Business Problems of Western Union Company - Case Study Example

?Business Problem Analysis Research Paper Executive Summary Western Union Money Transfer is one of the world's most popular money transfer companies in the world. Since the global market is facing economic fluctuations due to recession, the companies like Western Union who are totally depended on the money exchange is bound to be affected. The company is developing several plans to mitigate its loss and boost up its revenue in different places. Moreover, the rising levels of competition from companies like MoneyGram International or PayPal are also hampering the business of the company. Western Union also has to compete with the local money transfer companies in different countries. The second major rising issue is that of the money laundering cases around the world. Many people are falling prey to such situations when they are choosing the convenient methods of money transfer for avoiding time taking paper works. Western Union has boost its sales by acquiring several small companies in the same industry, so that it can utilize its resource and customer base and spending heavily to develop an effective framework to avoid money laundering cases. In this study the PSU-SBU model has been utilized to analyze the position of Western Union in the money transaction market and the major issues that the company is facing has been discussed to derive certain results and methodologies has been also selected to solve those issues, so that the company can eliminate several risks. Table of Contents Executive Summary 2 Introduction 4 Business Problems of Western Union Company 4 Problem Solving Methodology 5 Position 6 Sense 7 Uncover 8 Solve 10 Build 10 Achieve 11 References 13 Introduction There is huge demand of US payment service companies in the global market. Companies like Western Union, MoneyGram International, etc are generating great revenue in this sector due to the rising demand of money transfer around the world. The companies are still looking out for new avenues of services ranging from domestic services to mobile transfer of funds. The Asian, especially the south-eastern countries are the major markets for the money transfer companies. Countries like India and China are on the top of the list of remittance receiving countries (Mukherjee, and Bhattacharjee, “U.S. money transfer firms explore new routes in Asia”). According to the World Bank Report, the projected remittance flow towards the developing countries were about 6.2 percent in the year 2010 and about 7.1 percent in the year 2011. The money transfer companies have a wide network all around the world (Hoovers, “The Western Union Company”) According to the World Bank the amount of global remittance is about $317 billion. Companies are also launching mobile money transfer to facilitate the people in providing effective services. The remittance industry cannot be underestimated as about two-third of the developing countries receive money from the workers staying in different countries of the world, through these money transfer companies. The money transfer industry is actually fragmented and it has to adapt and include new policies, technology and regulations to compete in the present economic situation. The money transfer companies such as Sigue, Unistream, and MoneyGram and off course Western Union are the few well-known companies few of the top level money transfer companies which are planning to expand rapidly (Yahoo Finance, “The Western Union Company (WU): Competitors”). Business Problems of Western Union Company Western Union is one of the major players in the money transfer industry. It is a big company which employees around more than 7,000 people. The company was founded in the year 1851 by Ezra Cornell. The services offered by Western Union are mainly money orders and wire transfers. The annual revenue for the past year was about $5.193 billion. The different departments of the company are mainly business payments, person to another person payment, money orders, money transfer and other commercial services. It is a common fact that every large organization face challenges which conducting their day to day operations. Western Union is also not an exception. There are few internal problems and also the effect of the external situations, affect the company in a negative manner to create barriers for them to function efficiently. The company mainly deals in money transfers, so the prevalent issues in money laundering are a big problem for the company. The company has to spend huge sum of money every year to deal with this problems (Onkvisit, and Shaw 37). The second problem is the manpower management of the company. The manpower management department is not streamlined. It has been found that there is lot of bureaucratic practices as the company outsources the customer services and these agencies are not good enough to meet the working standards of the company. The business processes has to be streamlined and the paperwork of the agents should be completed on time, so that they do not complain. The working atmosphere is good and employees are satisfied working in the company, but Western Union also has all those general problems which almost every big company has. Problem Solving Methodology Managers in different companies perform different functions, but one function of the managers is common in all organization, that is problem solving. Research shows that most of the time the managers spend is on problem solving. Managers have the skill to handle sudden situation. So it is often seen that managers are valued in the organization. Despite recruiting potential managers, companies sometimes face many internal and external problems. Everyone wants to be good at problem solving. The core elements in the framework of problem solving consist of identifying the problem areas, finding out the alternatives, evaluating each alternative on the basis of the available arguments and choose the best alternatives as solution. This approach has certain difference from the traditional approach. The problem solving framework depends on certain criteria, they are as follows: It starts before the problem arises. By focusing on the mission and vision of the organization, and the structural factors managers keep track of the problems that might arise in future. It helps to choose between real problems and simple difficulties. Simple difficulties go away