Frontiers of Distance Learning in Business Education [1 ed.] 9781443866484, 9781443844529

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Frontiers of Distance Learning in Business Education

Frontiers of Distance Learning in Business Education

Edited by

Hooman Estelami

Frontiers of Distance Learning in Business Education, Edited by Hooman Estelami This book first published 2013 Cambridge Scholars Publishing 12 Back Chapman Street, Newcastle upon Tyne, NE6 2XX, UK

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library

Copyright © 2013 by Hooman Estelami and contributors All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-4438-4452-7, ISBN (13): 978-1-4438-4452-9

To my father, Dr. Mohammad Estelami who taught me how to teach

TABLE OF CONTENTS

Preface ........................................................................................................ ix Chapter One................................................................................................. 1 The Role of Distance Learning in Business Education Hooman Estelami Chapter Two .............................................................................................. 11 Important Characteristics in an MBA Program: The Perspective from Online Students Jacqueline K. Eastman, Joseph Bocchi and Danielle N. Rydzewski Chapter Three ............................................................................................ 24 Why Some Distance Education Programs Fail While Others Succeed in a Global Environment Alfred P. Rovai and James R. Downey Chapter Four.............................................................................................. 46 An Exploratory Study of the Perceptual and Structural Determinants of Price of Online Business Education Hooman Estelami and Zeinab Rezvani Chapter Five .............................................................................................. 64 Cooperative Learning at a Distance: An Experiment with Wikis Katherine Campbell and Dee Ann Ellingson Chapter Six ................................................................................................ 75 Toward a Course Conversion Model for Distance Learning: A Review of Best Practices Steven D'Agustino Chapter Seven............................................................................................ 99 A Case Study of the Benefits of Short-tem Study Abroad as a Blended Learning Experience Michael H. Slotkin, Christopher J. Durie and Jarin R. Eisenberg

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Chapter Eight........................................................................................... 112 An Exploratory Study of the Drivers of Student Satisfaction and Learning Experience in Hybrid-Online and Purely Online Marketing Courses Hooman Estelami Chapter Nine............................................................................................ 137 Effects of LMS, Self-Efficacy, and Self-Regulated Learning on LMS Effectiveness in Business Education Sean Eom Chapter Ten ............................................................................................. 159 Teacher Communication Preferred Over Peer Interaction: Student Satisfaction with Different Tools in a Virtual Learning Environment Felicity Small, David Dowell and Peter Simmons Chapter Eleven ........................................................................................ 178 Utilizing Technology Effectively to Improve Millenials' Educational Performance: An Exploratory Look at Business Students' Perceptions Maria Aviles and Jacqueline K. Eastman Contributors............................................................................................. 201

PREFACE

Distance education and online learning are interchangeable terms used to describe the delivery of educational content whereby the student and the instructor are separated by geography, time, or both. Within the domain of business education, approximately one-third of all business schools offer online business programs, and many more are expected to follow in this direction. Therefore considerable attention is being given by business educators to the refinement of pedagogical approaches in their distance learning offerings. The growing attention is reflected in the rising number of academic papers related to distance learning methods which appear in leading business journals, as well as the growing number of workshops, research seminars and online forums on the topic. Despite the growing trends in the use of distance learning methods in business education, up until now, there had been no book that would serve as a resource to consolidate and disseminate related research findings. Much of the existing books and resources on online pedagogy have been general in nature without specific focus to business education. The objective of this book is therefore to consolidate state-of-the-art knowledge on distance learning methods, best practices, and research findings as they relate to online business education. This exposure would help inform business faculty, administrators and course designers on how to optimize distance courses in the various sub-disciplines of business to achieve the most beneficial results for business students. The chapters included in this book are sourced from published research reflecting state-of-the-art thinking on distance business education. These research studies have undergone extensive scientific review at top academic journals and are recognizable for their unique focus on issues related to the advancement of distance learning capabilities among business schools. As such, the compilation of these articles enables us to better understand the unique dynamics by which business programs can be offered in the online world, and how pedagogical approaches can be modified to further enhance business students' learning outcomes. The authors of the individual chapters must be commended for their innovative thinking and methodical approach to researching specific aspects of distance learning in the context of business education.

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It is important to acknowledge that the development of this book has been inspired by my own personal fascination with distance learning, and the opportunities that I see it presenting all educators. My own personal experience with the topic stemmed from designing, developing and offering several online marketing courses at Fordham University's Graduate School of Business. The encouraging feedback expressed by the students and the superior learning outcomes exhibited in their academic performance in my online courses over the years encouraged me to further educate myself on distance learning methods. This led to several years of study of the area, several research papers of my own, and eventually a conference hosted at Fordham university in 2012 on the use of distance learning methods in advancing business education. Several of the chapters in this book are based on papers presented at the 2012 conference. I must thank several colleagues at Fordham University who have been instrumental in helping my though process and eventually the development of this book. These include Dr. Fleur Eshghi who has over the years provided me with the wisdom, guidance and constant support on the use of emerging instructional technologies available to faculty. Her deep understanding of the field of education and immense knowledge of instructional technology has helped guide my thinking tremendously. Dr. Steven D'Agustino has also been very instrumental in shaping much of my thinking on how distance education programs can be implemented to optimize student learning. His visionary thinking on the transformation process is unique and highly effective and I thank him for the many hours he has patiently spent with me educating me on the topic. I must also thank Dr. Aditya Saharia who first encouraged and inspired me to pursue the development of distance courses at Fordham. Had it not been for his encouragement I probably would not have found this path. The support and vision of Dean Donna Rapaciolli at Fordham's Gabelli School of Business and Dean David Gautschi at Fordham's Graduate School of Business have also been instrumental in paving the path which led to the development of this book. They have both allowed me to explore new teaching methods and have enabled me to share my experiences, vision and pedagogical approaches with other colleagues at Fordham and elsewhere. Most of all, I would like to thank my father, Dr. Mohammad Estelami who as an esteemed educator and scholar is my role model. His approach to teaching has been exemplary for me. I clearly recall when as a child I would sit in some of his lectures and observe his teaching style, finding myself (and others) mesmerized by his superior communication abilities. Much of my own approach to teaching has been informed by his

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pedagogical approaches which I was fortunate to observe at an early age. Later, as I grew and learned more about his scholarly contributions to his own field of study, I recognized how much catching up I have to do. However it is his supportive role as a loving and caring father that more than anything has made him my role model, and for this reason this book is dedicated to him.

CHAPTER ONE THE ROLE OF DISTANCE LEARNING IN BUSINESS EDUCATION HOOMAN ESTELAMI

The creation of a book on distance learning, specifically focused on business education, is in response to the growing level of participation of business schools around the world in distance modes of education. While business education shares a great deal with education in other fields, there are distinct characteristics of this discipline which warrant a focused examination of the pedagogical approaches used. The field of business, as an educational domain is one of the richest disciplines in the degree of diversity by which it draws from other disciplines. Business students are exposed to a wide range of tools, from sophisticated statistical modeling and accounting tools to the qualitative methods used in understanding human behavior and organizational leadership. In gaining such exposure business students learn from a variety of fields such as statistics, economics, psychology, sociology, and arguably even philosophy. While business education draws from a wide spectrum of scientific and liberal arts disciplines for which distance education methods may have been long established, the focus of business training is considerably different from these fields. For one thing, the criteria by which 'success' is defined are more clearly stated in business settings. For many, business success is measured by objective indicators such as profits and market share, and in some cases, subject to other important objectives such as meeting social responsibility mandates and maximizing customer satisfaction. The very fact that these objectives can be clearly stated and often accurately measured requires business professionals to be focused on the end goals by which organizational success is assessed. As a result, in preparing business professionals of the future, business schools have to develop very tight curricula addressing the pressing needs of businesses for graduates capable of achieving the end goals being sought. Business education is therefore considerably more focused and often leaner than

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educational approaches in other fields, especially those in non-professional domains where learning may occur through introspection and reflection. In contrast business education focuses on teaching students the application of specific tools which make organizations more efficient and competitive. This need for a focused approach to learning clearly differentiates business education from education in many other disciplines. The pressure on business educators to adopt distance forms of course delivery is increasing due to the challenges that environmental forces have brought onto the business world. Many of these challenges relate to technological forces which have made the workforce more efficient and mandate increased technology use by business professionals. Electronic means of information exchange and the ability for global organizations to operate continuously without interruption through their multiple offices around the world spanning the time zones has made the work environment far more agile than a decade ago. Elements of this technology have directly affected corporate training programs allowing organizations to synchronously train their geographically dispersed pool of employees using tools such as webinars and podcasts. The need for change has however become even more pressing in light of the financial crisis of the last decade which resulted in massive workforce reductions. This made it necessary for organizations to demand more output from the remaining employees. The training of these employees has therefore transitioned from costly seminar-based in-person delivery to distance modes whereby less travel and logistical challenges exist and a larger number of employees can be trained. As the economy recovers and as the rate of employment improves, the need to deploy such modes of training for newly hired or rehired employees becomes even greater. The net effect is the expansion of the workforce receiving their training through distance learning modes. For the same reasons that the world of business has transitioned into distance learning modes of employee training, distance learning methods offer many opportunities in formal business education in preparing the future business professional. Business schools have the ability to efficiently deliver their curriculum to a large number of students. Given that research across many fields indicates that distance learning outcomes are generally equivalent, and in some cases superior, to traditional face-toface teaching significant economies of scale can be recognized by business schools that proactively adopt distance learning methods. Furthermore, the reliance on distance learning methods requires students and instructors to focus on applicable content and skill development and enhances the direct practical applications of the disseminated knowledge. This focus on

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application rather than theory has been shown to be an effective form of teaching in other professional fields such as engineering and medicine where distance learning methods are heavily utilized today. It is therefore clear that a book on distance learning focused on business education is long overdue. The accumulation of research in recent years on the effectiveness of different distance learning approaches enables us to gain a clearer perspective on which pedagogical approaches work best. Formal and methodical research on the use of distance learning methods in business education helps inform the science by which educational administrators in business schools can shape and mold the curricula offered to their students. The research can also guide the development of programs that best suit the evolving needs of industry.

The Evolutionary Nature of Distance Education When discussing distance learning, the conversation often focuses on methods, technology and the emerging possibilities arising from mass adoption of communication tools. As a result the common belief is that distance learning is a recent phenomenon. Despite this popular belief, distance learning methods have in fact been in use in a variety of professional fields for nearly two centuries. The earliest documented cases date back to the early 1800s. At that time, several European institutions provided educational services in a range of professional disciplines using correspondence course formats. Some of the offerings included courses in short-hand writing, home economics, graphics design, history and mathematics (Edelson and Pittman 2008). In the United States, the use of distance learning methods by educational institutions was first adopted in the early 1900s. The primary reason for their use was the logistical challenges facing the population, specifically in the mid-western regions of the country (Simonson, Smaldino, Albright and Zvacek 2009). Due to the westward expansion of the population of the United States at that time, states such as Iowa, Ohio, Illinois and Indiana had low density populations and potential students were dispersed over large geographic ranges. This made the task of offering face-to-face instruction a challenge and one that could only be addressed in the more populated metropolitan areas of these states. Serving the specialized educational needs of the remaining population using traditional needs in these states would have been impractical and uneconomical. As a result in the first half of the 20th century a number public and private universities located in the US mid-west utilized the newly introduced technology of radio to broadcast courses over the

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airwaves. Radio enabled these institutions to deliver instruction on a wider geographic scale, far beyond the reach possible through campusbased instruction. Similar uses of the radio technology in supporting distance education have also been documented in European countries. In the 1960s, with the global mass adoption of television, distance education became a more visual means of instructional delivery. Televised courses enabled distance learners to visually connect with their instructors. The visual communications means of television supplemented auditory communications and enhanced the richness of the medium and quality of the educational experience of the students. While broadcast instruction through television allowed the delivery of educational content to the masses, the use of closed-circuit TV in the 1970s and 1980s enabled more specialized instruction to be provided for well-defined and specific educational needs. As a result, students in various levels of schooling could receive instruction independently and the amount of distancedelivered course content grew both in numbers and specialization during this period (Allen and Seaman 2008). In the 1990s distance education grew on a much larger scale. This was primarily due to the mass adoption of the Internet by the public. Though the Internet was originally developed for military applications by the US armed forces, its mass public adoption enabled educational institutions at all levels to deliver both text-based and multimedia based content at speeds beyond any other means possible. Since the turn of the century, the increased bandwidth offered by telecommunications providers has allowed communication speeds to become even greater. The increased bandwidth capacity now enables distance educators to offer synchronous web-based courses and to engage their geographically dispersed students in live communications, thereby eliminating the physical boundaries created by classroom walls. As a result, today online learning affects close to 7 million students in the United States (Allen and Seaman 2013).

