This research paper will describe Capital One’s general environment, technology and political and legal segments, forces of competition, Predicting and addressing forces, strengths, weakness, opportunities and threats (SWOT) as well as resource capabilities. The external environment affects a firm’s strategic actions. Essentially, if a company decision has created a disaster in the environment, they intern make corrective actions. According to the Hitt et al. (2003),“strategic actions are affected by conditions in other segments of its general environment, such as the political/legal, social/cultural, and physical environment segments” (Hitt, 2003). For more than 20 years, communities have seen Capital One work to build a lastingly immense business in financial services.
Capital One has chosen the businesses that they have with extraordinary care. For instance, they have created great tools to manage risk. They have also built a continuous balanced sheet (Capital One, 2011). Specifically, Capital one is best known for creating and building a successful credit card business. Essentially, if unauthorized persons were to get access to personal, confidential or proprietary information, it could result in legal and financial exposure. Capital One business is also subjected to increased litigation risks because of regulated financial services industry, and the structure of the credit card industry including practices in the mortgage lending business (Capital One, 2011). Technology, Political and Legal Segments
The Internet provides significant opportunities for any company. In fact, Capital One would benefit from utilizing the Webb. Hitt et al. (2003) discuss that since many individuals use the web, a company could send messages to customers about specials and new products especially, if they have visited the site previously. For example, “a number of other companies such as Netflix also collect demographic data about their customers in an attempt to identify their unique preferences (Hitt, 2003). Perhaps, Capital One would benefit from this innovative action to reach potential stakeholders and valuable customers. Product Innovations. Product innovations consist of new communication technologies. Capital one must apply knowledge to address possible threats and create opportunities. For instance, with an increase in smart phones, applications can be introduced to allow online banking at any time. Essentially, technology touches every aspect of our personal and professional lives. Noe (2010) state, “Technology- based learning has helped improve learning efficiency” (Hitt, 2003). Successfully working with and managing technology can be a demanding process.
Political/Legal Segments. The political and legal segment deals with organizations and interest groups. These groups compete for attention, resources, and a voice in regulating laws. The political and legal segment also guides interactions among nations, firms and governmental agencies (Hitt, 2003). Educational Philosophies and Policies. Education is vital therefore; it plays a major part in the solution and in the design of policies. Since the early 1980’s according to Fowler, a new policy environment proposes change due to crisis and situations (Capital One, 2011). Capital One is devoted to provide resources to help students succeed on the field, in the classroom, and in their communities. According to Cabrera, (2008) “it is true that one school alone can do little to change the world, but there is much we can and must do collectively as educators” (Hitt, 2003). For this reason, Capital One should continue to sponsor numerous college-based athletic programs. According to Rude, Whitcomb and Comerford‘s study (2005) suggest “education is much more than imparting knowledge and skills; it is opening the eyes of students” (Hitt, 2003).
Forces of Competition Including Predicting and Addressing Forces
Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. Two of the five forces that are the most significant for Capital One would be rivalry among competitors and threat of new entrants. Capital One has addressed rivalry among competitors in the past by getting new customers to keep their percentage level low for the new and existing customers. Also they have credibility among investor to find individual who are at high risk but will have a good potential with handling their credit card. Capital One threat of new entrants was a major concern in the first two to three years of their business. These concerns are now less intense as it has led to a cost advantage that would be impossible for new entrants to replicate. Capital One can approve these two forces going into the future by keeping up with the latest technology, catering to the community so they can continue to get new customers, and continue to come out with other products that will allow the company to grow in other fields.
Capital One has addressed these two forces by creating valuable programs to educate students, and monitoring trends. “A quality education is one of the most important determinants of future success for children and youth” (Capital One, 2011). The firm was creative in targeting and investing in students. Essentially, they are potential stakeholders. “Financial literacy and money management skills are crucial building blocks for economic success. These are the reasons that we support academic achievement from pre-school through college and invest in programs that prepare young people for a love of life-long learning and economic self-sufficiency” (Capital One, 2011). Additionally, effectively working with and managing technology can be a challenging process. Although technology is one of the most powerful forces, Capital One must continue to stay abreast of innovations. Based upon Hitt (2003), companies like Capital One should identify and successfully use resources over time.
Essentially, these companies must consistently think about how to manage resources. Managing resources would increase the value of their goods or services; create for customers as compared to the value competitive products created. (Worley, 2009) Since Capital Ones is one of the most recognizable and leading banks in America, utilizing technology is a sure way to address competition. According to Hitt et al. (2003), “Firms use several sources to analyze the general environment, including a variety of printed materials (such as trade publications, newspapers, business publications, and the results of academic research and public polls), trade shows, suppliers, customers, and employees of public-sector organizations”(Hitt, 2003). Firms also use methods such as scanning, monitoring forecasting and assessing. Forecasting, analysts develop feasible projections of what might happen, and how quickly, as a result of the changes and trends detected through scanning and monitoring” (Hitt, 2003).
