CAT Preparation Industry Trends - Past
rajesh_balasubramanian last edited by admin
To start with, a simple caveat. Almost all numbers, stats, charts provided here are, at best, best guesses. We at 2iim get a lot of questions about CAT, CAT preparation, CAT industry, usefulness of doing an MBA etc. So, we thought we would put together some random charts and have some fun with them (May be the directors missed the days where drawing 3 charts was considered a good day's work.). More disclaimers below.
We can classify the last 20 odd years into 4 phases.
Phase I in the early 90's (late 80's) was more about material-based preparation than classroom coaching. This is the era where IMS replaced Brilliant as the institute that defined the market. The numbers were not big, IMS created pretty good content and were in the process of slowly building the classroom business as well.
Then, in the late 90's, TIME happened. Starting from Hyderabad, TIME built classroom-based coaching businesses in all the big cities. TIME gave the industry three new trends -
1. Franchise model gained popularity. Via the franchise route, they demonstrated that a strong value proposition existed for serious players in the education industry. (This became too much of a good thing. More on that later)
2. TIME proved that the market for CAT preparation was 10x what everyone was playing with. And in a pretty short burst. In some ways, the others rode this wave. But were left behind by TIME, who knew how to play the game best.
3. Pan-India test-series, large classes, gazillion standardized tests became the norm.
The flip side of all this was that Quantity replaced quality in the preparation industry. The friendly neighbourhood good teacher was replaced with big fat books that did not actually add that much to the understanding.
Phase III can broadly be called "more of phase II", where the virtues of Phase II became overcooked a little bit. Industry expansion happened rapidly. Many new franchises were started in smaller towns. More books and test series were published. Industry consolidated around fewer players (Big 3 or Big 3 + few more). Bigger ad budgets, more sales and marketing expense, more discounts, more deals etc. followed. Industry moved further from teaching and more towards selling. The word "funding" was mentioned more than once.
Alongside this trend in the industry, sat another trend in the B-school space. Every B-school worth its salt (and a great many that weren't) was increasing seats. Those who did not just want to increase seats added campuses. Many created newer MBA degrees. SP Jain global, IMT Gaziabad in Nagpur, Symbiosis PGDM in Media management are but few examples of this overreach. The IIMs increased seats, added campuses and created new degrees as well.
Phase IV can be broadly classified as a mild reality check on the industry. The TIME franchise model unraveled a bit (A few big guys threw the toys out of the pram and got their own new toys). Classroom coaching numbers perhaps fell by 45% or more from 2008 to 2015.
In the B-school space, people began questioning the value proposition of an MBA. The entire discussion can be framed with this example case study
Ram has 3-years experience at Infosys, earns around Rs. 4-4.5 lakhs per annum, has a chance of going abroad on work and should see his salary expand by 40% in the next two years in the same company and potentially 75%+ in the next two years if he shifts company. If he joins a B-school ranked between 25 and 35 in India, there is a decent chance that he will land a job in the finance or insurance industry 2 years from now with a starting salary of circa ~Rs. 7.5 lakhs per annum. The cost of doing this MBA is Rs. 12-15 lakhs per annum. Should he take up this MBA?
Huge global opportunity, giant salaries with huge bonuses, fancier job title after MBA, lifelong brand value were all not really on offer anymore. The global recession of 2008 did not help either. Remember, the fewer IIM ABC guys go to cool global I-banking jobs, fewer cool Indian jobs are available for graduates from colleges from colleges ranked 11 or worse.
So, is CAT not worth it? Is an Indian MBA degree not value for money?
CAT is definitely worth it. A good MBA is still value for money.
Things have just gotten a lot saner. In 2005, you could have bought real estate anywhere in India and at almost any price and made phenomenal returns over the next 5 years. In 2010, that kind of opportunity just does not exist. It is the same with the B-school market. One needs to do decent research and get into a good college. And have the courage to say "No thanks. This school is not worth it."
The reality is not that bad. The newer IIMs will be very useful additions to India's B-school space. Some of the colleges established in the mid 2000's have built handy reputations, and have good faculty and alumni. Some of the more random expansions have paid the price (or will pay the price). With online delivery becoming more viable and compelling, the CAT preparation industry could also see some change.
So, all told, we probably needed a spell to pause and take stock. India did not have the economy in 2008 to add 30000 B-school graduates to the workforce. The economy was definitely not big enough to justify paying Rs.12-15 lakhs for a 2-year PGDM from ok-ish teachers. Now, with the economy becoming bigger, B-school space slightly less crowded, and expectations more reasonable, the value-proposition is still probably valid.
Now, on to the disclaimers. Most numbers are best-guesses. Most theorizing is based on thought experiments. May be the economy is still not big enough. May be the economy is way bigger and we can have 10 more colleges. Who knows? If you are preparing for CAT and want to do an MBA, you probably need to learn to read throw theories with charts and stats along with them. Think of this as practice for that.
Have fun with your CAT preparation. Remember, no matter what you think of an MBA, the CAT is a good starting step for this process and online is the place to begin your Preparation!
Read the Future of CAT prep here!