The Revolutionary Impact of Distance Learning Methods in Business Education An examination of the current state of distance learning tools in business education reveals that in many schools, technology is accessible at its maximum potential to serve the evolving needs of business students. While business schools vary in the intensity by which they deploy possibilities made available through these tools, the state-of-the-art technologies available today have greatly enhanced the reach and effectiveness of business educators who embrace them. These technologies

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include the use of web-based synchronous communication tools to reach geographically dispersed student populations, advanced courseware systems to automate student performance assessment, the use of artificial intelligence systems by instructors to enhance performance feedback to students, plagiarism detection software, and the application of computer simulations to enable students to experience the dynamics of business decision making. While many of the distance learning tools used by business educators have been applied in other fields, some are more applicable and beneficial in business education. Since business is a field in which the responsibility of managers is to make decisions and to mobilize organizations, the tools that enable the managers of the future (current business students) to enhance their decision making abilities have found a strong foothold in business education, especially in the distance form, where pedagogical efficiency is critical. Distance business education is considerably different from traditional teaching where the face-to-face interactions between the instructor and students can enhance student appreciation for decision making. In a distance education setting, where students are dispersed across geographic areas and the opportunity for in-person interaction does not exist it becomes essential to utilize tools that emulate such dynamics. For example, computer simulations facilitate such an experience and have grown in their use among business schools over the years. Similarly the use of web-based synchronous instruction has been found to present business educators with unique benefits as it allows the efficient delivery of technical instruction to geographically dispersed populations. While the merits of distance learning methods in business education are rarely disputed, what characterizes the potential impact of these methods is what Christensen, Johnson and Horn (2008) refer to as a "disruptive change" in how education is likely to be delivered in the coming decades. We are, at his point in time in the midst of a revolutionary change in how business education is to be delivered. This change will most likely materialize over the next decade and favor institutions that embrace distance learning tools, not necessarily to completely replace all their face-to-face instructional capabilities but to enhance and empower them further. While a decade ago offering online courses was frowned upon by many high-level research-based universities, today many Ivy League universities are active providers of distance courses. It is no longer taboo to be involved in distance education. The embracing of this mode of teaching by the top institutions enables them in the long term to capitalize on more efficient and cost-effective means of offering their services, while at the same time expanding their reach far beyond their traditional geographic range. The resulting competitive

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pressure on the remaining schools will require an accelerated adoption of this mode of instruction and create what is referred to as a tipping point (Gladwell 2002) in the wide acceptance of an innovation such as distance business education. The ultimate question for most business schools is not whether to participate in this transition, but when. Resisting the forces of change, driven by technology, demographic shifts, and the favorable long-term economics of distance learning will in many ways resemble the state of mind that incumbents in many aging and obsolete industries exhibited when facing leapfrogging technological changes. Examples include vacuum tube technology (replaced by transistors), prerecorded music (replaced by digital music), silver-based film (replaced by digital photography) and rental movie distribution (replaced by video streaming services). In all these cases, competitors who were hesitant to embrace the revolutionizing technologies faced dire consequences, reflected by significant loss of market share, downsizing, and in many cases the eventual collapse of the business. There is therefore no reason to believe that business education will be any different from these earlier examples. It is not beyond existing technological capabilities nor beyond imagination to expect that in the coming years a much larger number of business courses would be delivered in combined face-to-face and webcasted formats. This is because the instruction provided by a business professor in the confines of classroom walls can now be broadcasted live to remotely located students, at very little cost. Therefore, the students in the classroom are no longer the only group benefiting from the lecture content, and the lecture material can be accessed live or as recordings for future viewing by large numbers of students across the globe. Modern methods of student assessment and automated feedback and scoring tools can further ensure that students who remotely access the course meet the same academic standards as those in the classroom, thereby assuring equal learning outcomes. This provides business schools with the opportunity to experience leapfrogging improvements in the economics of how business education is delivered. To further accelerate the rate of change, many textbook publishers are taking on an active role in producing the course content that can be integrated into online course formats. Their participation will not only reduce the production cost of online courses, but can also question the role of traditional universities in offering business education, where the delivery of education is no longer a process executed by the professor in a classroom setting. As Christensen, Johnson and Horn (2008) speculate, the opportunities for change are great as are the dangers of ignoring the forces at work.

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Overview of the Chapters in this Book The chapters in this book have been written by a number of expert researchers whose work has focused on specific aspects of distance learning methods in the context of business education. The research produced by these authors has been recognized as contributions to the field of business education and many have been published in top scholarly journals in recent years. Broadly speaking, the themes of the various chapters can be divided into three different topic areas, as outlined below.

Online Education Models Three chapters in this book focus on the administrative mindset as they relate to the offering of online business courses. These three chapters examine the impact of distance business courses to the main stakeholders, namely administrators, students and educators. In the chapter entitled "Important Characteristics in an MBA Program: The Perceptions of Online MBA Students," Eastman, Bocchi and Rydzewski examine how student perceptions of the program are formed in the unique environment of distance MBA programs. Utilizing a survey-based approach the authors identify the role of factors such as student perceptions of program length, costs, course offerings and program quality on how students perceive the online MBA program they are enrolled in. Their work provides guidance to administrators in distance business programs on how to improve MBA students' experience with the business curriculum and program delivery. In the chapter entitled "Why Some Distance Education Programs Fail While Others Succeed in a Global Environment," Rovai and Downey highlight the strategic importance of distance education in the survival of modern educational institutions. By using filings with the U.S. Securities and Exchange Commission (SEC) they identify the drivers of success in offering online programs. Their approach is novel and their findings are highly prescriptive in guiding educational administrators in their resource allocation decisions related to the offering of online programs within and beyond business education. Examining the financial aspect of online MBA programs, the chapter by Estelami and Rezvani entitled "An Exploratory Study of Perceptual and Structural Determinants of the Price of Online Business Education," examines how MBA program characteristics influence revenue streams. Using a database of program design characteristics and tuition levels, the role of factors such as MBA rankings, accreditation status, program length and program format on online MBA tuition levels are examined.

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Course Design The next two chapters in the book focus on the various choices that faculty may have with respect to course design. In the chapter entitled "Cooperative Learning at a Distance: An Experiment With Wikis," Campbell and Ellingson report on the use of wikis to enhance group work in an online MBA setting. They demonstrate how to effectively use a wiki to enhance cooperative learning in the seemingly distance environment of an online accounting course. In the chapter entitled "Toward a Course Conversion Model for Distance Learning: A Review of Best Practices," D'Agustino provides a framework for administrators in both business and non-business programs on how to assess online program delivery. He provides a formal model on how existing face-to-face courses can be transitioned into the online format. This is an important concern for many business schools as the majority of courses in most business programs are in the face-to-face format and the transition to distance modes of education would often require the utilization of such a conversion model.

Technology Use The next set of papers in the book focus on the effective use of distance learning technology to enhance online business education. Slotkin, Durie and Eisenberg in their chapter entitled "A Case Study of the Benefits of Short-term Study Abroad as a Blended Learning Experience" examine how distance education tools can be used in undergraduate business programs. Focusing specifically on study-abroad programs, the authors demonstrate how the strategic deployment of distance learning tools can enhance student experience by providing them access to course content that would not be accessible using alternative means. The authors demonstrate how such a blended approach can be both pedagogically effective and economically feasible in delivering specialized offerings to undergraduate business students. The next chapter by Estelami entitled "An Exploratory Study of the Drivers of Student Satisfaction and Learning Experience in Hybrid-Online and Purely Online Marketing Courses," also focuses on technology use in the context of MBA programs. The chapter examines the boundaries of online education by questioning the extent by which online MBA students should be kept at a distant. In doing so it empirically determining the specific contexts in which hybrid-online courses (whereby a combination of distance teaching and face-to-face instruction is used) are perceived to be superior to purely online courses.

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In the chapter entitled "Effects of LMS, Self-Efficacy, and SelfRegulated Learning on LMS Effectiveness in Business Education," Eom studies how e-learning technologies may impact the educational experience of business students. Using a large database, Eom identifies the drivers of student satisfaction with e-learning management systems and by doing so provides guidance on how such systems can be configured to optimize business students' learning experiences. The next chapter by Small, Dowell and Simmons entitled "Teacher Communication Preferred Over Peer Interaction: Student Satisfaction With Different Tools in a Virtual Learning Environment," focuses on the merits of various forms of interactivity in the online learning environment. The authors examine the myth that student-to-student interactivity is central to the distance learning environment. Using a large survey they find evidence for the greater impact that teacher-to-student interactivity has on students' perceptions of learning for both business and non-business students. In the final chapter of the book, by Aviles and Eastman, entitled "Using Technology Effectively to Improve Millennials' Educational Performance: An Exploratory Study of Business Students' Perceptions," focus is given to the emerging population of business students. Millennials - those born between the late 1970s and the late 1990s -- are commonly believed to interact using communications technology, including those used in online learning, in ways different from students of other age brackets. Due to their unique information processing needs, the authors demonstrate that millennial business students find certain dimensions of distance education highly conducive to their learning. The authors also demonstrate that many of the technology tools assumed by educators and administrators as ineffective are viewed favorably by the millennial business student due their unique mode of learning.

Conclusion The various chapters in this book have provided specialized and methodical focus on issues that administrators and faculty in the business schools of today and tomorrow will need to grapple with. The forces of change mobilized by the efficiencies, economies and pedagogical outcomes of distance learning have made it impossible for business educators to ignore what the future has to hold. As the capabilities of distance learning technology further improve, and as business students become more acclimated with this mode of learning, the demand on faculty and administrators to respond to the change becomes greater. While the needed changes in course delivery may be viewed by some as a

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disruption to the traditional modes of teaching, they also present great opportunities for those who embrace these changes. The ultimate question for many educators in the field of business therefore becomes an issue of timing. If history is to inform us on this matter, one would have to conclude that adaptation sooner is indeed better that later.

References Allen, I.E. and J. Seaman (2013), Changing Course: Ten Years of Tracking Online Education in the United States. Boston: Babson Survey Research Group. Allen, I.E. and J. Seaman (2008), Staying the Course: Online Education in the United States. Boston: The Sloan Consortium. Christensen, C., C.W. Johnson and M.B. Horn (2008), Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. New York: McGraw-Hill. Edelson, P.J. and V.V. Pittman (2008), “Historical Perspectives on Distance Learning,” in W.J. Bramble and S. Panda (eds.), Economics of Distance and Online Learning: Theory, Practice and Research. New York: Routledge. Gladwell, M. (2002), The Tipping Point: How Little Things Can Make a Big Difference. New York: Back Bay Books. Simonson, M., S. Smaldino, M. Albright and S. Zvacek (2009), Teaching and Learning at a Distance: Foundations of Distance Education. Boston: Pearson Education.

CHAPTER TWO IMPORTANT CHARACTERISTICS IN AN MBA PROGRAM: THE PERCEPTIVE FROM ONLINE STUDENTS1 JACQUELINE K. EASTMAN, JOSEPH BOCCHI AND DANIELLE N. RYDZEWSKI

Online education is becoming more common as technology advances. “Web-based classes are becoming popular in business schools as alternatives or supplements to traditional on-campus courses” (Rossin, Ro, Klein, and Guo, 2009, 87). As early as 2001 there were over 986 distanceteaching institutions in 107 countries, showing that the convenience of the online atmosphere provides students who might not have the ability to attend a formal class the opportunity to gain education through online means (Sprague, Maddux, Ferdig and Albion, 2007, 157). “Online learning is growing, with enrollments increasing 33% per year as part of an estimated $2 billion business” (Bocchi, Eastman, and Swift, 2004, 245). Online courses offer the benefit of convenience while being flexible and provide anytime, anywhere learning (Bocchi, Eastman, and Swift, 2004). Thus, online classes are becoming more appealing due to the convenience of online programs. The recession has also helped to increase the number of individuals participating in MBA programs. The online program has given students the ability to keep working, while others hope that if they stay in school the economy may pick up when they get done with their degree (Yoon, 2008). For managers, online MBA programs have given them the opportunity to improve their education and careers, while still working for their company (Kathawala, 2001). Thus, online MBA programs have 1

First published in American Journal of Business Education, Vol. 3, Iss. 4, pp. 3341.

