Decisions in Paradise, Part II - Essay Example

Introduction The island of Kava is an international location that Capital One has identified as a potential expansion spot. The location of island of Kava is the South Pacific region. Capital One for years has had the intentions of expanding into this marketplace. The small size of Kava makes it a perfect testing ground for Capital One. The firm can advantage of its market test in Kava to study the culture of the South Pacific region. The plans of expanding into Kava would be much simpler if there weren’t a serious of issues and business risks associated with Kava.

To evaluate potential solutions this paper will implement a decision making model that will simplify the process by using a proven scientific method to arrive at solutions. Decision making model The decision making model used to evaluate Capital One’s options at Kava is a nine-step model. The nine steps of the model are: indentify problem, define criteria goals and objectives, evaluate effect of problem, identify causes of problem, frame alternatives, evaluate impact of alternatives, make decision, implement solution, and measure impact.

The use of a decision making model can facilitate the assessment of a problematic situation. The usefulness of the decision making process is that it helps managers identify the optimal selection among a set of alternatives given a specific set of objectives (Answers, 2011). The first step of the decision making model is indentifying the problem. Problem Identification The identification of the problem at Kava involves a series of issues that make Kava a high risk proposition from an investment standpoint.

To start Kava is one of the countries in the world with highest risk to natural disaster exposition. Kava’s population has a high blend of different cultures and ethnic backgrounds. Half the population of Kava is compose of indigenous tribes; also half the population is children under the age of 15. Kava is a haven for terrorism activity. The next step of the decision making model is defining goals and objectives. The goal of Capital One is to expand its operations in Kava to help the community by creating jobs and economic activity.

Another important goal that Capital One and all public corporations must follow is to maximize shareholders wealth (Besley & Brigham, 2000). A third goal of Capital One is to minimize the business risk of the company while maximizing the benefit of the stakeholders including the employees and the community. The cause of the problem is nature itself and the lack of economic resources of the Kava government and private community. Alternative Solutions Capital One has several alternatives solutions it can consider in regard to the Kava situation.

A first alternative solution is to close down operations in Kava. The firm can move Alex and Chris out of Kava and cancel Nik’s assignment. This alternative solution is a cheap solution that considers the interest of the Capital One shareholders from a financial perspective. A problem is the solution is not aligned with the vision of the management of the company. Capital One targeted Kava because it was a poor community that needed the influx of foreign capital to help out the economy. A second solution for Capital One is to penetrate Kava in a limited plan.

Capital One could open just one banking institution in Kava. This option limits the risk of the firm because the company would have only one subsidiary to worry about. In case of a natural disaster the temporary shutdown of one business unit will not affect the company that much. The option allows the company to perform market research in the South Pacific region market. The population of the South Pacific region is 34.7 million people (Internetworldstats, 2011). A limitation of this option is that it does not comply with goal of helping the Kava community in a significant manner.

A third alternative solution is to penetrate Kava by opening several business units. Capital One would open four banks along with an ATM infrastructure. The banks would provide approximately 50 jobs in the financial sector. To create more jobs to have a greater impact in the Kava community Capital One will open a service call center to service the worldwide Capital One customer database. A good attribute of Kava is the languages spoken in Kava. The call center would create 200 jobs in a 24/7 operation.

The company would insure all assets against all types of natural disasters and terrorist attacks. A con of this strategy is that it exposes the company to many business risks. The threat of discontinuity in operation in Kava would hurt customer service of the entire company. Conclusion Capital One has a real interest in expanding its operation in the island of Kava. In order to determine the best options available the company utilized a nine-step decision making model to dissect the situation.

The three options that the company is considering are leaving the island of Kava, penetrating on a small scale, and full scale expansion into the island of Kava. The next step for the company is to determine the optimal solution to the Kava dilemma. References Answers.com (2011). Decision Making. Retrieved May 3, 2011 from http://www.answers.com/topic/decision-making Besley, S., Brigham, E. (2000). Essentials of Managerial Finance (12th ed.). Fort Worth: The Dryden Press. Internetworldstats.com (2011).

Oceania and South Pacific. Retrieved May 3, 2011 from http://www.internetworldstats.com/pacific.htm