Western Union Seeks East and Central African Market

‘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 deve lopment 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 uni on 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 agen t   that   allows   him   to   keep   his   children   in   school. If   this   money   was   delayed,   or   the   sender   waited   until   the   recipient   Ã¢â‚¬Å"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   bargainin g   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.