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given non-traditional students the ability to gain their MBA degree without having to change their daily schedules. The purpose of this exploratory paper is to look at what characteristics of an online MBA program are important to online graduate students in terms of availability, program quality, program length, cost, and course curriculum. The paper will examine these characteristics so that we can gain a better understanding of why individuals may choose an online MBA program. We do this through consideration of one online MBA program in-depth, the Georgia WebMBA program. Finally this paper examines if there are any differences in what characteristics are important based on demographic variables.

Literature Review The main aspects for choosing a school for someone considering an online MBA program are accreditation, flexibility, and services (Gerencher, 1998). When choosing, students want to make sure that the school is credible, the program can fit into their schedule, and that the services provided by the program are worth the time and effort. We also propose that the cost of the program and the courses offered are also critical components.

Availability The time constraints of everyday life are a major factor in determining if one can take on an MBA program. Dash (2006) suggests that flexibility of online scheduling is a key factor in the growth of online MBA programs. Having classes online has given those who may not have the ability to travel to campus or have a set schedule to sign up for a class the opportunity to gain an MBA degree without having to change their current schedules. Online graduate education has attracted a variety of individuals that may not have been able to gain an MBA degree through the traditional classroom setting. Many online students say their main priority when it came to selecting a program was convenience (Kerkman, 2004). “Selection differs from one student to another, but the major criteria is, first, the flexibility to enroll in the program and courses” (Abdou, Elmuti, and Kathawala, 2002, 14). “It is estimated that five of six online students are employed and would not be able to attend traditional classes,” which has made online programs more appealing (Bocchi, Eastman, and Swift, 2004, 245). By offering an online MBA program individuals are able to

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enhance their career opportunities and balance their non-work life making the program doable (Bonk, Kim, Lui, and Magjuka, 2005).

Quality The quality of the MBA program is also an important factor that potential students look at when determining where they want to gain their degree. One major concern of gaining a web-based graduate degree is whether or not the quality is equal to that of a traditional program (Bocchi, Eastman, and Swift, 2004). Many experts say that there is no difference between online and traditional MBA’s, and if any, “online distance learning is more rigorous than classroom learning, and draws more disciplined students” (Cowan, 2007, 1). Rossin, Ro, Klein, and Guo (2009) state that research has shown that online courses or campus-based courses show no significant difference between the two. Students want to feel that they are working towards a degree that will give them an advantage in the future. To help students feel more confident about an online degree, finding out if the school is accredited by a recognized accrediting organization, like AACSB, can be helpful (Gangemi, 2005). “Accreditation is the number one verification of the quality of a higher education distance education provider” (Abdou, Elmuti, and Kathawala, 2002, 16). AACSB has developed specific standards for distant education students to insure that the schools are managing resources, advancing business and management knowledge, providing high-caliber teaching of quality and current curricula, cultivating meaningful interaction, and producing graduates who have achieved specified learning goals (Accreditation, 2009). A degree from a school with AACSB certification is looked at as a credible program for gaining an MBA online degree.

Length of Program An online MBA programs also gives individuals the option to participate in an accelerated program, as the flexibility and reduced time constraints give students the opportunity to complete the program faster. Cornell University had a 50% increase in applications for its 2008-2009 accelerated MBA program, a quicker, more condensed version of a traditional 2-year MBA (Dizik, 2008). While one-year online MBA programs are time-consuming, they are cheaper than two-year MBA programs (Dizik, 2008).

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Cost The flexibility of the program is helpful to students choosing a program, but they still have to factor in the cost. The cost of an online degree can range from $5,600 to $115,000 depending on the university (“Should you Get an Online MBA Degree,” 2008). The technology and preparation make the cost of an online MBA program about the same as a traditional program, even without the cost of a physical classroom. Finally, online instruction provides flexibility for students in that it reduces the often substantial transaction and opportunity costs one associates with traditional campus offerings (Terry, 2007, 222).

Courses The course curriculum is another factor in choosing a certain MBA program. When talking an MBA program students want to feel a since of satisfaction in achieving their goal. Student satisfaction with online programs can be based on course rigor, fairness, interactions with professor and peers, and a support system (Endres, Chowdhury, Frye, and Hurtubis, 2009). The satisfaction that MBA students get from a course is considered to have multiple aspects like technology quality, high media richness, positive instructor attitudes, and high involvement and participation, to name a few (Endres, et. al, 2009). The multiple aspects that positively affect students opinion on the online course shows that when students choose a MBA program they are looking at a variety of different course structures that fit their needs.

Research Questions After researching the online MBA program we will be looking into two research questions. RQ1: Which characteristics are most important in an online MBA Program: Availability, program quality, program length, cost, and courses in the curriculum? RQ2: Does importance of characteristics vary by demographic variables?

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Methodology The Georgia WebMBA program is now offered by six University System of Georgia universities: Columbus State University, Georgia College and State University, Georgia Southern University, Kennesaw State University, University of West Georgia, and Valdosta State University. A survey was conducted to determine how the Georgia WebMBA associates viewed the program. All past and current associates (approximately 325 in the ten cohorts) were invited by email to participate in an online survey at www.georgiawebmbasurvey.com; 105 surveys were completed for a response rate of 39.3%. Approximately one-third of the respondents were alumni and two-thirds were current students.

Sample As Table 1 illustrates, we had a strong representation of males, at 67.6%. WebMBA alumni made up 34.3% of the respondents and 65.7% were current students in the program. Approximately three-fourths of the respondents were from the state of Georgia. The median age category was between 31 to 35 years old; almost three-fourths of the respondents were between the ages of 26 and 40. In terms of ethnic group, 81% of the respondents were Caucasians with the next highest being African Americans at 7.6%. The median income category for the respondents was between $50,000 and $100,000 a year. It is important to note, however, that there is a two-year work experience requirement for admission into the Georgia WebMBA program. The median category for work experience was seven to nine years, with ten years of work experience being the mode with almost 42% of the respondents.

Measures To measure the importance of the five characteristics single item measures were created by the author. All the questions were scaled on a (not at all important) to three (somewhat important) to five (very important) scale (see Table 2). To determine if there were significant differences in importance, paired sample t-tests were used. To test if the importance scores varied by demographics, independent sample t-tests were utilized.

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16

Table 1: Descriptive Information on Sample Items Gender: Male Female

67.6% 32.4%

Age at Enrollment: 18-25 26-30 31-35 36-40 Over 40

14.3% 29.5% 23.8% 21.0% 11.4%

Income at Enrollment: Less than $25,000 $25,001- $50,000 $50,001- $100,000 $101,000- $150,000 More than $150,000

2.9% 33.3% 49.5% 11.4% 2.9%

Georgia Resident: Yes No

75.2% 24.8%

Years of Work Experience: 0-1 2-3 4-6 7-9 10+

1.0% 21.0% 15.2% 21.0% 41.9%

Ethnic Group African American Caucasian Asian Hispanic Other

7.6% 81.0% 5.7% 1.9% 3.8%

Alumni Student Breakdown: Alumni 34.3% Current Students 65.7%

Important Characteristics in an MBA Program

17

Table 2: Measurement Items Items/(Mean/SD) Course Availability The availability of online learning was a strong determinant when choosing an MBA program. (4.63/.639) Quality of Program The quality of the online program was a strong determinant when choosing an online MBA program. (4.33/.828) Length of Program The length of the course program was a strong determinant when choosing an online MBA program. (4.21/.886) Cost The cost of tuition was a strong determinant when choosing an online MBA program. (4.20/.934) Course in Curriculum The courses in the curriculum was a strong determinant when choosing an online MBA program. (3.98/.930)

Results In looking at the mean scores of the five items measured by importance, the rank in terms of mean importance score was Availability (4.63 mean, .639 standard deviation(sd)), Quality (4.33 mean, .828 sd), length (4.21 mean, .886 sd), cost (3.98 mean, .980 sd), and courses (3.98 mean, .930 sd). Paired t-tests were then run to see if there were significant differences between the different ranked items (see Table 3). The results illustrate that the mean difference between Availability and Quality was significant (t 3.30, p = .001), but not between Quality and Program Length or between Program Length and Cost. Finally, the mean difference between Cost and Courses was significant (t 2.126, p = .036). These results illustrate that the importance items broke down into three tiers. The most important item was Availability. Then, the next tier was Quality, Program Length, and Cost. Our results suggest that the respondents saw all three of these items as being similar in terms of

Chapter Two

18

importance. The final tier in importance was Courses. It is important to note that even the lowest rated item in importance (Courses) still received a mean importance score of close to four on a one to five scale. Table 3: Paired Sample T-tests Pair

Mean Difference

SD

T

Df

Sign.

Availability/ Quality

.295

.909

3.30

104

.001

Quality/ Program Length

.124

1.034

1.23

104

.223

Program Length/ Cost

.010

.904

.108

104

.913

Cost/Courses .036

.219

1.056

2.126

104

We then looked at if there were significant differences based on demographic differences looking at gender, years work experience, age, and income level upon starting the program. There were few demographic differences in importance (see Table 4). For years work experience, availability was more important to those who had more work experience (t , p). This result makes sense given that those who are advancing in their careers may have more limitations in terms of continuing their education. The only other differences were in gender in which for females quality (t , p), program length (t, p), and courses (t, p) were more important than they were for men.

Discussion The results suggest that multiple factors are important to online MBA students as they require multiple needs to be addressed from an online MBA program. The research shows that availability, quality, program length, cost and courses in the curriculum are factors that vary in importance to students when choosing an MBA program. In terms of availability, it was significant for all respondents and it was rated higher then the other factors. Having a program that can fit into the schedules of the students is very important in choosing an MBA program

Important Characteristics in an MBA Program

19

whether it is online or on-campus. Individuals with over 6 years of work experiences rate availability higher than students with less then 6 years. The respondents felt that the quality, program length, and cost of the MBA program are equal important characteristics when choosing an MBA program. A way of determining the quality of an MBA program is by look for the AACSB accreditation. The research found that AACSB accreditation was significantly important when comparing online MBA degree programs. Thus, having AACSB accreditation is a critical aspect when promoting the quality of the program to potential students. Cost was considered important as we found those students that are time conscious are also cost conscious so the program has to address both factors. Students with over 6 years of work experience rated cost higher then those with six years or less work experience. The courses in the curriculum were considered to be important when choosing an MBA program because it was rated lower then the other characteristics. Females rated the importance of he program courses higher then males which shows that females are more likely to look at the courses offered in choosing an MBA program then men do. The contribution this paper made is that we created items that others can utilize in measuring the determinants in selecting online education. Our results suggest the need to stress availability, quality (particularly in terms of AACSB accreditation), program length, cost and courses curriculum in promoting online programs. Additionally, our results suggest they want good value for the time, effort, and money being spent on an online MBA program.

Limitations and Future Research There were certain limitations that we encountered during the development process. A major limitation in the survey was that only respondents involved in online education were examined and data were obtained from only one online MBA program, the Georgia WebMBA. Future research could compare results from different online MBA programs. Additionally, comparisons could be made between on-campus and online MBA students. Looking at on-campus MBA programs and comparing them to online students will help to determine the differences between the students. Research could also examine how potential MBA students determine quality as this will help in developing and marketing online MBA programs. Finally, researching information on the perceived differences between online courses and on-campus MBA programs would

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be helpful for future research. Thus, this study hopes to spur further discussion and analysis on the critical factors in online MBA education. Table 4: Independent Sample T-Tests (Equal Variances Assumed) Gender, Years Work Experience, Age, and Income Mean

SD

N

T

DF

Sign.

