24 months


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Other Benefits: Placements

Negative (Compared to Indian Standards): Just a MBA degree

3.5. Group 5 colleges

The last 50 collegesfalls into this group. The standards are very low and the faculty

ratio as well as the student quality is low when compared to top 50 colleges. These

colleges act as an educational intuition that teaches students a degree instead of

sculpting the students as a master. Students coming out from these colleges cannot

compete with the top college MBA students. But still these colleges have on campus

placements and few colleges achieve more than 80 percent placements. The college

fee structure varies from Rs. 1,50,000 to Rs. 11,00,000 and the normalised figures

taking all 50 into account gives the Range as Rs. 3,00,0006,50,000. The overall cost

will fall in the range as similar to that of previous group. The returns on investment

cannot be calculated as many colleges are giving fake details on the placement

packages or using various manipulative techniques to evaluate average packages. Andalso average salary should be calculated for the whole batch of students and not only

to those who got placed. As these colleges does not have cent percent placement it

cannot be calculated. Apart from few colleges in this category most college does not

have good track record based on placements. Company repetition percentage is very

low.

3.5.1. Analysis


Average Salary Package: Not Applicable

Break even period: Not Applicable


Other Benefits: A degree

Negative (Compared to Indian Standards): Most Things

4. Comparative Chart of Five Groups

Monetary Benefits Group 1 Group 2 Group 3 Group 4 Group 5

Net Monetary Profit 16 12 7 5 NA

Cost of Investment 18 13.5 8 8 8

ROI 88.89% 88.89% 87.50% 62.50% NA

Values Given for Non Monetary benefits

to the

ROI

*NOTE: Minimum % Value is

assumed. The Values may act to a

higher extent or to a lower extent

based on individual. An

approximate is taken here.

Brand Value 15%

Network 5%

New Career Paths in area of Interest on

campus 5%


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ROI after Both Monetary and Non Monetary Benefits

Group 1 Group 2 Group 3 Group 4 Group 5

Net Monetary Profit 16 12 7 5 NA

Cost of Investment18 13.5 8 8 8

ROI 88.89% 88.89% 87.50% 62.50% NA

Non Monetary

Benefits to the ROI 20% 15% 5% 5% NA

New ROI 108.89% 103.89% 92.50% 67.50% NA

Graphical Representation

5. Conclusion

My analysis reveals that a larger monetary benefit and non monetary benefits are there

for the first three groups. Whereas the benefits degrade as the ranking of the college go

down. From this it can be concluded that just pursuing MBA from any college will do

no good. Doing in the Top 30 is beneficial in monetary aspects in terms of placements

and also in creating a larger network, brand value and career path that will be useful infuture of any student. Two main contributors to this outcome are opportunity costs and

brand value, where both cannot be monetized but plays vital role in measuring the

worthiness of a MBA degree.

However, in my opinion doing MBA from top 2 groups is the best option. As they

both have more or less same values and benefits. Pursuing a degree from group 3 has

its own set of pros and cons and can be considered as the second best. Group 4 is the

last set of colleges which can be considered for doing a quality MBA program in

India. But pursuing MBA from group 5 colleges seems to be less worthy for the

money invested and should be avoided at all cost.

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Group 1 Group 2 Group 3 Group 4

ROI Without Non

Monetary Benefits

Non Monetary

Benefits to the ROI

New ROI


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References

1. http://www.careeranna.com/top-mba-programs-with-low-fees/

2.

http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-

time/

3. http://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-

MBA+Options.pdf

4. http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-

wise/

5. http://www.tcyonline.com/mba/salary-statistics.php

6. http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-

india-for-batch-2011-13

7. BSchools_salary_survey_report_2011 by Browning University

8. Forbes survey conducted and published on 2011

9. Business week survey conducted on 2003

10.

The Hindu, bschool in Chennai

11.Official IIM websites, iim.edu
http://www.careeranna.com/top-mba-programs-with-low-fees/http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://cat.learnhub.com/lesson/20397-fee-structure-of-top-15-b-schools-of-india-for-batch-2011-13http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://topbschoolsinindia.com/tag/top-100-mba-colleges-in-india-placement-wise/http://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://www.bus.ucf.edu/faculty/rhofler/file.axd?file=2011%2F2%2FBrowning-MBA+Options.pdfhttp://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://poetsandquants.com/2010/06/28/is-the-mba-still-worth-the-cost-and-the-time/http://www.careeranna.com/top-mba-programs-with-low-fees/

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Cost Benefit Analysis of Doing a MBA Course -NirmalM Runner Up