External Threats and Opportunities
SWOT consists of making an analysis of strengths, weaknesses, opportunities and threats in an organization to determine where resources need to be applied. Hitt et al. (2003) state, “An opportunity is a condition in the general environment that, if exploited effectively, helps a company achieves strategic competitiveness” (Hitt, 2003). Based upon the research, Capital One opportunities consist of banking and brokerage global investments, asset management market, and growth in the credit card market, growth in commercial banking industry and opportunistic acquisitions and further industry consolidation.
Capital One should deals with the following opportunities by taking advantage of the opportunities that have been suggest to Capital One to help them stay ahead of their competitors such as MasterCard and Visa. A “threat” is a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness (Hitt, 2003). Capital One has to deal with threats such as new banking regulations in the US and Europe, weak mortgage market in the US and increased regulation in interchange rates. One way to deal with threats is to increase and improve its global presence. The state of the economy has put individuals as well as firms in a position to rethink decisions.
Greatest Strengths and Significant Weaknesses
Strengths can be considered characteristics of the business that allow them to have or take an advantage over others.Capital One greatest strategy consists of moving from one competitive advantage to the next. For instance, Capital One’s organization is developed from the onset with a hiring process. This process includes selecting individuals who like change. As part of the thorough interviewing process, individuals are asked to discuss leadership abilities and learning from change. Additionally, management focuses on identifying employees who have a passion for distinction and join forces well with others. For this reason, Capital One has managed to be a leading global financial brand with extensive retail distribution network, high quality asset investments, capital strength and a fortress balance sheet.
Weaknesses are simply limitations. Additionally, values are characteristics that place Capital One at a disadvantage when compared to other firms of its size. Capital One weakness consists of sub prime exposure in the United States and over dependent on one geographic area, the United States. Capital One weakness are negative publicity in the UK market bringing brand value diminution, increasing provision for a loan losses impacting profitability, and limited international presence enlarging business risk. Some tactics that Capital One should take in improving their weakness is to investigate their weakness to see what the company can do to improve. They could also take a different approach on some of the items that fell into the weakness category and turn them into an opportunity or strength for the company (Capital One, 2011).
Resources, Capabilities and Core Competencies00
Hitt et al. (2003) express, “Firms understand the external environment by acquiring information about competitors, customers, and other stakeholders to build their own base of knowledge and capabilities” (Hitt, 2003). In other words, Capital One takes actions based on acquired information in order to build new capabilities and core competencies. Essentially, companies try to shield themselves from any harmful environmental effects. This intern creates opportunities to offer all stakeholders better services to meet their needs. Capital One uses the following capabilities: First, they increase the amount of change related skills and knowledge in the organization. Second, they implement supporting organizational systems and structures, and third, they engage in and learn from change.
Only by embracing change as a normal part of organizational functioning can they build the social capital necessary to make change a competitive advantage. Capabilities are supported by organization design elements structures, policies, and systems. Capital One’s renewed commitment to its core competency in credit card lending portends continued earnings improvement as the company integrates its two acquisitions over the next year. This commitment led to vital improvements and proved it a top financial leader. Capital a business leaders’ personal understanding of technology, markets, and customers with the processes of change enhanced Capital One’s change capability. Capital One and the resources that influence a temporary competitive advantage are what drive the capability. Essentially, change has helped to develop Capital One to deliver both current performance and future results (Worley, 2009).
Analyzed Value Chain
Capital One has invested in human capital. Noe (2010) explain, “ Employee development is a necessary component of a company’s efforts to improve quality, meet the challenges of global competition and social change, and incorporate technological advances and changes in work design” (Hitt, 2003). According to Hitt (2003), “ value is measured by a product’s performance characteristics and by its attributes for which customers are willing to pay. Firms create value by innovatively bundling and leveraging their resources to form capabilities and core competencies” (Hitt, 2003). In other words, it is vital to create value for customers in order to receive an average return. Specifically, “value chains are activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers” (Hitt, 2003). Hiring the right staff and investing in the proper training to be a leader in the financial industry has helped Capital One achieve this activity.
Cabrera, A. (2008). The case for a professional code. BizEd, 7(2), 42-43.
Capital One (2011) Capital one annual report. Retrieved from http://www.capitalone.com/about/
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Worley, C. & Lawler, E. (2009). Building a change capability at capital one financial. Retrieved from Organizational Dynamics, 38, (4), 245-251 www.elsevier.com/locate/orgdyn