.665 .589

71 34

-.529

103

.598

.909 .557

71 34

-2.223

103

.028

.937 .706

71 34

-2.128

103

.036

.995 .799

71 34

-.713

103

.478

.961 .819

71 34

-1.966

103

.052

Gender Male Female Male Female Male Female Male Female Male Female

Availability 4.61 4.68 Quality 4.21 4.59 Length 4.08 4.47 Cost 4.15 4.29 Courses 3.86 4.24

Years Work Experience (7+ years work experience versus under 7 years work experience) Availability 7+Years 4.76 .498 66 Under 7 Years 4.41 .785 39 2.775 103 .007 Quality 7+Years 4.32 .914 66 Under 7 Years 4.36 .668 39 -.243 103 .809 Length 7+Years 4.21 .953 66 Under 7 Years 4.21 .767 39 .039 103 .969 Cost 7+Years 4.20 .948 66 Under 7 Years 4.21 .923 39 -.043 103 .966 Courses 7+Years 3.97 .960 66 Under 7 Years 4.00 .889 39 -.161 103 .873

Important Characteristics in an MBA Program Age (Those over 36 years old versus those under 36 years) Availability Those over 36 4.73 .520 59 Those under 36 4.50 .753 46 1.84 103 Quality Those over 36 4.30 .933 59 Those under 36 4.37 .679 46 -.394 103 Length Those over 36 4.14 .973 59 Those under 36 4.30 .756 46 -.197 103 Cost Those over 36 4.17 .931 59 Those under 36 4.24 .947 46 -.377 103 Courses Those over 36 3.93 .980 59 Those under 36 4.04 .868 46 -.606 103 Income (Those over and under $50,000 annual income) Availability Over $50,000 4.72 .517 67 Under $50,000 4.47 .797 38 1.893 Quality Over $50,000 4.27 .914 67 Under $50,000 4.45 .645 38 -1.063 Length Over $50,000 4.21 .930 67 Under $50,000 4.21 .811 38 -.009 Cost Over $50,000 4.27 .931 67 Under $50,000 4.08 .941 38 1.00 Course Over $50,000 3.93 .942 67 Under $50,000 4.08 .912 38 -.812

21

.069

.694

.335

.707

.546

103

.061

103

.290

103

.993

103

.320

103

.419

References Accreditation (2009). AACSB International. Obtained through the Internet: http://www.aacsb.edu/accreditation/, [accessed 9/13/2009]. Abdou, K., Elmuti, D., & Kathawala, Y., (2002). The Global MBA: A Comparative Assessment for Its Future. Journal of European Industrial Training, Vol. 26, No. 1. pp. 14-23. Bocchi, J. & Eatman, J. & Swift., (March/April 2004). Retaining the Online Learner: Profile of Students in an Online MBA Program and Implications for Teaching Them. Journal of Education for Business, Vol. 79, No. 4, pp. 245-253.

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Bonk, C.J., Kim, K.J., & Liu, s. (2005). Online MBA Students’ Perceptions of Online Learning: Benefits, Challenges, and Suggestions. Internet & Higher Education, Vol. 8, No. 4, pp. 335-344. Cowan, K. (2007). Online vs. Traditional MBA’s: What’s the Difference? Obtained through the Internet: http://blogs.payscale.com/content/2007/08/payscale---onli.html, [accessed 9/8/2009]. Dash, E. (2000). The Virtual MBA: A Work in Progress. Business Week, 3701, 96. Obtained through the Internet: Academic Search Complete database [accessed 6/2/2008]. Endres, M., Chowdhury, S., Frye, C., & Hurtubis, C. (2009). The Multifaceted Nature of Online MBA Student Satisfaction and Impacts on Behavioral Intentions. Journal of Education for Business, 84(5), 304-312. Obtained through the Internet: Academic Search Complete database [accessed 11/2/2009]. Gangemi, J. (2005). Do Online MBAs Make the Grade?. BusinessWeek Online, N.PAG. Obtained through the Internet: Academic Search Complete database [accessed 9/20/2009]. Dizik, A. (2008). Accelerated MBAs Are Gaining Ground. BusinessWeek Online. Obtained through the Internet: Academic Search Complete database [accessed 9/20/2009]. Gerencher, K. (1998). MBA programs go online. Infoworld, Vol. 20, No. 51, pp. 71-73. Kerkman, L. (2004). Convenience of Online Education Attracts Midcareer Students. Chronicle of Philanthropy, 16(6), 11-12. Obtained through the Internet: Academic Search Complete database [accessed 6/2/2008]. Rossin, D., Ro, Y., Klein, B., & Guo, Y.. (2009). The Effects of Flow on Learning Outcomes in an Online Information Management Course. Journal of Information Systems Education, Vol. 20 No. 1, pp. 87-98. Terry, Neil. (2007). Assessing Instruction Modes for Master of Business Administration (MBA) Courses. Journal of Education for Business, Vol. 82 No. 4, pp. 220-225. “Should you get an Online MBA Degree? (2007). Obtained through the Internet: http://www.dirjounal.com/guides/should-you-get-an-onlinemba-degree/, [accessed 5/29/2008]. Sprague, D., Maddux, C., Ferdig, R., and Albion, P. (2007). Online Education: Issues and Research Questions. Journal of Technology and Teacher Education, Vol. 15, No. 2, pp. 157-167.

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Yoon, H. (2008). Economy slowing, but MBA Apps on the Rise. In The Daily Pennsylvanian. Obtained through the Internet: http://media.www.dailypennsylvanian.com/media/storage/paper882/ne ws/2008/02/13/News/Economy.Slowing.But.Mba.Apps.On.The.Rise3206004.shtml [accessed 6/2/2008].

CHAPTER THREE WHY SOME DISTANCE EDUCATION PROGRAMS FAIL WHILE OTHERS SUCCEED 1 IN A GLOBAL ENVIRONMENT ALFRED P. ROVAI AND JAMES R. DOWNEY

NAFSA: Association of International Educators predicts that by 2020, from a year 2000 base, global higher education demand for seats will double to 200 million, suggesting a growth market in international higher education (Redden, 2009). Much of this growth will be in distance education. Consequently, an increasing number of universities are transforming themselves from single-mode on-campus universities to dual-mode universities as they acknowledge the importance of distance education and the opportunities it provides. Global distance learning is facilitated by the fact that many countries teach English in addition to their own native languages, making English a de facto standard in the global distance education marketplace. International students not only become part of the fabric of university and classroom life, but the curriculum incorporates global learning themes across disciplines (Rovai, 2009). Thus, online cross-border distance education provides an additional opportunity for achieving global competence over the more traditional global learning experiences universities offer, such as organizing study abroad opportunities, internationalizing the faculty, creating foreign immersion programs, and organizing international symposia and colloquia. Providing a truly global virtual classroom in which culturally diverse students participate from their own countries provides a powerful academic environment for achieving global competence. The economic potential of the global higher education market has attracted numerous higher education providers, with many operating on a for-profit basis. Consequently, the global learning environment helps fuel

 ͳFirst

published in Internet and Higher Education, Vol. 13, Iss. 3, pp.141-147.

Why Some Distance Education Programs Fail

25

the growing competition in higher education based on economics and consumerism rather than the political, cultural, and academic rationales that previously were the main driving forces (Kälvermark & van der Wende, 1997; Rovai, 2009). As competition increases, institutions are moving toward reducing costs as well as specializing their curricula in order to compete more effectively for students. In a globally engaged institution, academic solutions must take into account student differences arising from different national cultures, different educational backgrounds, dissimilar national teaching practices, and diverse student demographics and educational needs. Business and technology solutions must recognize that technology is expensive and many global markets are low cash and low technology. Moreover, as online enrollments increase, technology support becomes more expensive and more complex. While many online programs are successful, other programs are of lesser quality and sometimes fail due to pressures arising from the increased competition for students described above coupled with weaknesses in one or more of the factors described below. For example, NYU Online, a commercial venture of New York University, closed as a result of economic conditions (Carnevale, 2000), an outcome shared by the US Open University, UMUConline (a for-profit entity created by University of Maryland University College), Temple University’s Virtual Temple (Carlson & Carnevale, 2001), and others. More recently, nearly a year after its launch, an $8.6 million online campus created by the University of Illinois had just 121 students enrolled in only five degree programs – far short of the 9,000 students that officials had anticipated within the project’s first five years (Carter, 2009). The purpose of this article is to draw primarily from the professional research literature in order to explore the major reasons why some programs fail to meet their goals while others thrive.

Discussion The failure of many distance education initiatives can be attributed to a variety of reasons that ultimately result in overwhelming financial problems. The major factors discussed in this article are: x x x x x

Factor #1: Planning Factor #2: Marketing and recruitment Factor #3: Financial management Factor #4: Quality assurance Factor #5: Student retention

26

Chapter Three

x Factor #6: Faculty development x Factor #7: Online course design and pedagogy Deficiencies in any of these factors can adversely influence an otherwise successful online learning program. Each factor is examined, in turn, starting with planning.

Factor 1: Planning Although schools in the past have competed with each other in recruiting students, what makes the situation different today is the increased ability of universities to expand their reach both nationally and globally by means of online programs, the proliferation of for-profit providers that use business models to manage pricing, and the expectations of students who are accomplished information age consumers and are able to select a program across a large and diverse higher education marketplace (Rovai, Ponton, & Baker, 2008). Additionally, many institutions have established a worldwide presence by actively marketing online programs for cross-border delivery and even creating overseas learning centers. Consequently, online learning represents both an opportunity and a threat for universities in the competitive environment of academic globalization. The result is increased pressure for higher education to adopt competitive business practices in order to survive. One such practice is renewed emphasis on planning. A former Merrill Lynch analyst warns that, because “the Internet is all about disproportionate gain to leaders,” eventually only about 100 leading universities will thrive in the higher education market while the other 3,400 will have “to make themselves relevant to the new economy” (Pittinsky, 2003, p. 2). Thus, universities must evolve and adapt to changing environmental conditions in order to remain relevant. Effective planning can facilitate this transformation. The result is a strategic vision and strategy to achieve this vision that are created at the intersection of an external appraisal of the threats and opportunities facing the institution in its environment and an internal appraisal of the strengths and weaknesses of the institution (Mintzberg, 1994). A properly specified strategic vision statement outlines the institution’s aspirations in sufficient detail to inform planning and budgeting. No planning or poor planning can lead to programs that waste time and money, are ineffective and unreliable, lack robust financial sustainability, and ultimately lead to failure. If increasing international student enrollment is a university goal, it becomes important to organize the institution to support international

Why Some Distance Education Programs Fail

27

strategic enrollment management in order to attract international students that fit well with the institution and provide the necessary financial and academic support to maintain optimum recruitment, retention, and graduation rates. Increasingly, institutions are finding that forming strategic alliances or partnerships also have an important role in their overall strategies, especially if the institution’s strategic vision encompasses cross-border provision. When formed, alliances and partnerships focus on the specific needs of both the institution and the target population. They allow universities to take advantage of opportunities too great to tackle on their own, such as recruitment of international students; to spread risk; to capitalize on each others’ branding, geographical presence, and experiences; and/or to facilitate creation of local or regional study centers, if needed (Rovai, 2009). For example, Australia’s IDP Education, which recruits one of every five international students who studies in Australia, advertises its services as a cost-effective way for universities to extend their reach overseas (McMurtrie, 2009). One example of a successful association is the University of Liverpool / Laureate Online partnership. Laureate Online designs and delivers online programs worldwide, giving students personal and technological support throughout their studies. Meanwhile, the University of Liverpool is responsible for the academic quality of all the programs and awards students their degrees. This approach in the UK education system is known as validation and is consummated by a validation agreement, where one institution serves as the teaching arm of a second, accredited institution, with the second institution awarding the degree or diploma. To determine if a partnership is beneficial to an institution, it must examine how the proposed association will contribute to achieving its strategic vision as well as the capacity that the partnership presents for doing so. Strategic planning helps ensure that all relevant opportunities and threats are identified and addressed in a systematic fashion. It is a prerequisite for a successful online program but does not, by itself, guarantee success. Indeed, planning is likely to contribute to program failure when it does not accurately identify what the institution should do (i.e., failure to develop a realistic strategic vision), major stakeholder buyin is weak, its strategy is off the mark, and/or its strategy is not executed effectively, e.g., weak quality assurance and institutional effectiveness.

