Chapter 4: Case Study
4.3 Five-force analysis
4.3.1 Major competitors on remittance business in the market
0 10,000 20,000
2001 2002 2003 2004 2005 2006 2007 2008 Year
VND
changes
Major competitors are not many. The direct competitors of ABCMTC current are Sacomrex and Incomex, which they have all kinds of services like counter pickup, account transfer or bank‟s card, home delivery. However, they still have lower market share in comparison with ABCMTC, meanwhile the demand of this service is more and more increased. These competitors can not cover all market, so the market for ABCMTC is always high.
(a)Formal channel
A remittance firm transfers funds from one person in one country to another person in another country. Often, the international remittance is the monetary fruit of migrant labor that is being transferred back to the migrant worker‟s family. This makes the remittance service a crucial component of the logistics of migration. There are many remittance service providers in certain country which cooperate with remittance service providers in other countries to help customers transfer money to customers‟ home. They are banks, non-bank financial institutes like Western Union, Moneygram, foreign remittance service providers. These are some indirect competitors for ABCMTC.
At present there are some Vietnamese banks have cooperated with foreign banks to transfer money for customer such as: Incombank, BIDV, Vietinbank, Vietcombank, Sacombank, Asia Commercial bank, Agribank. Moreover, these banks cooperated with Western Union and Moneygram in this service, and they keep in touch with Export labor companies to give information about their services to Vietnamese worker.
Generally, services of the indirect competitors are also quite narrow, limited and lack of profession. Most of their services primarily concentrated in the type of home delivery but still limited. However, there are some small companies with large-scale activities and bring extensive expertise as Sacomrex, Eden FSC, FINTEC, Incomex, and forms of operation, products and services of these companies are quite similar to ABCMTC.
Most of banks just focus on counter pickup, account transfer or bank‟s card, and other money transfer companies specialize on home delivery. Meanwhile, ABCMTC has all those kinds of services.
However, there are some informal small non-bank businesses that have especially served for Vietnamese workers in Taiwan, but which is perceived to prevent a level playing field and create a competitive disadvantage to the firms that are appropriately licensed.
(b) The threat of established rivals in each product
- Network
Bank or Company
Number of province
BIDV 64
Agribank 64
ACB 64
ABC 57
Sacomrex 55 Incombank 54
VCB 38
Eximbank 16
Source: Directory of the statistics in Vietnam Table 3: Network of rivals
Some competitors has their service in all 64 provinces in Vietnam, meanwhile ABCMTC has 57/64 provinces.
-Products and services
+ Home delivery:
Source: Directory of the statistics in Vietnam
Figure 9: Three biggest companies in Home delivery service
+ Counter pickup: The number of POD (places of delivery) of ABCMTC is ranked 5th comparison with Sacomrex, BIDV, VCB, ACB
+ Bank‟s card: The number of ATM in ABCMTC is ranked 3rd in comparison with VCB and VIDB.
Although ABCMTC has the infrastructure less than competitors, it has done business better than these rivals.
(c) Informal channel
Traditionally, Most of Vietnamese worker is familiar with informal channel when they send money to their relatives in Vietnam because they don‟t know much about the formal channel.
Other reasons are language barriers, complex procedures in banks, regulations because these Vietnamese workers are mainly the unskilled (including construction workers, domestic workers, farming labour, etc) and semi-skilled (including electronic workers, factory workers, etc) job categories. Moreover, IFT operators meet the demand of the recipients in the rural
Home delivery
50 55 60 65
ACB Sacomrex
Number of provinces
ABCMTC
areas in many ways. Not only do they offer distribution into rural areas where formal systems have not penetrated, but they conform to the cultural and personal desire for anonymity – an important factor for many recipients in Vietnam, especially in rural areas. Some rural recipients refer IFTs because they do not want neighbors or officials to know they receive money. In rural areas, local government oversight can be strong and, at times, intrusive from the perspective of senders and recipients. One government officials or other community members know that the person receives money from overseas, they question where the money comes from, ask for loan or gift and monitor spending habit of recipients.
Global money transfer 4.3.2. Threat of substitute products or services
In general, there are many substitute services of ABCMTC that are banks, foreign remittance services, and informal services. Threat of substitute products here is medium because customers can choose other services, but they have to pay higher cost with formal channel or get high risks with informal channel. However, the scale of these substitute services is not high enough to affect to ABCMTC.