with time but problems need to be solved. Creative methodologies can be used in finding alternative solutions. It helps to consider the economic, environmental and social consequences on the company. Implementing the solution in the organization and ensure its continuous improvement for better problem evaluation and control (Yuthas, “Problem Solving”). Position Problems come suddenly and managers in such situations do not have many alternatives to choose the best solution. In these situations managers often divert all their resources towards solving such problems. Though this approach solves the problem but the resources allotted to fulfill important goals of the organization gets wasted. The managers fail to solve certain problems because they do not consider the external environment while analyzing the problem. Sometimes they do not follow proper decision making model and barriers before making strategies. So it is very important to first study the problem in context of the mission, vision and values of the company. Even the expectations of stakeholders, the barriers and the decision-making models have to be taken into account. The stakeholders are those who take decisions of the company. They would be the ones who would be directly affected by the consequences of the company's decision-making. Previously the stakeholders were ignored and the company mainly paid attention to the shareholders and owners. But now the scenario has changed (Daniels, Rdebaugh, and Sullivan 28). The vision and mission of Western Union is to conduct business by following the ethics, credibility and honesty. The customers must trust the services of the company and their fast and reliable services. The company had been successful in establishing a healthy relationship with the agents, employees and other people related to the organization, but certain issues such as employee management in the organization and streamlining the business functions often create barrier in the smooth flow of business process. Sense It is very important to identify the problems. Failing to do so would cause breakdown of the system. A systematic framework should be made to diagnose the impediments, so that the best decision is taken. Managers should find and prioritize the problems through problem identification, evaluating structural short comings and then prioritization of those problems. The common mistake that most of the managers make while solving business problems is identification of the right problem. Whenever managers detect symbols of malfunction they quickly assume common causes for such disorientation. But assumptions taken in haste may not be correct sometimes. So in order to sense the real issue behind the malfunction of systems or confusion, problems should be prioritized. The problem areas should be identified, among them the core problems should be taken into account. Then the structural barriers within the organization have to be located and accordingly prioritized. This would help the manager to solve the problem one by one and every problem will get equal attention of the management. The problems which have been identified are somehow embedded within the structure of the organization. Due to this reason it hinders the development of the organization and decision-making of the managers. The structure of the company signifies the rules and the resources of the company. In this segment the problem is identified such as the money laundering issues, bureaucracy and employee management issues in Western Union. Then the effect of those problems on the organization is analyzed so as to assess the effectiveness of such problems on the organization. Accordingly they are prioritized, such as in this case the employee management and money laundering issues should be given prime attention because the negative effects of these problems can be really strong on the organization (Organization for Economic Co-operation and Development 124). Uncover Identifying and defining problem is very important to find solutions. Once the problems are prioritized, it becomes easy to solve issues quickly. So manager must look for the causes creating those problems and look for alternatives. Other than this, the information relating to such issues should be gathered and evaluated on both internal and external context. Once the problems are identified, the reasons behind such occurrence should also be identified. Once the causes and the sub-causes are identified, the company can map a fish bone diagram. Here the problem is mentioned at the head of the fish. The causes are mentioned in the spines and the sub-causes (smaller factors) are mentioned in smaller spines that lead out from the key spine. This diagram would help the company to identify the primary causes and also the secondary causes which are leading the primary causes. Information is gathered on the alternatives through survey within the organization. Figure 1 shows how a company can design their fishbone diagram to detect the causes of the problems. Figure 1 The fishbone diagram is used here to identify the major issues within Western Union and the sub-causes within those issues that have to be given priority. The major causes that Western Union has to think about is the issues related to economic recession in the global market, due to this reason the payment business of the company is also facing a slow down. The sub-causes involved in the this issue are the financial crisis in few countries especially in American countries, the sub-prime crisis and relatively the transfer of money was affected due to this reason. The second cause was the rising cases of money laundering around the world at an alarming rate also are a threat to the company (Madinger 170). For the first cause, that is the economic slowdown has a direct relationship with payment business and Western Union has no major alternative to fight in this scenario because the circumstances are unavoidable and the company will have to keep their operational functions and their position stable in the market. The second cause may be controlled through developing an effective framework for detecting laundering cases and take strict measures against it (Hrishikesh, “Western Union's business payment unit faces slow growth”). Solve When it comes to solving the problem, both qualitative and quantitative analysis is done to check the feasibility of the proposed solution. This is a lot of difference between