External and Internal Environment of Capital One - Essay Example

The external environment can be analyzed by using various tools like PEST analysis. The PEST analysis stands for Political factors, Economical factors, Social factors, and Technological factors. The analysis of Capital One can be undermined as below:

• Political factors – The markets in which the company was operational did not have many political disturbances and therefore it could be said that the company experienced conducive political factors for its new strategy of acquisition.
• Economic factors – This was undoubtedly the most vital aspect for a company operating in the domain of financial services and products. The economic slowdown and the global meltdown really hampered the growth of the company. The financial performance of the company worsened on year – to – year basis even after following the strategy in an aggressive way. The faith of the general public in the financial system was disturbed as one after the other too – big – to – fail companies became bankrupt.
• Social – Capital One had considerable social acceptance and that proved beneficial for the company to continue the business even in the trying times of financial slowdown. The company had taken a number of efforts and initiatives that contributed towards community development and corporate social responsibility and those have paved the way for the sustainable growth of the company.
• Technological factors – The company has been observed to be technologically sound and it was found that Capital One offered the best of the attributes based on technological developments. It could be said that the research and development in the technological segment paid well as the environment is continuously changing.

Internal Environment

In spite of having an aggressive policy based upon acquisition, it could be said that Capital One Financial Corporation did not have a great year. Though the reasons were primarily external, like the global meltdown and economic slowdown, there were areas for the company to worry about. The auto segment of the company was badly hit. But in reference to the undertaken strategy, the company claims, that those strategies contributed towards the success of the company. According to the annual report of 2008, “Despite the challenging economy, 2008 also was a year of progress for Capital One. Many of the strategic choices we have made over the years were validated when tested by the economic storm. These critical decisions included our business mix, our banking transformation, our decreased reliance on capital markets funding, our capital and liquidity strategies, and our early exit from the Green Point mortgage origination business which we inherited as part of the North Fork Bank acquisition” (Annual Report, 2008).

Strategies

The strategies of Capital One Finance Corporation can be divided into two parts namely the business-level strategy and the corporate-level strategy. The business-level strategy is decided at the operational level and is responsible to generate more businesses in the short term where as the corporate-level strategy is initiated at the management level with the view of long-term strategic changes.

The landmark business level strategy for Capital One Finance Corporation had been the fact of providing a customized business solution to the prospective as well as existing clients of the financial institution. It could be made successful with the help of information technology as the company stored all its data for the likings and disliking of each of the customers. The major success of the corporate level business strategy of the company had been the changing of the mode of being only a credit card company to a bank in due course of time. Capital One acquired at least three large regional banks that helped the company to mitigate the risk which the company had depended solely upon the subprime borrowers of the credit cards. It is because of this acquisition and diversification strategy, Capital One Financial Corporation could manage to thrive despite the subprime crisis and the economic slowdown (Business & Finance, 2007).

Strategic Fit

The company claims to have tremendous strategic fitness. It is also evident that the strategies initiated by the company had been relatively successful as they could assist the company to manage itself well. It can be well said that the strategy of having a diversified business mix and transformation to the bank has been a major success for Capital One Financial Corporation along with efficient credit risk management and balance sheet management. With the new policy of aggressive acquisitions, the financial institution could get hold of newer markets, and being a bank since 2005 helped Capital One Financial Corporation to have deposit mobilizations. The core business of the group i.e. the card business is still doing well for the company amidst economic downturns

International Exposure

Capital One Financial Corporation is yet to make an international presence felt. Being primarily a credit card company and now also a bank, the company has the–ups with a number of international financial institutions all across the globe like that Master Card. Capital One has its own operations in the countries of Canada and the United Kingdom apart from the United States. With the aggressive policy that the company follows, it might soon have a number of other similar institutions acquired in many other countries.