‘WESTERN UNION SHIFTING FOCUS TO TRANSACTIONS WITHIN AFRICA. ’ INTRODUCTION This article under review is taken from the outlook section of The EastAfrican newspaper as for the dates between 19th to the 25th September 2011. It is a Q&A article with Western union’s present regional director southern and East Africa, Karen Jordaan. It was chosen in line with other online articles published two weeks prior that informed of the change in strategy being adopted by the global money transfer company in terms of their operations within the African continent. ARTICLE OVERVIEW
With the ever growing number of immigrants standing at around 250 million globally with 30 million of these being from Africa and better still 19 million of them being migrations within Africa and with the ever growing number people moving within the East African region for leisure, business or seeking job opportunities, it was clear that the potential number of transactions within the region was increasing and Western union identifying this decides to apply their marketing mix in terms of place or location by changing their strategy by focusing on the East African region and the African continent as a whole.
To cement their operation in the region, western union has taken to invest to train more agents to reach a wider population and enhance service delivery in the region. With over 23,000 locations in 50 African countries and only 3,600 of this being in the East African region, western union is facing a challenging ‘motor and brick’ situation where they have been unable to reach the 39 million Kenyans with most adopting informal ways of money transfer coupled with low penetration of mobile transfer in rural areas.
The 700 locations in Kenya coupled with differing data as provided by the local government and international bodies has left western union without proper information of where to invest and that is why they are taking charge and repositioning themselves to grow in the regional market. Besides investing in their people to reach a wider population, they are also running promotions geared to stimulate local money transfer through their formal channels. Some of this are such as changes in pricing as seen in the charges if $1. for transactions between Kenya and Uganda aimed primarily at the foreign students learning there across the other east African region. Articles implication on the economy and general business environment. The move by western unions displays a lot of marketing characteristics that are bound to affect the economy positively. Western unions newly defined market or constituency of potential customers who are willing and able to engage in exchange will drive economic development up in terms of the pace of doing business due to western union agents offering more places to access their services.
This can bring about more investment in the region with the three countries recording a strong balance of trade and balance of payment statements. The economy stands to benefit from the fact that a lot of unrecorded transactions or ‘black market economy transactions’ are avoided realizing a situation where the government is able to raise more money through proper taxation of all transacted amounts. The expansion of western unions outreach will prove to provide and facilitates inter? ersonal transactions, it could improve the allocation of savings across households and businesses by deepening the person? to? person credit market. This could increase the average return to capital, thereby producing a feed? back to the level of saving and by making transfers across large distances trivially cheap, western union could improves the investment in, and allocation of, human capital as well as physical investment. Households may be more likely to send members to high? aying jobs in distant locations (e. g. , the capital), either on a permanent or temporary basis, and to invest in skills that are likely to earn a return in such places but not necessarily at home. Electronic funds transfer as offered could bring a situation that affect the ability of individuals to share risk. Informal risk? sharing networks have been found to be an important, although not fully effective, means by which individuals spread risk, making state? ontingent transfers among group members. By expanding the geographic reach of these networks, western union may allow more efficient risk sharing, although the risk? reducing benefits might be mitigated due to issues of observability and moral hazard when parties are separated by large distances. Risk? related effect arises if western union facilitates timely transfer of small amounts of money. Instead of waiting for conditions to worsen to evels that cause long term damage, western unions money transfer might enable support networks to keep negative shocks manageable. For example a household head with access to money transfer who suffers a mild health shock might receive a small amount of money via any western union agent that allows him to keep his children in school. If this money was delayed, or the sender waited until the recipient “really needed it”, the children might have quit school, the effects of which may be hard to reverse.
Money received through such electronic channels as western union might and could most likely conceivably alter bargaining power and weaken incentives within households or other networks. Economically weaker family members might expect larger and more regular remittances from better? off city? dwelling relatives, who themselves might find it hard to justify not sending money home. This could weaken incentives for rural household members to work or innovate, offsetting some of the efficiency? nhancing benefits of improved geographic labor allocation and risk sharing. Money received by certain households could have the effect of empowering members who have traditionally had less bargaining power, in particular women. Especially among poorer segments of the population, remittances and transfers received (and sent) via western union are less visible than those transmitted by other means, such as Delivery by a friend or relative. Granted this information advantage, recipients could be in a position to keep more of the funds they receive.
Evidence suggesting the spending patterns of women and men differ then implies that the advent of western union along other electronic fund transfers could have real effects on the allocation of household Spending. Articles implication on the market competitiveness. The article address the strong link between marketing and strategy whereby in the marketing strategic mapping of western union, after defining their marketing objectives they carried out a SWOT analysis of their current structure realizing that the potential of the growing east African market is only hindered by the lack of agents within the region.
It is this that led them to the need to build competitive marketing strategies that involves segmenting, targeting and positioning themselves closer to their target market. Western union strategy has been seen to change its marketing mix within the region interms of price, place, promotion and its people (agents) though retaining most of its product offering and process.
The case analysis its presence in the east African region and business position across its countries of operation though not highlighting much of its distinct competences and competitive advantage with its rival companies such as money gram and the new threat that has been brought about by mobile money transfer systems such as m-pesa and tangaza that have a close to 49% penetration rate due to the high adoption of mobile phones across the region over the last nine years.
Western unions improved agent presence is a threat for moneygram which is still operating locally through banking and financial institutions as agents and with increased presence has the distinct advantage of eating into the market share of moneygram due to better presence that is key in such a service driven industry. Presence means access to more people within more regional blocks meaning more transactional volumes for the organization. In terms of whether or not it will be able to able to make a dent on a hold a share of the mobile money transfer market is a question of wait and see.
This is due to the fact that the regions for penetration have not being clearly addressed to weigh such factors as to the access of mobile phones and subsequent mobile money transfer penetration, though western union distinct advantage over the regions mobile transfer market is that it can transact across boarder within the east African and central African region unlike m-pesa and the like which have had long standing operational battles on their limitations with central bank and other formal banking institutions, though all in all westerns union change of strategy to better serve the region will bring along with it changes in marketing tactics for established and potential new operators in the money transfer industry.
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