Factor 2: Marketing and Recruitment A symbiotic relationship exists between planning and marketing that adds strength to each process. Marketing and recruiting a critical mass of

28

Chapter Three

qualified and motivated students is essential to the success of distance education programs. Without a sufficient number of students enrolling, and staying enrolled, financial sustainability cannot be achieved (Bates, 1999). For-profit institutions, in particular, pursue an aggressive online affiliate marketing approach. Affiliate marketing is an agreement between an affiliate that agrees to feature online content or advertisement designed to drive traffic to another site (i.e., the university Web site). In return, the affiliate site receives reimbursement based on the traffic it sends to this site. Each school must align its marketing and recruiting strategy with its strategic vision. For example, Tufts University energized its internationalalumni base to help support its global marketing and international strategic enrollment management efforts. Marketing and recruiting plans for distance education must take into account the school’s distinctive place in the distance education market relative to competing programs (Foskett, 2002). This means developing or refining a brand, as appropriate. Branding is important to set a specific institution apart from its competition and to get prospective students to select its online program over the competition. “Some prospective students are looking past the famous schools’ brand promise and buying into the brands of other institutions. These days, virtually all students are brand shoppers — but not all colleges have developed effective brand strategies” ȋLockwood & Hadd, 2007, p. 2, ¶5). A natural market for distance learning lies within the fastest-growing segment of the higher education industry: continuing and professional education for working adults. A school’s branding and geographical location play a significant role in attracting online students. Carnevale (2007) reports 64% of students enrolled in an online program live within the same geographic region as the institution offering the program, and 36% of them live within 50 miles. However, each institution must determine its own focus and strategic position and identify its strategy for achieving market advantage. According to Michael Porter (2003), strategic positioning means performing different activities from rivals’ or performing similar activities in different ways. An institution can adopt various strategies alone or in combination to achieve a favorable strategic position. Porter categorizes these strategies as follows: x Cost leadership strategies based on achieving a lower cost position than the competition, e.g., low-cost tuition and tuition discounting. x Differentiation strategies in which the online program is viewed as unique, e.g., by program design, customer service, or institutional

Why Some Distance Education Programs Fail

29

reputation and branding.

x Focus strategies in which the institution targets a specific type of student or student need rather than competing in the mass market. Institutions adopting a cost leadership strategy seek operational efficiencies by such actions as eliminating non-self-supporting departments, increasing activities that generate revenues, outsourcing student services that might be provided by others at less cost, and adjusting or creating programs that respond to student interests, talents, and desires in order to operate competitively. For example, at the end of the 2008 fiscal year, Capella University, a 100% online school, reported only 178 of its 1,140 faculty members were full-time. Alternatively, institutions adopting a differentiation strategy emphasize program distinctives to set its program apart from others, e.g., emphasizing global learning and competence; distributing iPods to students; providing job placement services; giving generous credit for work experiences; and reducing the time to obtain a degree. Finally, institutions adopting a focus strategy seek to minimize competition by targeting a specific market or niche with specialized programs instead of competing in the mass marketplace, e.g., Christians and/or working adults in specific vocational disciplines. Berge (2000) describes the strategy of many for-profit institutions as “picking the low hanging fruit” by offering the more marketable courses, e.g., business and computer science, and leaving the “heavy lifting” type of courses to traditional academe. What must be avoided, in Porter’s (2000) view, is adoption of a “stuckin-the-middle” strategy in which the institution loses the high volume students who seek low prices and also loses high-margin students to the universities that focus on high-margin targets. As a corollary, the institution cannot be all things to all people. Porter (2000, 2003) asserts that such a strategy – unmanaged and without focus – is a recipe for mediocrity and cannot lead to a sustainable competitive advantage. Institutions must avoid the “build it and they will come” mentality if they desire a successful distance education program. Indeed the cost associated with marketing and recruiting is one of the major factors that institutions must consider when contemplating entry into the distance learning market. This and other financial considerations are discussed next.

Factor 3: Financial Management The economic collapse of 2008 significantly impacted the financial situation of many universities. With endowments down as much as 30-

30

Chapter Three

40% and support from public sources at the state level reduced, many institutions are looking for other ways to improve their revenue stream and bottom line. Global distance education is an attractive option, especially as enrollment demand grows. Even before 2008, many universities considered an online program, often thought of as a “cash-cow,” as a way to increase revenue. However, in order to be successful, institutions must understand the costs and business practices involved in entering this market. The days of easy entry into the distance education market are long over. One of the first financial decisions is whether the online effort is to be organized as a separate division or integrated within the existing structure of the institution. Often this decision is driven by enrollment goals where larger enrollments often lead to a separate entity and cost center (Drury, 2007). Schools offering online programs also need to spend substantial amounts of money on marketing and recruiting efforts in order to compete successfully for new students. This is arguably the most underestimated aspect of entry into the online market. A good way to estimate these costs is to examine the marketing and recruiting investments that the major forprofit providers make in order to expand enrollments. This article analyzes six US-based for-profit higher education providers in order to quantify marketing and recruiting costs: x Apollo Group – includes the University of Phoenix, a mega university with over 300,000 students, as well as Western International University. x Career Education Corporation – a multinational corporation with approximately 100,000 students across the world; includes American InterContinental University Online and Colorado Technical University Online. x Strayer University – includes approximately 44,000 students who attend classes at more than 65 campuses or online. x Corinthian Colleges, Inc. – includes more than 69,000 students at over 100 campuses within the US and Canada. x Capella Education Company – includes over 28,000 students representing 45 countries. x Grand Canyon University (GCU) – includes approximately 25,000 students. Information about finances, especially marketing and recruiting costs, were obtained from the annual Form ͳͲǦ reports filed by each of these providers as required by the US Securities and Exchange Commission (SEC Annual Reports, 2009). It should be noted that these schools have ambitious

Why Some Distance Education Programs Fail

31

growth plans. Shown in Figure 1 is the enrollment growth rate for the six schools for the period 2004-2008. The percentages are year-to-year growth at the end of the fiscal year as reported by each school. GCU is the newest distance education entry examined and has a significantly higher growth rate. 70%

60%

Enrollment Growth Rate

50%

40%

GCU

30% Capella 20%

Strayer

10%

Apollo Corinthian

0%

Career Ed -10% 2004

2005

2006

2007

2008

Year Figure 1.

These providers spend millions of dollars annually to attract new students. The Apollo Group in 2008 invested over $805 million dollars (or 26% of net revenue) in marketing and recruiting on net revenue of $3.14 billion dollars. This number is in fact typical of the investment necessary. Shown in Figure 2 is the marketing and recruiting spend as a percent of net revenue for all six providers. What is striking about these data is that six very different schools (enrollment size, degree focus, online only vs.

Chapter Three

32

mixed) spend between 20-30% of net revenue on new student acquisition. Again, GCU stands out as higher due to its newness and more aggressive marketing. Any institution desiring substantial growth will almost certainly have to plan on a similar investment of resources. In fact, one strategy often employed is to make a significant upfront investment to underwrite enrollment growth sufficiently so that the online programs become self-sustaining more quickly. 45%

% Net Revenue for Marketing

40%

GCU

35%

Capella 30%

Career Ed Corinthian

25%

Apollo Strayer

20%

15% 2005

2006

2007

2008

Year Figure 2.

A different and perhaps more useful way for institutions to use this information is to look at the marketing and recruiting cost associated with the overall enrollment of the school. This statistic is found by dividing the enrollment at the end of the fiscal year into the total expenditure for

Why Some Distance Education Programs Fail

33

marketing and recruiting. Presented in this way, the statistic provides a value that accounts for new student enrollment and attrition, to include graduation. The results for the six providers are presented in Figure 3. The weighted average based on total enrollment for 2008 is $2,788 ($3,551, if one excludes the Apollo Group with its total enrollment of 362,100 students). This figure provides a reasonable planning factor for determining the necessary investment to achieve a desired enrollment. $6,000

Career Ed

$ / Enrolled Student

$5,000

Corinthian $4,000

Capella $3,000

GCU $2,000

Apollo

Strayer

$1,000 2005

2006

2007

2008

Year Figure 3.

Additional financially driven considerations also need to be addressed. Most schools that are producing net positive revenue use a larger number of adjuncts, since the gap between pay for adjunct and full-time faculty is large. Large for-profit universities, for example, are built on a large pool of interchangeable, disposable adjuncts. For example, in 2008 GCU

34

Chapter Three

reported a total of 1,760 faculty for both on-campus and online programs and only 49 of those were full-time (Grand Canyon University, 2008). Adjuncts are generally employed as independent contractors and may or may not be well integrated into the life of the institution. The marketing and recruiting enterprise may need to be outsourced to gain efficiencies. Many schools also develop dedicated staffs to support the online enterprise both in admissions and student advising. Indeed, although universities may desire distance education to provide positive revenue, it can take many years before this goal is realized. It is not uncommon for schools to make large initial investments in the form of venture capital to underwrite the growing operation and allow it to become profitable. It is in this area that a well developed strategic and business plan is critical for success. Again, GCU provides a useful case study in this regard. Formerly a non-profit Christian institution, GCU became a for-profit enterprise in 2004 and executed an Initial Public Offering in November 2008. The scope of the investment to grow enrollment is significant. Shown in Table 1 below is information concerning GCU’s enrollment growth, revenue, marketing and recruiting spending, and profit. Perhaps most telling is that after approximately five years of operation the net cumulative profit is negative $11.7 million dollars. Revenue trends suggest the university will become profitable after six to seven years of operation. As distance education has become more pervasive, the rate of growth in enrollment has slowed. In 2008, the average growth rate declined to approximately 13% (Sloan-C, 2008). As a result, it will become increasingly expensive to attract new students. When enrollment growth declines, retention of current students becomes more critical and demands greater effort and investment. Additionally, online programs that do not provide adequate quality assurance will come under increasingly competitive pressure.

Factor 4: Quality Assurance Successful online programs require quality assurance and accreditation to attest to its quality and to open the door for student financial assistance and employer recognition. Quality assurance is carried out on a regular basis to monitor and improve online program outcomes so that the educational services satisfy program goals and meet student needs. An effective quality assurance strategy for online programs addresses a wide range of processes, to include faculty selection and qualifications, faculty professional development, and student support services in addition to student outcomes.

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Table 1. Selected Enrollment and Financial Information for Grand Canyon University 2004 2005 2006 2007 2008 Total 4,993 8,422 10,662 14,754 24,636 enrollment % growth 66% 69% 27% 38% 67% Online 3,141 6,212 8,406 12,497 21,955 enrollment % growth 98% 35% 49% 113% Net revenue* $25,629 $51,793 72,111 99,326 161,309 M&R* $9,735 $14,047 $20,093 $35,148 $65,551 M&R % of 38% 27% 28% 35% 41% revenue Net profit* ($416,212) ($4,286) $598 $1,526 $6,685 Cumulative net ($16,212) ($20,498 ($19,900 ($18,374 ($11,689 profit* ) ) ) ) Net profit as % (63%) (8.3%) 0.8% 1.5% 4.1% of net revenue M&R $1,950 $1,668 $1,885 $2,382 $2,661 $/enrolled student Notes: * = in thousands; total enrollment in 2003 = 3,000; M&R = marketing and recruiting; negative numbers are enclosed in parentheses. Source: SEC Form 10-K Annual Filings.

Competition and the rise of consumerism in academe place pressures on institutions not only to cut costs, but also to improve the quality of their educational programs. Presently, the quality of online programs varies considerably, suggesting weaknesses in quality control for some programs. A meta-analysis of 232 comparative studies conducted by Bernard et al. (2004) concludes that while there is no average difference in student achievement between distance and traditional classroom courses, the results demonstrate wide variability. In other words, a substantial number of [distance education] applications provide better achievement results, are viewed more positively, and have higher retention rates than their classroom counterparts. On the other hand, a substantial number of [distance education] applications are far worse than classroom instruction. (p. 406)

These findings suggest that some institutions are not adequately attentive to quality control regarding educational outcomes or may be sacrificing traditional standards as they seek to lower costs in the delivery

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of courses. Such inattentiveness can lead to program failure. Additionally, many national systems for quality assurance, accreditation, and recognition of qualifications do not address the quality of cross-border provision. These national systems need to develop appropriate policies and procedures to cover both national and foreign providers and programs in order to achieve the full benefits academic globalization.

