Western Union Case Study

Western Union Case Study

Identification of the major problem

In today's sluggish economy and with increased competition Western Union (WU) must find different ways to remain the leader in wire transfers of money. Western Union was founded in 1851 and enjoyed a long history as a telegraph and wire services company, but by 2006 it had discontinued its telegraph services to focus on money transfers. Paragraph three talks about how executives from WU came together to develop a strategy that would increase money transfers and further WU's commitment to corporate social responsibility. Many people boycotted WU because of the fees they would charge on money transfers. A consumer activist group TIGRA coordinated boycotts against WU to lower their fees, and called for WU to invest $1 dollar per every $100 in money transfer transaction revenues.

Next, other than corporate responsibility issues WU faces are government regulations and increased competition. Paragraphs seven through nine discuss the growth period of WU, and describes how WU is the largest franchise by number of locations (300,000 worldwide). Western Union grew by pushing expansion into other emerging markets such as India. Western Union's main competition is with Global Payments Inc., Euromet Worldwide, and MoneyGram International. Also, there is a variety of indirect competition such as credit unions, ATM operators, web-based services, telephone payment systems, postal organizations, retailers, check cashing services, and currency exchange providers.

Banks, Wal-Mart, and cell phones are also emerging as alternative ways for immigrants to send money transfers. Brand reputation, convenience, speed, reliably, and price are all things WU must consider when competing with these alternative means. Increased price competition and regulatory burdens were driving out smaller rivals, leading to higher market shares for those remaining in the industry. Finally, a weak global employment market has kept many immigrants home rather than coming to the US for work. With declines in construction, and the debate over US immigration has had a direct effect on the transfer of money from US to Mexico -which is WU's most profitable segment.

Analysis of the problem

Western Union is a mature company that posses many of the characteristics needed for long-term profitability. WU's current profit is roughly $16.00 per transaction, generating roughly $4 billion a year in transaction fee revenue (Pearce). Organizations with high profit margins, such as WU's leave them vulnerable to competition. WU has merged with several of its competitors and still relies heavily on its brand image to remain on top. "WU has managed to ride each successive wave of change in its history rather than getting swamped. After handling the first