Porters Five Forces is considered a strategy that is holistic that goes beyond an analysis of a company’s present competition. The Western Union Company can use the Five forces in exploring profitable opportunities evident in the financial sector.
Threats of New Entrants
New entrants in Credit Services leads to the development of unique ways of doing things, an action that puts pressure on Western Union Company. The new entrants lead to low pricing, new prepositions to buyers as well as reducing the cost of services. Western Union can tackle these challenges through innovating new products that are evident to attract new customers as well as the old ones. Western Union can build economies of scale in order to minimize fixed cost per unit.
Bargaining power of suppliers
The existence of powerful suppliersimpacts the financial sector through the negotiating power that makes it possible for them to get higher prices from companies in the Credit Services sector. This leads to lowering of the overall profit of Western Union and any other companies in the Credit Services. For instance, according to the Western Union Fourth Quarter report of February 2019, GAAP earnings per share registered was $ 0.48, a figure compared to the previous year loss of $2.44. The loss can be as a result of the bargaining power of suppliers. However, Western Union can minimize the weight of this problem by developing an effective supply chain with various suppliers in the sector.
Bargaining power of buyers
Buyers always bargain a lot to get best offers available under minimum prices. This issue in most cases affects the Western Union Company’s ability to make a profit in the long run. In other words, customers bargaining power aims at making the Western Union increase discounts and offers which affects the profitability of this firm. However, by building a vast customer base, the Western Union Company will have minimized the bargaining power of not only buyers but would have also created an opportunity for streamlining its sales as well. This strategy is evident from the market cap of $7.85 billion released on 8th of this month.
Threats of Substitute Products or Services
In most cases, new product or service meeting customer needs make business profitability to suffer. For instance, the threat of a substitute service such as Dropbox negatively impacts the Western Union’s value proposition. The Western Union can tackle this problem by increasing the switch cost for the buyers.
Rivalry among the Existing Competitors
The Credit Service industry is very competitive making existing players like the Western Union Company. The competition in most cases affects the overall profitability of the company. However, Western Union through collaborating with market competitors to increase the size of the market.
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