Factor 5: Student Retention Although the growth of online learning in higher education is well documented, a number of studies (e.g., Brady, 2001) provide evidence that course-completion and program-retention rates are generally lower in distance education courses than in face-to-face courses. A major reason is that distance education programs attract a higher percentage of nontraditional students. The National Center of Educational Statistics (2002) estimates 50% of nontraditional undergraduate students will leave college without earning a degree after three years, compared to 12% of traditional-aged students. Additionally, 27% of nontraditional students will drop out in their first year and only 51% of all students who begin university study in the US complete their degree at their initial institution within six years. Nontraditional distance education students have many risk factors that work against retention, such as varying degrees of mismatch between the difficulty of online courses and students’ academic preparation, family and peer influences, the high degree of self-directedness required for most online programs, the interaction of course design and cultural issues, the need to adapt to computer-mediated communication, economic factors, variability in the level of employer support, and time management and technology issues (e.g., Rovai & Wighting, 2005). Moreover, specific distance education programs may exacerbate these risk factors by providing poor student support services. Students in distance learning programs may be more likely to experience isolation and alienation from the institution because of their physical separation from the school and its services and from other students. Tinto (1987) argues two types of support are necessary to promote retention, namely academic and social support. Insufficient interactions with peers and faculty and differences with the prevailing value patterns of other students are likely to result in students who feel they do not “fit in” socially and, consequently, feel isolated, have low sense of community, and are at-risk of withdrawing. In a global virtual classroom, foreign students are especially at risk of social alienation

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because of the differences between their cultural orientations and behaviors and those of the majority culture represented in the classroom. Promoting social support helps students “fit in” and fosters a desire to persist in their studies. Academic support is provided by student and faculty support services, by individual faculty members, and by the use of financing and incentive schemes to encourage student retention. Institutions must take on the task of faculty development and recognize that most faculty members are not trained to teach online. As a result, universities must provide faculty with the pedagogical and assessment skills they need to establish conditions in their online classrooms that promote student involvement, learning, and retention (Tinto, 1987).

Factor 6: Faculty Development The purpose of faculty development is to engage a range of faculty who learn together and seek to advance their skills. However, many faculty development programs are designed as a one-size-fits-all solution. Few programs view faculty as adult learners and consider their prior knowledge and experiences. Some faculty members teach their first online course or experience a globally diverse online learning community without any prior online teaching or learning experiences and with minimal faculty development that is often limited to technology use. This is especially true for adjuncts. Although many large for-profit institutions do an excellent job acclimating adjuncts to the online environment and screening out those not well suited for the online medium, they also have no qualms dropping faculty whose teaching evaluations fall below a certain threshold. Poor faculty development can adversely influence online program quality, lead to student dissatisfaction and attrition, and adversely affect the school’s reputation and branding. All faculty members have needs that faculty development should address. These needs include thorough orientations with school culture, knowledge of school policies and procedures, understanding student characteristics and needs, assistance with online course design and pedagogy, recognition for quality work, development of a sense of collegiality, and identification of online faculty performance expectations. Effective faculty development responds to these needs. An investment in faculty development is essential for delivering quality online learning programs. However, outside of a few notable examples, such as the University of Maryland’s faculty teaching program for online courses, effective online faculty development programs in higher education are the exception (Levine & Sun, 2002).

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Best practices for online faculty development include using online media for faculty participation in professional development activities so faculty can become familiar with the online environment as a learner, experience a master online teacher, and practice moderating online discussions. Effective faculty development programs also create communities of practice that encourage peer relationships to continue outside the formal faculty development environment. Perhaps most importantly, effective faculty development programs include a mentoring component, especially when involving adjunct faculty and junior full-time faculty (Lyons, 2007). However, the best faculty development program will not succeed unless the curriculum is designed with online delivery in mind.

Factor 7: Online Course Design and Pedagogy Students and teachers are in a fundamentally different starting situation with online learning and teaching, creating essentially different learning spaces that are qualitatively unlike those in traditional classroom settings (Peters, 2003). Consequently, it is important to design an online course with a clear understanding of how online courses differ from traditional face-to-face courses, as summarized below. x Online course design and teaching require an extensive investment of time; more upfront planning and preparation is required as online teachers must create course materials prior to course start. x Online learning comes with a different set of expectations for teachers, including 24/7 availability, responding to e-mails from students, and tutoring students. x Student-content, student-student, and student-teacher interactions change dramatically in an online learning environment as a result of computer-mediated communication. x Engaging students and facilitating and moderating online discussions effectively require specialized skills on the part of the teacher. x Assessment of student learning online is more complex because of issues regarding identity security and academic honesty and when direct observation of the student by the teacher is the best assessment approach. x Online teachers and students must develop personal time management skills. x Online courses require teachers who are technologically competent and can use technology effectively to facilitate student learning.

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The major impact of these differences is that online faculty should spend less time teaching and more time designing learning experiences for their students. Problems occur when traditional face-to-face courses are presented online with few, if any, changes or teachers are required to develop and present an online course with little or no online course design or teaching preparation. This situation is most likely to occur at institutions that have weak faculty development and/or quality assurance programs. Careful attention to online course design and pedagogy are needed to ensure development of a successful program. A well-designed online course offers an active-learning environment in which meaning is socially negotiated and students are actively engaged in the learning process. Consequently, the teacher’s skills in facilitating and moderating online discussions and providing opportunities for collaborative group work also influence learning outcomes. Limiting an online program to a pedagogically narrow approach without due consideration of the educational needs of diverse students will hurt the program and ultimately the institution. Additionally, as an artifact of globalization, educational providers and students are moving across borders as the world enters an era of global distance education. Effective cross-culture and cross-border communications are essential elements of effective teaching and learning in this global environment. There must be a partnership in the classroom for culturally-responsive teaching to be effective. Students must take ultimate responsibility for their learning, but teachers must also accept responsibility for the effectiveness of the delivery of the curriculum to a diverse audience. Although students may have different learning style preferences, most students are able to learn from a variety of teaching styles. Nonetheless, it is important that no cultural group(s) be placed at a disadvantage in the teaching-learning process. As various cultures come together in the classroom, online teachers must mediate cultural diversity present in the classroom, help eliminate prejudices, and promote multicultural understanding. There is a need to avoid reliance on cultural generalizations, which often lead to reinforcement of negative stereotypes. Teachers must also demonstrate respect and patience for students whom English is their second language and value their contributions to the virtual classroom. Failure to adapt course materials to culturally-different global markets can also lead to program difficulties. The failure of the US Open University attests to the importance of this issue. Several aspects of its curriculum, developed by the UK Open University, did not fit the US market, e.g., the curriculum provided a European perspective on issues. The costs of redesigning courses and adapting its curriculum added to the

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pressure on the institution and contributed to its failure (Meyer, 2006).

Conclusion Increasing globalization, advancing technology, growing competition for students, and rising student expectations affect all aspects of higher education and provide both opportunities and threats. Institutions unable to adapt to these realities are destined for mediocrity or worse. Ruby (2005) maintains that universities should seize the opportunity by addressing the most pressing questions posed by globalization: x Do we need new approaches to how learning is structured and evaluated in light of recent trends in private-sector provision, distance learning, and student diversity? x How do we ameliorate the disparities between rich and poor and speed the trickle-down of globalization’s benefits? x How do we refine the competencies needed to solve the pressing problems of a globalized world? To this list one can add two more pressing questions: x How can institutions ensure a robust revenue stream and financial stability in an era of increasing competition for students, especially when targeting students from less developed regions? x How do we guarantee quality assurance, accreditation, and international recognition of qualifications that cover both foreign and national providers engaged in cross-border provision? Global learning is one way for universities to respond to globalization and develop global mindsets that facilitate responding to these questions. Proponents of global learning identify it as a remedy for widespread crosscultural misunderstanding, prejudice, and global ignorance (Rovai, 2009). If we are to become a truly global and educated planet and solve the problems of a globalized world, we must explore issues of diversity and investigate how multicultural matters affect our society and us. We must also prepare leaders and a workforce that can succeed in a global environment. Extending the reach of a university to a global population through distance education can help promote such a vision in an authentic manner. There are many contributing factors to explain why some distance education programs fail, as described in this article. Zane L. Berge (2007) concludes that distance learning requires a great deal of organizational

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support if it is to move to center-stage and become part of the profile of the institution. He notes that this will only occur as a result of a cultural shift from valuing education to valuing learning, strategic planning, and quality assurance. As institutions strive to make their distance education programs successful, they need to attend to issues that often become barriers to achieving this goal. In particular, they must not underestimate the amount of time, effort, and expense required to attract and retain students. Moreover, institutions should not view distance education as an easy way to make money. One model that has worked in the past for some distance education providers largely strips the faculty of their control in order to increase standardization and uses millions of dollars in startup funds for massive marketing campaigns and aggressive student recruitment drives (Carter, 2009). An important challenge facing institutions is how to moderate the use of business models with traditional academic models as they become global institutions and adapt to the changing higher education landscape. Some educators are challenging the trend of higher education to adopt competitive business practices and are critiquing what academic capitalism does to the traditional areas of teaching, scholarship, and service. David Noble (2003) asserts that quality education is labor-intensive and requires a low student-teacher ratio and significant student-teacher interaction. Any effort to offer quality in education must therefore presuppose a substantial investment in educational labor. The requirements of financial sustainability, however, can undermine the labor-intensive foundation of quality education. According to Noble, pedagogical promise and economic efficiency are often in opposition. Larreamendy-Joerns and Leinhardt (2006) observe that the history of distance education teaches us that academic quality is undermined when business becomes the dominant model for distance education programs. They also note that while a market approach to distance education may allow institutions to secure funding and increase revenues, it may also bypass academic controls and practices in favor of supply-and-demand opportunities and consumerism, if left unchecked. Finally, they claim that heavy reliance on business models may disassociate, in the name of efficiency, course conception and development from their pedagogical roots, and in doing so compromise the scholarship of teaching. Other educators are celebrating the entrepreneurial efforts of higher education and consider these efforts to be a natural outcome of modernity (e.g., Breneman, 2005). They argue that universities are businesses and need to apply business logic in order to survive, where the dominant goal is to increase accountability and efficiency. These educators tend to view

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increased access to higher education as the primary goal of distance education and seek to increase enrollment and manage costs. Consequently, they also tend to organize distance education as cost centers with the expectation that they recover costs of operations through new revenue generated by tuition and contracts and report through separate university administrators rather than through academic deans (Miller & Schiffman, 2006). Online program administrators need to keep in mind what Meyer (2006) writes regarding lessons to be learned by the failure of the U.S. Open University. These lessons …show the need to combine lofty ideals with a solid understanding of the marketplace – the number and character of competitors, potential customers’ desires, the difficulties of adjusting a successful model to a new environment, the importance of timing – so that new projects can generate sufficient revenue to prove themselves before their support erodes. (p. 6)

Whatever strategy the institution decides to pursue in achieving its vision for distance education, it is important to note that change initiatives crucial to organizational success fail more often than not (Miller, 2002). It is imperative that institutional stakeholders support the adopted strategy so that the organization as a whole can benefit from the initiative as the organizational change is embedded into the culture of the institution.

