Imagine this: there are over 2,400 b-schools in India of which 1,999 are approved by the All India Council for Technical Education (AICTE) and 400 function as unapproved private b-schools. Together, they have nearly 190,000 seats for a total pool of 3.5-4 lakh MBA aspirants who sit for the national and state-level MBA entrance exams.

If we hypothetically consider that the average fees charged by these b-schools is about Rs 200,000, then the total potential revenue for b-schools in India = Rs 3,800 crores.

As the number of seats are fewer than the total pool of available students, getting students to enroll should not be a problem for these 2,400 b-schools, on the face of it.

Wrong. Every year, since the last 2-3 years, an increasing number of b-schools are finding it tougher to fill the complete intake capacity of their MBA or PGDM batches by the time they begin their sessions in the month of June. I am not talking about 50 of the best known (‘top 50′, if you will) b-schools, which have enough pull effect to attract excellent numbers and thereby have the privilege of even providing a waiting-list for prospective students.

The worry is with the second and third tier of b-schools. Almost all of them are privately owned and funded and many were set up with the noble intention to provide management education to those Indians who could not get through to the best b-schools. Some were also set up to provide education to a special section of the society.

However as of today, death looms large on these b-schools. The primary reason being that they have never figured out the changing dynamics of the market or the way MBA applicants have been choosing b-schools in the past few years.

Consider some numbers for example: in the year 2003, out of the 95,000 odd students who appeared for the Common Admission Test (CAT), the ratio of freshers to those with substantial work experience was about 60:40. Moving forward to 2008 and 2009, the number of CAT takers increased to over 250,000 of which more than 60% had work experience.

In 2003, freshers chose higher education due to the fact that the economy then promised them something really big if they spent two years arming themselves with more skills before venturing out into the job market. In other words, there weren’t many lucrative opportunities available for someone fresh out of undergraduate college. On the other hand, those who were employed for 4 or more years were already happy, or had families and never bothered so much with a 2-year fulltime MBA in India. There were fewer b-schools in the country, and filling up their intake capacity wasn’t that much of a challenge.

Seeing this trend, b-schools started mushrooming all over the country over the next five years, some even trying to replicate the Indian Institute of Management model by opening branches in multiple cities.

In the last couple of years, since 2008, things have been really bad for most of these private b-schools. They have found it tough to fill their classrooms with quality candidates. The student market response to their advertising and branding messages has been appallingly cold. Overall, things look very bad for them.

A deeper look into the trends gives a better idea: the 60+ % applicant pool with work experience has a better idea about what they want to do with their professional lives, and so are averse to settling for a b-school that is not in what is broadly perceived as the ‘top 50′. They have developed sharp expectations from the two years that they will spend at a b-school and the return-on-investment at the end of it. For them, joining any of the 2,000 b-schools at the bottom of the pyramid does not make much sense.

The freshers on the other hand, are always the confused lot. If they get into a ‘top 50′ b-school, most will join it in all likelihood. If not, then they start looking at the next best options (driven largely by the kind of placements the remaining b-schools offer). This translates to a very slow decision process, as students try to make sense of the offerings of these schools, which don’t differ too much from each other.

This leads to almost a mini recession-like situation, wherein a couple of thousand b-schools have over 1.5 lakh empty MBA or PGDM seats on offer but no takers. Spending on advertisements in the print media and other publicity avenues (seminars, education fairs) has little or no effect in generating applicant interest. In order to break this standoff, several b-schools get hold of ‘leads’ (a ‘lead’ in industry-speak is the contact information of an MBA aspirant) from websites, coaching institutes or other sources. They then start calling up these freshers at least 30 times to get them to apply. That produces frustration on both ends. The aspirants feel that – “this college doesn’t get any applications and is therefore following up.” For them it doesn’t mean anything that the b-school is looking for genuine candidates to apply to them. Over time, some schools either resign to running on less-than-full student capacity or choose to admit almost anybody, much to the dismay and disillusionment of the good faculty in the school. The route down the regression road is thus laid out.

Add to that the growing trend of multinational companies recruiting undergraduates for the same jobs (analysts, sales and marketing executives, jobs in KPOs, auditor firms, equity research, etc) that one gets after a second-tier MBA. This is further pushing more fresher applicants towards the experienced category, further reducing their availability to second and third tier schools.

If the b-schools fail to understand this, very soon they will lose their reason to exist, will become financially unviable and will have to shut down. Already, they have optimized their operational expenditures beyond limits (getting visiting faculty, optimized infrastructure usage, class schedules, etc). If they don’t take corrective steps right now, then they will surely be heading for a sad end.

There is still hope. These b-schools will need to look inward and ask themselves some very important questions:

1. What is lacking in them that they do not have a ‘pull effect’ like the top-50 do?

2. What have b-schools such as ISB Hyderabad or Great Lakes, Chennai done that has allowed them to gain a reputation in less than a decade?

3. Do the marketing and admissions teams in these schools have more members than the total number of fulltime faculty members?

4. How do these schools do when put to the scrutiny of the best academic standards and fora?

The trouble is that with the kind of ‘sweatshop way’ of working that these b-schools internally have, it is difficult that they will see the light. Extinction is a big threat and sooner or later they will have to think of questions that matter, or perish.