MPESA Service by Vodafone and Safaricom
The Blue Ocean strategy provides a framework for thinking creatively and differently in business. According to Mauborgbe & Kim (2004), “the real opportunity is the creation of blue oceans of unchallenged market space. One company that has been creative and innovative is Kenyan telecom giant Safaricom, which was largely owned by Vodafone. Safaricom Limited devised a service known as MPESA, the most successful mobile money transfer service that enables millions of people to send or receive money through their mobile phones. Vodafone launched the service in the year 2007. According to Safaricom (2011), the number of MPESA customers is about 15 million and the service brought the company about $203 million in the year 2011. This is an example of the blue-ocean strategy case.
Two tie-ins can be drawn in this case. First, the company created an uncontested market space. It is true that mobile telephony and data services were existent. At the same time, money transfer was common in the banking industry. However, mobile money transfer was not available and it is this space that Safaricom created through its MPESA service. Second, the company made competition irrelevant and tried to create and capture demand. The company did this through value-added services such as the paying of utility bills through the MPESA service. It also introduced money transfer between banking institutions to the mobile service and this captured new demand.
Three things led to the creation of MPESA. First, banking services existed but not many people had access. Banking services were also somewhat expensive for the common citizen. Second, mobile phones had become increasingly available to many people in the country (Vodafone, 2013). Third, there was a need to bring money services to the majority of people who did not have access to banking services, but had access to mobile phones. There are three factors that set MPESA from its red ocean competitors. After MPESA was a success, other service providers such as Airtel Kenya and Orange introduced mobile money services such as Zap and Orangemoney respectively. Therefore, while Safaricom created an uncontested market space, the other providers try to bring competition. Second, these other providers tried to beat the competition by lowering prices for their services. However, Safaricom made competition irrelevant through value-added services. Third, while the other providers tried to exploit the existing demand, Safaricom and MPESA created and captured new demand through bank-to-mobile and mobile-to-bank money transfer, as well as the paying of utility and other bills with MPESA.
References
Mauborgne, R. & Kim, W.C. () Blue Ocean Strategy. Harvard Business Review, October 2004, pp. 1-12.
Safaricom. (2011) MPESA Key Performance Statistics, 2011. Retrieved, 03, March 2013 from http://www.safaricom.co.ke/personal/m-pesa/m-pesa-resource-centre/statistics
Vodafone. (2013) Vodafone Money Transfer. Retrieved, 03 March 2013 from http://www.vodafone.com/content/index/about/about_us/money_transfer.html