References Bates, A. W. (1999). Managing technological change: Strategies for academic leaders. San Francisco: Jossey-Bass. Berge, Z. L. (2000). Why not reengineer traditional higher education. In L.A. Petrides (Ed.), Case studies on information technology in higher education: Implications for policy and practice (pp. 209-216). Hershey, PA: Idea Group Publishing —. (2007). Barriers and the organization’s capabilities for distance education. Distance Learning, 4(4), 1–15. Bernard, R. M., Abrami, P. C., Lou, Y., Borokhovski, E., Wade, A., Wozney, L., Wallet, P.A., Fiset, M., & Huang, B. (2004). How does distance education compare to classroom instruction? A meta-analysis of the empirical literature. Review of Educational Research, 74(3), 379–439. Brady, L. (2001). Fault lines in the terrain of distance education. Computers and Composition, 18(4), 347-358. Breneman, D. (2005). Entrepreneurship in higher education. In B. Pusser

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(Ed.), Arenas of entrepreneurship: Where nonprofit and for-profit institutions compete (pp. 3-10). San Francisco: Jossey-Bass. Carlson, S., & Carnevale, S. (2001, December 14). Debating the demise of NYU on-line. The Chronicle of Higher Education, A31. Carnevale, D. (2000, December 15). Accrediting panel grants candidate status to Western Governors U. The Chronicle of Higher Education, 47(16), A51. —. (2007, March 26). Nonprofit colleges are likely to challenge for-profit sector in online education, report predicts. The Chronicle of Higher Education. Retrieved June 11, 2009 from http://chronicle.com/daily/2007/03/2007032601t.htm Carter, D. (2009, January 6). How to create a successful virtual campus. eSchool News. Retrieved May 23, 2009 from http://www.eschoolnews.com/news/top-news/index.cfm?i=56581 Drury, S. (Ed.) (2007). Systems of excellence in adult higher education. Marion, IN: Triangle Publishing. Foskett, N. (2002). Marketing. In T. Bush & L. Bell (Eds.), The principles and practice of educational management (pp. 241–257). London: Chapman. Grand Canyon University. (2008). Annual report. Retrieved June 11, 2009, from http://phx.corporater.net/External.File?item=UGFyZW50SUQ9MzMxMjgyfENoaWxkSU Q9MzEzMzUwfFR5cGU9MQ==&t=1 Kälvermark, T., & van der Wende, M. C. (Eds.). (1997). National policies for internationalisation of higher education in Europe. Stockholm: National Agency for Higher Education. Larreamendy-Joerns, J., & Leinhardt, G. (2006). Going the distance with online education. Review of Educational Research, 76(4), 567–606. Levine, A., & Sun, J. C. (2002). Barriers to distance education. Washington, DC: American Council on Education. Lockwood, R. C. & Hadd, J. (2007, July). Building a brand in higher education: Why business practices – particularly brand strategies – are becoming essential in today’s universities. Gallop Management Journal. Retrieved May 9, 2009, from http://gmj.gallup.com/content/28081/Building-Brand-HigherEducation.aspx Lyons, R. E. (2007). Best practices for supporting adjunct faculty. Bolton, MA: Anker. McMurtrie, B. (2009, May 27). Australia’s top student-recruiting firm sets its sights on U.S. market. Retrieved May 27, 2009 from http://chronicle.com/daily/2009/05/18810n.htm?utm_source=at&utm_

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medium=en Meyer, K. (2006). The closing of the US Open University. Educause Quarterly, 29(2), 5-7. Miller, D. (2002). Successful change leaders: what makes them? What do they do that is different? Journal of Change Management, 2(4), 359368. Miller, G. E., & Schiffman, S. (2006). ALN business models and the transformation of higher education. The Journal of Asynchronous Learning Networks, 10(2), 15-21. Mintzberg, H. (1994). The rise and fall of strategic planning. New York: The Free Press. National Center for Education Statistics. (2002, June). The condition of education 2002 (NCES 2002–025). Washington, DC: author. Noble, D. F. (2003). Digital diploma mills: The automation of higher education. New York: Monthly Review Press. Peters, O. (2003). Learning with new media in distance education. In M. G. Moore & W. G. Anderson (Eds.), Handbook of distance education (pp. 87–112). Mahwah, NJ: Lawrence Erlbaum. Pittinsky, M. S. (2003). The wired tower: Perspectives on the impact of the Internet on higher education. Upper Saddle River, NJ: Prentice Hall. Porter, M. E. (2000). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press. —. (2003). What is strategy? Harvard Business Review. 75(1), 61-78. Redden, E. (2009, May 29). In global recession, global ed still growing. Inside Higher Ed. Retrieved May 29, 2009 from http://www.insidehighered.com/news/2009/05/29/international Rhoades, G. (2006). The higher education we choose: A question of balance. Review of Higher Education, 29(3), 381–404. Rovai, A. P. (2009). The Internet and higher education: Achieving global reach. Oxford, UK: Chandos Publishing. Rovai, A. P., Ponton, M. K., & Baker, J. D. (2008). Distance learning in higher education: A programmatic approach to planning, design, instruction, evaluation, and accreditation. New York: Teachers College Press. Rovai, A. P., & Wighting, M. J. (2005). Feelings of alienation and community among higher education students in a virtual classroom. The Internet and Higher Education, 8(2), 97–110. Ruby, A. (2005). Reshaping the university in an era of globalization. Phi Delta Kappa, 87(3), 233-236. SEC 10-K Annual Filings. (2009). Retrieved June 11, 2009 from Apollo

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Group: http://phx.corporate-ir.net/phoenix.zhtml?c=79624&p=irol-sec Career Education Corporation: http://phx.corporate-ir.net/phoenix.zhtml?c=87390&p=irol-sec Strayer University: http://www.strayereducation.com/edgar.cfm Corinthian Colleges: http://investors.cci.edu/phoenix.zhtml?c=115380&p=irol-sec Capella: http://investors.capellaeducation.com/phoenix.zhtml?c=189886&p=iro l-sec Grand Canyon University: http://investors.gcu.edu/phoenix.zhtml?c=221997&p=irol-sec Sloan-C. (2008, November). Staying the course: Online education in the United States, 2008. Retrieved June 11, 2000, from http://www.sloanc.org/publications/survey/pdf/staying_the_course.pdf Tinto, V. (1987). Leaving college. Chicago: The University of Chicago Press.

CHAPTER FOUR AN EXPLORATORY STUDY OF THE PERCEPTUAL AND STRUCTURAL DETERMINANTS OF THE PRICE OF ONLINE BUSINESS EDUCATION1 HOOMAN ESTELAMI AND ZEINAB REZVANI

Providing higher education using traditional face-to-face teaching has for nearly a decade gradually given way to distance learning methods (Christensen, Johnson and Horn 2008). Educational institutions have in recent years been able to reach out to their students using Internet-based educational tools and have benefited from the mass access of the population to the Internet and the cost efficiencies made possible by online offering of educational content. The mass adoption of broadband Internet services and the high ownership penetration of computers by households have enabled a larger proportion of the population to benefit from the opportunities of distance learning. This is especially notable since studies have shown that the largest level of participation in distance learning programs is exhibited by business schools, exceeding participation levels in other professional fields such as engineering, legal services and medicine (Allen and Seaman 2008). The net effect of this transition in educational technology has been the realization of unprecedented enrollment growth in distance learning courses in many universities. It is estimated that one in every five students has taken an online course, and the anticipated annual growth rate for online enrollments is well over 10 percent for the next decade (Curran 2008). In light of this growth, a central question for the public as well as business school administrators is with respect to the pricing of distance 1

First published in Journal of Product and Brand Management, Vol. 20, Iss. 2, pp.158-165.

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education. The tuitions charged for distance learning programs can be affected by structural as well as perceptual characteristics of these programs. Structural variables such as the program format and length, and its funding sources can affect costs and thereby prices (tuitions)2 charged. In addition, perceptual variables such as favorable rankings by third-party organizations and certification by accreditation agencies can serve as quality cues and influence the public’s perceptions of a given program, with subsequent effects on the tuition charged. In this paper we will examine the effects of both perceptual and structural variables on the pricing of distance education. Specifically the context of distance business education in the United States will be studied. In the next section a review of research findings on distance education outcomes and trends will be provided. Following that, the effects of both perceptual and structural variables on the pricing of distance education will be examined. A survey of online MBA programs in the United States is then used to examine the relationships of interest. The paper concludes with a series of pricing recommendations and suggestions for future research.

Distance Education The terms ‘distance education’, ‘online learning’ and ‘distance learning’ are often interchangeably used to describe the process of providing formal instruction to students in such a way that the instructor and the student can be separated by geography, time or both (Simonson, Smaldino, Albright and Zvacek 2009). Despite the increased attention given to the topic over the past decade due to the growing use of the Internet, distance education is a pedagogical approach that has been used for nearly two centuries. Dating back to the professional schools of Europe and the first half of the 19th century, distance education first took on the form of correspondence schools (Edelson and Pittman 2008). The emergence of this form of teaching in the United States first occurred at the end of the 19th century lead mostly by a group of educational institutions located in the heartland of America. Schools such as the University of Iowa, University of Wisconsin and University of Chicago were among the first to adopt distance education methods in a variety of programs that continued to be offered until the first half of the 20th century. Eventually the correspondence method evolved and was enriched by the use of broadcast 2

In this paper the terms ‘price’ and ‘tuition’ will be used interchangeably, as will the terms ‘consumer’ and ‘student’.

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communication technologies of radio and TV in the 1950s and 1960s, enabling educational institutions to reach out to students using audio and visual modes of communication. Though originally developed for military applications in the 1970s, the Internet has had the most significant effect on mass adoption of distance learning methods. Its wide adoption by the public since the mid-1990s has enabled educational institutions to provide services to a geographically diverse learning population. Today, in the United States more than 4 million adults have taken at least one online course, and it is estimated that the annual growth rate for student enrollment in online courses will continue to grow at rates of 10% or higher throughout the next decade (Curran 2008). Business schools have been active participants and have contributed to the growth trend. It is estimated that one third of the all business schools provide online education options to their students, either as full-degree programs or as supplements to their existing classroom-based programs (Allen and Seaman 2008). A large number of research studies have shown that the learning outcomes of distance education can be equivalent and in some cases superior to traditional face-to-face teaching. These research findings are strategically significant to business education, not only since they challenge the misperception of distance education as an inferior form of instruction, but also since distance education can be delivered at considerably lower costs and with greater flexibility than traditional classroom-based teaching. The financial and strategic advantages of distance education have been so profound that they have for example enabled the U.S. Army to provide formal education to thousands of military personnel dispersed in bases around the world. Distance education has also made it possible for a notable number of countries such as India, China, and Thailand to overcome geographic and socio-economic challenges and to reach out to diverse segments of their population in need of educational services (Edelson and Pittman 2008; Edirisingha 2008). Within the context of graduate business education over 400 MBA programs are currently offered in the United States. These programs have evolved over the years to reflect the emerging capabilities and sophistication of the available educational technology. Print-based correspondence programs of the 1980s gave way to the electronic means of email in the 1990s. For some institutions, distance learning has since evolved into synchronous teaching methods whereby the communication capabilities of the Internet are used to connect the instructor with a geographically dispersed population of students, through such means as web-based meetings and closed-circuit broadcasting. Asynchronous distance

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education methods have also been made available through courseware systems which allow the distribution of course content and are widely adopted by the majority of business schools. In addition, some business schools have adopted hybrid forms of distance learning whereby traditional face-to-face teaching is blended with distance education methods (Arbaugh, Desai, Rau and Sridhar 2010; Garrison and Kanuka 2008; Oblender 2002).