Informal funds transfer system is still a matter of concern for ABCMTC. Informal funds transfer systems (IFT) operate in the main markets in Vietnam like the jewelry shop in Ben Thanh market. The following steps are required to complete the money transfer operation.
- A sender deposits money in a designated bank account in the originating economy.
- An IFT system operator in foreign countries confirms the deposit and provide a code to the remitter
- The IFT system operator in foreign countries calls an IFT system operator in Vietnam to transmit the code.
- The sender calls the recipient to convey the code
- The recipient receives the money in exchange for the code from the IFT system operator in Vietnam.
Formal funds transfer systems have yet to match the speed and low prices of the IFT systems.
For example, transfers money from Canada to Vietnam through banks and other major Money services business (MSBs), such as Western Union, can take 2-5 days in contrast to 24 hours for IFT operators. In some cases a remittance through formal channels to a rural region in Vietnam can take a month. An IFT agent typically charges 1-2 percent of the transferred amount for each transaction, depending the size of the transaction. Fee in the formal sector vary widely, from 2 to 10 percent. Some formal channels charge a smaller percentage but with the addition of the flat fee. In the case of bank transfers, additional fee may be charged to recipients by the intermediary and distributor in Vietnam. Remitters are thus likely to pay more when using formal operators.
4.3.3 The threat of new entrants
The threat of new entrants is low as the following reasons:
- Government has tightly controlled in allowing registering for remittance service business in Vietnam.
- Remittance service has required high knowledge about finance for people who want to run business about this.
- Money Transfer Company has required a lot of investment in capital in cash or infrastructure like place of delivery, agencies.
Therefore, there are so many difficulties for new entrants that they want to do this kind of business. Most of new entrants are from banks which established new branch to specialize about this. Moreover, Western Union and Money gram also set up more places of sales to expand their business in Vietnam in recent years. Other new entrants are not so big.
4.3.4 The bargaining power of suppliers
The bargaining power of suppliers is medium. Suppliers are agencies in other countries.
This service has required worldwide network. It is not easy for ABCMTC to find out agencies in foreign countries, but it is not difficult to keep long relationship with them thanks to ABCMTC reputation in Vietnam.
4.3.5 The bargaining power of customer
The bargaining of customers is low because the number of customers who have money transfer demand is high, but the good money transfer service is not so many. ABCMTC has a full-product advantage, which customers are very easy to get the satisfactory from ABCMTC‟services in comparison with others services. In addition, they use other substitute services such as sending money through someone from foreign countries to Vietnam, which will have limitation of the amount of money. If they send by informal channel, it will be risky.
In generally, customer habits and the existing industrial organization is so entrenched that institutions with external financing or existing financial infrastructure will have the competitive edge in changing the market. They usually choose the remittance services as their
habit, especially workers. They like services that are familiar with them and easy to access to avoid risks in transaction.
Because of most customers are like home delivery service, ABCMTC needs to develop more these services with other partners (Instant Cash, Money ... X-Press ) and expand activities to the rest of provinces. ABCMTC needs to shorten delivery time to have better services and compete with Sacomrex (4 hours in Ho Chi Minh City, 8h in center of other provinces and 24h in the rural areas).
To attract customers, ABCMTC should set up more ATM machines to be more
convenience when customers use the card, and they should do some promotions such as free cards and free transactions in the first 10 trading.
4.4 BCG framework
As the above analyzing, ABCMTC has the second biggest market share in remittance service and still improve their service to adapt the market growth.
According to BCG matrix, the position of ABCMTC should be at “Stars”.The business has high market share compared to competitors and it is doing business in high-growth market.
This business is a market leader. Successful Question Marks will grow their business and capture more market share and will hopefully become Stars (move from the Question Marks quadrant to the Stars quadrant). Successful and competitive organizations have at least one star business unit or product. ABCMTC has to improve their business continuously in order to keep their position in the marketplace. As long as this market is growing new question marks will try to capture new business
Relative market share position is given on the x axis of the BCG Matrix. The midpoint on the x axis usually is set at .50, corresponding to a division that has half the market share of the
leading firm in the industry. The y axis represents the industry growth rate in sales, measured in percentage terms. The growth rate percentages on the y axis could range from 20 to +20 percent, with 0.0 being the midpoint.
