Tuesday, September 17, 2019

Capital One Financial Corp: Setting and Shaping Strategy Essay

Strategy Capital One Financial Corp’s strategy is to develop and market products and services to satisfy the demands of a competitive and ever-changing marketplace by utilizing information technology for mass customization which will deliver the right product to the right customer at the right time and at the right price. Such a strategy requires the employment of talented people and a flexible culture promoting innovation to help identify, develop and market products and services. Capital One’s information-based strategy, or IBS, serves as the strategy to improve operations in every aspect of the company. IBS technology enables Capital One to provide more valuable products, thereby creating a positional advantage over its competitors. However, by focusing on the IBS capability as its sole competitive advantage, Capital One neglects any positional advantages, such as its brand, that might become more valuable than the potential advantage IBS might yield elsewhere. Analysis Capital One makes it a point to hire the top talent from top schools. Even though this is an important initiative to obtain quality assets, it is just as important to organize such assets in a way that achieves competitive advantage. Capital One has done a good job aligning its organizational structure with its strategy. Its functional structure enables Capital One to facilitate technical excellence within each function and still achieve cross-functional sharing of information or knowledge due to its loose coupling of departments. By aligning the internal organizational structure with the talented resources they become a source of competitive advantage. Capital One created a culture that rewarded data and fact-based decision making which flattened its hierarchy and promoted innovation. Employees were empowered to test and learn through all aspects of the organization. Performance reviews were conducted by peers and bosses, providing constant feedback. Compensation was heavily weighted on cash bonuses and long-term incentives; further aligning employee behaviors with the long-term goals of the company. Departments were encouraged to work closely with each other, which promoted information sharing. This loose coupling benefited Capital One’s explorative initiatives in finding completely novel ways of doing things, rather than doing the same things better than the competition. Capital One’s IBS capabilities aligned with its internal functions enabled it to differentiate its credit card product offering from the existing competitors. In so doing, it attracted the lowest risk applicants creating a completely new super-prime market segment. Due to the explosive success of the credit card divisions, it would be very easy to support the Summit Acceptance Corporation initiative. The IBS capability was easily applied to the credit sector, and one would deduce that this competitive advantage would be successful in other credit-based markets. Even though Capital One was in a position to easily leverage its existing IBS capabilities into products not previously considered, it would be difficult to support the America One initiative. There was a lack of synergy with Capital One’s existing operations, and the telecommunication market was a drastically different industry. Alternatives Even though Capital One experienced rapid growth and success in the credit industry due to its superior IBS capabilities, it is clear that the company’s strategy is lacking exploitive competencies. Systems have become increasingly complex and duplicative which could impact Capital One’s ability to react to environmental changes quickly. The company’s explorative focus on growth and change has made it difficult for the finance division to forecast effectively. The company must continually develop and deepen its current IBS advantage if it is to meet the challenge of competition both locally and globally. They are great at exploring new opportunities but fall short from further exploiting those markets. They were able to get things done operationally, but were not able to add any additional value. Capital One needs to recognize that environments change and as they explore new opportunities, they may want to create new forms of competitive advantage. By focusing on the IBS capability as its sole competitive advantage, Capital One neglects any positional advantages, such as its brand, that might become more valuable than the potential advantage the capabilities might yield elsewhere.

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