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 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.