ABCMTC is located at x=18.03/20.86=0.86 (ABCMTC‟s market share compared to VCB‟s market share); y= (sales in 2008 – sales in 2007)/sales in 2007=(8-5.5)/5.5=45%. (The data is collected up to 2008)
Source: This research
Figure 10: BCG shows ABCMTC’s position
Remittance services have existed for a long time, but it was delivered by informal channel.
This is the reason why informal channel had the big market in the past. However, informal channel is going to decrease its market share and growth because informal channel is reliable and easy to use, and it lies between cash cows and dogs. As regards foreign remittance
services, it is at question marks because it is growing, its market share is still low. In terms of Vietcombank, its market share is larger than ABCMTC, but its growth is lower than ABCMTC.
In short, ABCMTC is a leading player in money transfer market, and they are harvesting their profit. However, they should have strategies to maintain their position in the market.
They should focus on developing internal resources such as improving their services better and better and training their staff more professional in order to keep high growth in the remittance market.
Chapter 5. Conclusion and Suggestions
a. Conclusion
After analyzing three frameworks for ABC Money Transfer Company, we can conclude that ABCMTC is one of the leading market remittances in Vietnam, and it has ranking fourth on the services network and is ranked the first on home delivery. This is one of competitive advantage of ABCMTC. In addition, ABCMTC has competitive advantage in the view that it has the second largest market share in remittance market in Vietnam. Moreover, they have full product advantage, and strong financial support, infrastructure, reputation from ABC Bank, high experience employees, and high speed services.
At present, ABC Money Transfer Company has more strengths, opportunities than weaknesses and threats, and they have the good position in the market.
Due to financial crisis in USA, the amount of money transferred back to Vietnam decreased slightly at the end of 2008 and during the period of 2009, but it will be jumped again when the world economy is recovered later. Money transfer companies should exploit their competitive advantages more effectively to improve their services better.
However, current government policies have ventilation on foreign exchange management and incentives for overseas Vietnamese and loosening monetary policy to help recover the real estate market, and setting a goal of exporting 90,000 workers to other countries.
b. Suggestions
ABC Money Transfer Company should improve their internal resources like human resources, organization, and the quality of products so that they can maintain their position in the market.
B1. To product or service
-ABCMTC can expand their services in many ways such as opening more branches, agencies, developing ATM systems and home delivery, etc. In particular, opening more agencies is more feasible and effective because the cost of this expansion is low and they can clearly understand the demand of each region.
-Improving the service‟s quality by shorten the time to delivery money to customers
-ABCMTC should expand more branches in remote areas so that more people can access their services.
B2. To customer and partner
- ABCMTC sends experts to other countries to support Vietnamese worker who don‟t know the procedure.
- ABCMTC needs to find and cooperate with more partners in other countries and global partners.
B3. To marketing activities
- ABCMTC can negotiate with Money Gram to promote ABCMTC image in other countries by posters at Money Gram‟s POS
- ABCMTC should advertise their service through Vietnamese newspapers in foreign countries.
- Cooperate with Vietnamese students in foreign countries or leaders of Vietnamese organizations to research and support for information about Vietnamese in other countries and find overseas Vietnamese partners in foreign countries.
- In long term, ABCMTC should focus on the Vietnamese export worker. ABCMTC can cooperate with foreign labor brokers and boss in manufacturers to follow workers in their transfer money to Vietnam.
c. Limitation of the study
There is limitation of statistics data because of some difficulties in collecting these kinds of data in my country.
Due to time limitation, this case study has only analyzed one company in Vietnam.
Therefore, this may have not enough evidence to go to the end conclusion for the whole market and lead to further studies in near future.
d. Future study suggestions
This research just focused on reviewing the remittance market in Vietnam to show up the competitive advantages of Money Transfer companies in Vietnam through some frameworks.
By this I mean that these companies should have right strategies to improve their services and products so that they can meet higher demand from customers.
In future, they should have some studies to draw out some new organization models for Money Transfer companies that these remittance companies can improve their performance.
Moreover, some researches about other remittance companies in Vietnam are needed in order to get more information for general market.
Another suggestion is that the empirical evidences regarding the impact of remittances on the real exchange rate in Vietnam are need for future study.
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