Perceptual Determinants of Online MBA Tuition Distance education represents significant benefits to the public. Research evidence has over the years consistently indicated that the learning outcomes of distance education are equivalent to that of traditional teaching methods (Leasure, Davis and Thievon 2000; Peltier, Schibrowsky and Drago 2007; Russell 1999). As a result, much opportunity exists for growth and the adoption of this method of learning by the public. The potential presented by distance education methods can be compared to that of disruptive technologies that have revolutionized specific markets in the past. Examples are the introduction of transistors which replaced costly and unreliable vacuum tubes in the 1960s, the use of facsimile to replace paper-based communications, and the mass adoption of digital imaging which has made film-based photography obsolete (Christensen, Johnson and Horn 2008). Every market has multiple examples of such drastic innovations, and in the field of education, distance learning methods seem to be the game-changer in the coming years. The impact of distance learning methods in the U.S. is further strengthened by the mass presence of computers in American homes. It is estimated that more than 60% of US households have a computer, the majority of which have high-speed broadband Internet access (Rovai, Ponton and Baker 2008). The continuation of reduction in the cost of bandwidth over the years further supports the mass adoption of the Internet, not only the US but also worldwide and strengthens the case for the use of distance learning methods. Nations such as India, China, Turkey, and Thailand have long recognized the strategic advantages gained through cost efficiencies and the reach advantage gained through distance education methods, and have channeled significant resources leading to the establishment of large-scale programs to serve their citizens (Edirisingha 2008). Distance learning provides multiple sources of value for consumers (prospective and existing students). Flexibility is often the most widely cited benefit (Simonson, Smaldino, Albright and Zvacek 2009). The

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ability to access educational content at will from any location enables students to overcome time constraints and geographic barriers that would otherwise prevent them from attending traditional face-to-face classes. Furthermore, the focused approach often present in distance learning courses provides specialized educational content that may not be locally present, thereby increasing student access to a wider range of learning resources. It is noteworthy that in the early days of distance education, the pioneering institutions in the United States were primarily located in Midwest where the population is dispersed across a large geographic range, and even today most of the active distance education programs continue to be offered from states in the Midwest. From a pricing perspective the flexibility and geographic reach gained from distance education can contribute significant value to potential or existing students. These advantages create benefits which can help create positive attitudes toward distance learning programs and as a result help justify the financial sacrifice and prices (tuitions) charged. Consumer perceptions of the value of a distance education program, and the resulting price tolerance, may be affected by information cues presented to them. Perceptions may for example be driven by indicators of the quality of the program such as accreditation status and rankings. Consumer research indicates that the decision to attend an educational institution is often one of the more complex decisions that an individual has to make in life (Christensen, Johnson and Horn 2008; Gurak and Duin 2004). This is because such decisions often involve the examination of a large number of attributes and the use of inference processes helps reduce the mental effort needed to determine the overall value of one school versus another. When a large number of pieces of information have to be examined, or in the absence of diagnostic information related to an MBA program (e.g., student satisfaction scores, graduate job placement rates), prospective students evaluating a program may make inferences based on existing information (e.g., layout of the school facilities, favorable ranking by authoritative organizations). These inference processes are referred to as ‘cue utilization’ and have been widely observed in a range of consumer decision contexts. For example, the quality of a product which is typically an unobservable feature may be inferred by a consumer by considering the product’s country of origin or warranty length– with the consumer assuming that these two attributes are good indicators of the product’s quality. Similarly, the price of a product may be used by a consumer as an indicator of its quality (Boulding and Kirmani 1993; Campbell and Goodstein 2001; Lichtenstein and Bearden 1988).

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In the context of distance education, many of the attributes associated with a traditional face-to-face educational setting may not be evident. For example, the appearance of the physical facilities where the program is housed, campus life, and location are largely irrelevant in distance education and as such cannot be used to serve as indicators of program quality. The intangible nature of distance education increases the reliance of prospective students (potential customers) on other perceptual indicators of quality. One such indicator is the accreditation status of the institution. Most educational institutions in the United States are as a minimum accredited by regional accreditation agencies approved by the U.S. Department of Education (Eaton 2006; Smith and Bramble 2008). To receive funding from the federal government and other sources, educational institutions are required to meet specific accreditation standards. The U.S. Department of Education has assigned six regional agencies to review and approve the programs offered by institutions within their scope of operations. The accreditation process is often conducted by external reviewers as well as through self-assessment procedures and ensures that the quality of education provided to the students is consistent with specific norms and standards. Quality assessment is conducted with respect to factors such as learning outcomes, course content, teaching methods, and research productivity of faculty. In addition to the six regional accrediting agencies, proactive institutions aiming to raise their quality standards even further, may seek accreditation from national organizations. In business education the dominant national accreditation agency is the Association to Advance Collegiate Schools of Business (AACSB). In addition to accreditation, consumers (prospective students) often rely on third-party organizations to form their assessment of a specific program. This is largely a result of the fact that the decision as to which institution to attend is a complex one involving a large number of parameters and many unobservable aspects of the institution (Christensen, Johnson and Horn 2008; Rovai, Ponton and Baker 2008). Consumer reliance on third parties has been a long-recognized phenomenon in decision making in many markets where consumers may be overwhelmed by the abundance of information that need to be processed. In consumer markets this has given rise to a number of organizations which review products and services on behalf of the public. Examples of markets where such organizations have had great impact on consumers are the automotive industry (e.g., J.D. Power and Associates, Insurance Institute for Highway Safety), hospitality services (e.g., Zagat, Michelin), home electronics (e.g., Consumer Reports, CNET), and financial services (e.g., Morningstar, Standard & Poor’s).

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The approval of a product by these third-party ratings organizations can significantly affect consumer interest in that specific product, with subsequent effects on consumers’ price tolerance (Biswas, Biswas and Das 2006; Dean and Biswas 2001). In the context of educational services, publications, such as Financial Times, Business Week and U.S. News and World Reports profile educational institutions and provide detailed information and summary rankings for the public to examine. It is therefore expected that the positive exposure that a business program receives from these organizations can contribute to its public perceptions and allow it to charge higher prices (tuitions).

Structural Determinants of Price The price of educational services can also be affected by structural variables that reflect the processes by which the services are delivered and the costs associated with these processes. The cost structure of most service organizations, including educational institutions are often dissected into fixed and variable costs. For an educational institution, the fixed costs reflect such factors as the overhead cost of the facilities and salaries of top management, and the variable costs reflect expenditures that grow with enrollments, such as instructional pay and instructional supplies for each student. Depending on the accounting procedures used and how the institution’s administrators view its operations the costs of various components of educational delivery – such as course development, student support, and information technology – can be categorized as either fixed or variable. However, in most educational institutions the fixed costs dominate and account for the majority of expenditures (Inglis 2008; Rumble 2009). The translation of the overall costs of an educational institution into its subcomponents of fixed and variable costs enables a strategic view of cost management and an analysis of the corresponding price effects. Generally in institutions that use traditional classroom-based face-to-face teaching methods, the fixed costs tend to be greater than institutions that serve their student base online. The additional costs of securing real estate and the financial resources needed to maintain physical facilities increases the fixed costs associated with face-to-face teaching methods, while at the same time reductions in the costs of technology have helped reduce the fixed costs of online institutions (Christensen, Johnson and Horn 2008). As a result, it is estimated that the cost of delivering online education can be about half the cost of traditional classroom-based teaching (Jung 2003). In addition, by increasing the number of students, one can lower the

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average cost per student. As a result educational institutions – both online and traditional – can benefit from significant scale economies by expanding their student based. Such a possibility is often more feasible for online institutions where the constraints of physical facilities and classroom size may be less pressing. The cost structure of distance education may further be affected by the program format for online teaching adopted by the institution. Distance education often takes on one of two forms: full-online programs and hybrid-online programs (Arbaugh, Desai, Rau and Sridhar 2010; Oblender 2002). In a fully online program, the entirety of educational content is delivered online and students are not required to attend any face-to-face class sessions. An emerging model in distance education is a hybridonline format whereby distance learning tools facilitated by the Internet are supplemented with periodic face-to-face meetings with the instructor in classroom settings. This allows the benefits of distance education to be combined with the interaction style and intimacy facilitated in the classroom and can provide a more comprehensive setting for the students to engage in the learning process. While some observers believe the hybrid model reflects the evolution of distance education into a superior state, studies on its relative effectiveness versus pure online programs have had mixed results (Arbaugh, Desai, Rau and Sridhar 2010; Pirluck 2004). From a cost perspective, hybrid distance learning has greater resource demands from the educational institution as it would require the allocation of classroom facilities, faculty time, and other related physical resources to implement. It may therefore be expected that institutions that provide distance education in the hybrid format would have higher costs than those providing pure online education, with subsequent effects on price. In addition to the choice of distance learning program format, the financial state of most educational institutions can be affected by their sources of funding. For example, in the United States, public institutions often benefit from resources allocated to them by the state or the federal government. These resources can take on the form of direct funding or indirect support such as access to land or real estate to subsidize their operating costs (Inglis 2008). In other countries, such as the United Kingdom, Singapore, India, Thailand, and Indonesia, direct government involvement focused specifically on the development of institutions for distance higher education has been at work for decades (Edirisingha 2008 Rumble 2009). It is therefore likely that public institutions that benefit from the influx of government provided resources would have more favorable costs and as a result be able to charge lower prices.

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Other structural characteristics of an educational program that can affect is pricing is its profit orientation and program length. Educational institutions in the United States can be categorized as either non-profit or profit-seeking. This reflects their financial objectives and how generated profits are used to either further grow the institution or produce income for its stakeholders (Smith and Bramble 2008). It may be the case that profitseeking institutions are more likely to charge high prices, consistent with a short-term profit maximization perspective. In addition to the profit orientation of a program, the prices charged by an educational institution can be affected by the program length and associated coursework requirements. Programs that have lower minimum credit requirements for an MBA degree to granted, would be less demanding of students not only in terms of the number of courses that need to be completed, but also with respect to the associated tuition. Having lower minimum credit requirements lowers the cost of tuition since a smaller number of course credit requirements would have to be satisfied by the student in order receive a degree. It is therefore expected that online MBA programs of shorter length would be priced lower.

Research Questions The objective of this paper is to examine how the price (tuition) of online MBA programs vary as a function of the perceptual and structural variables discussed above. Specifically, the role of the following variables on the tuitions charged will be examined: (1) National accreditation status (2) Endorsement by third-party organization (3) Program format: pure online versus hybrid online (4) Funding sources: public versus private (5) Profit objectives: for profit versus non-profit (6) Program length, as reflected by the minimum course credit requirements. In the following section an empirical study utilizing data on over 100 online MBA programs in the United States will be presented. A discussion of the findings and pricing implications will then follow.

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Methodology In order to explore the effects of the above variables on the price (tuition) for online MBA programs, data from several different sources were used. Information on tuition levels, funding source, profit objectives, accreditation status, program length and program format were obtained from the web site GetEducated.com. This site is a primary source for the public on distance education programs in the United States, and profiles over 400 online MBA programs offered by American educational institutions. A systematic random sampling method was used to draw a sub-set of 115 programs from the list provided by GetEducated.com. For the identified schools, endorsement status information from third-party organization was based on Financial Times profile of online MBA programs. Every year, financial Times provides a summary of the top distance learning MBA programs, publically available through print and electronic means.

Coding of the Data All of the institutions identified were accredited by one of the six regional educational accrediting agencies in the U.S. However of the 115 programs that are part of the sample, only 50, were nationally accredited by AACSB (Association to Advance Collegiate Schools of Business). The AACSB provides more challenging requirements compared to the regional accreditation agencies for schools to obtain its seal of approval and therefore represents an additional layer of quality control, specifically designed for business programs (Eaton 2006). A dummy variable was used to code accreditation status, (1=accredited by AACSB; 0=not accredited by AACSB). Dummy variables were used to code endorsement by a third party (1=listed by Financial Times; 0=not listed by Financial Times), funding source (1=private; 0=public), profit objectives (1=for profit; 0=non-profit) and program format (1=all online, 0=hybrid online). Program length was quantified as the minimum number of credits required to obtain an MBA from the institution. The tuition information, obtained from GetEducated. com reflect the tuition cost for completion of the MBA degree and are not yearly figures. At times these figures include a low and a high tuition level for each school. This is especially evident in the case of public institutions and those with special mandates (e.g., those serving the members of the armed forces) where for example state residents or

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military personnel pay a lower tuition than other individuals. In such cases the average of the low and high tuition levels was used as the price.

Data Analysis Across the 115 MBA programs profiled, the average price (tuition) was found to be $29,514, with a standard deviation of $16,318. With respect to accreditation status, 43.4% of the programs were accredited by AACSB. Of the 115 programs in the data set, 12 were recognized by Financial Times, reflecting the exclusive nature of being ranked by this publication in 2010. With respect to program format, 92 of the programs (80%) were pure online degrees requiring no campus visits. The remaining 20% however were hybrid-online programs and required some campus visits at different points in the MBA program. Sixty one percent (61%) of the institutions profiled were private, and the majority (88%) was non-profit. In order to examine the relationship between the perceptual and structural measures and the tuitions charged, average tuition levels were computed where possible. Programs that had obtained AACSB accreditation on average charged a tuition of $38,300 compared to $22,756 for programs that did not have national accreditation status. This difference is statistically significant (t=32.80; p