Mount Olive College has now become The University of Mount Olive (UMO). As Mount

Question

Mount Olive College has now become The University of Mount Olive (UMO). As Mount Olive expands, it needs to make some critical decisions. As a graduate student of this institution, you are asked to turn your reasoning powers on to Mount Olive's expansion.

First, UMO would like to know the extent to which we should expand. In other words, what is the optimal size of UMO, and how will we know if we are overextended? If we are looking at costs and profits, several issues arise which you will need to deal with. For example, what is the appropriate "cost" to use and, consequently what is the correct view of "profit"?

With the expansion, you will need to look at the Law of Diminishing Marginal Returns and determine whether it applies to education, especially in an online format. How does the Law apply to students and to the hiring of new faculty?

Furthermore, if Mount Olive hires adjuncts, what sort of agency problems might arise? How can they be best dealt with?

Finally, we need to consider the long-term effects of expansion on UMO's reputation. Specifically, what is the value of Mount Olive's reputation today and in the future if there is over expansion? To whom is UMO's reputation most valuable? How can the stakeholders help insure that the reputation is upheld?

Explanation / Answer

UMO Optimal size of expansion - firstly we need to drill down on the existing set of expension level as well as the profit to cost ratio being generated over say a period of last 12 months, that should give us fair idea as in how proiftable is our business and how far the expansion can be planned keeping in mind our investment capabilities.

Profit - one can take a thumb rule as the cost to profit ratio, the same can be made as the measure for new expansion's profitibility measurement. law of diminishing marginal return might have small but significant imlication in an online business of education as the probability of generating business from a single protal would go down if similar domains are opened in the same format, but if it can be categorized well so that the users get a clearer and better idea then the profitibality generated might well defeat the law of marginal returns. UMO's expansion would definately reap benefits if planned well, categorized well but focus as well as authority is given to indiividually funcation as a separate profit center unit. all the verticals can have same management at top but deligation of authrorities must happen at department levels. in long run the UMO's reputation will get huge boost if managed profitably.

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