presenting and idea and giving physical shape to it. The situations would be completely different and resources may respond adversely in practical implementation of the chosen solutions. So firstly, qualitative analysis also known as descriptive analysis is done. It includes the values of the company, results of the survey conducted, the statistical data derived from the questionnaires and the factors effecting the internal and external environment. Quantitative data as evidence is less preferred compared to the qualitative ones because qualitative data is easy to analyze and understand. The numerical analysis of the company mainly deals with the financial part. Problems in revenue generation, increasing cost, loss incurred by subsidiaries are all part of quantitative analysis of the company's financials. The descriptive analysis of data signifies the qualitative research data. Managers round the world prefer the usage of qualitative data. Descriptive data contains a detail analysis of the problem and its feedback. It not only consists of numerical data but also detail analysis of those data. The process of gathering information and exploring the alternatives further leads to finding solutions for the problem. Western Union has recently bought Travelex, a similar business payment system; so that it can help in boosting the business of the company and save it from further slow down. Western Union bought Travelex at $970 million. The company is expecting growth in the coming quarters with the help of business boost of Travelex. According to the CEO of Western Union, the company also expected revenue growth of 6 percent in the prepaid card segment. The rising level of competition from other companies in the same sector is also compelling Western Union to reduce their prices. Build In this section of problem solving, a formal business case is prepared where the problems and its various solutions are mentioned. It acts as a formal document for the decision-making body of the company to finally analyze the total research project on business problem identification and solution. The business case has been made keeping in mind certain factors. The validity of such solutions needs to be checked and it should be made on strong logical ground, so that it has supportive arguments for all the mentioned points. In business cases the identified problems and solutions are better identified. In organizations, problem solving teams or committees are formed to address problem within the organization and issues directly or indirectly related to the organization. These teams are also known as steering committee. This committee prepares a business report for each case they undertake. The cost benefit analysis is important to assume the monetary cost and the benefits of the proposed solutions. While formulating the cost/benefit structure, the team should consider the mission, vision and the values of the company. The values and the interests of the stakeholders should also be considered because the stakeholders are the actual owners of the company (Boardman et. al. 17). The Western Union board members mainly focus on the several standards of accountability of the different executive members in the organization and see that they are executing their responsibilities fully. The board also targets to establish the ethics and the culture of efficiency, friendliness and enthusiasm at Western Union. The performance evaluation of the executives is regularly done so as to maintain the smooth functioning of the business process. The company spends huge sum of money to develop strong mechanism against money laundering. Achieve The final step in the process of problem solving is to implement the chosen solutions and evaluate their effects on the company and the progress. After the implementation is done, the outcome of the project can be seen. If the solutions bring out a successful result then they should be improved from time to time for better results and if the alternatives fail to bring out desired results then again analysis can be done following the same steps to find better solutions. This how the management can estimate the total time required for successful implementation of the solution. The steering committee is responsible for the preparing guidelines, implementing new ideas and achieves results from them. The measures and evaluation outcomes of the solutions are also included in the process of implementation. The problem-solving team is responsible for proper implementation and success of the outcomes. The implementation process would include proper formulation of GANTT charts which would include the process to implement the solutions and time required for each activity. Western Union is already a market leader and the leading money transaction company in the world. The company has its business in almost every country in the world. That is why the company also faced slow down in the revenue generation during the recession phase. Western Union must have developed strategies to stop the slow growth of the company by acquiring a few small companies who are into similar payment business. This has helped Western Union to utilize their resources and customer base to increase their revenue growth and their productivity. References Boardman, Anthony. E., et al. Cost Benefit Analysis: Concepts and Practice, 3/E. New Delhi: Pearson Education India, 2008. Print. Daniels, Rdebaugh, and Sullivan. International Business. 11th ed. New delhi: Pearson Education India, 2007. Print. Hoovers. “The Western Union Company.” Hoover's Inc., 2012. Web. 30 July 2012. Hrishikesh, Sharanya. “Western Union's business payment unit faces slow growth.” Reuters, 2012. Web. 30 July 2012. Madinger, John. Money Laundering: A Guide for Criminal Investigators. 3rd ed. Florida: CRC Press, 2011. Print. Mukherjee, Supantha and Nivedita Bhattacharjee. “U.S. money transfer firms explore new routes in Asia.” Reuters, 2010. Web. 30 July 2012. Onkvisit, Sak, and John J. Shaw. International Marketing: Analysis and Strategy. 4th ed. London: Routledge, 2004. Print. Organization for Economic Co-operation and Development. Migration, Remittances and Development. Paris: OECD Publishing, 2005. Print. Yahoo Finance. “The Western Union Company (WU): Competitors.” Yahoo! Inc., 2012. Web. 30 July 2012. Yuthas, Kristi. “Problem Solving.” Problem Solving Handbook. Portland: Portland State University, 2005. Web. 30 July 2012. Read More