Capital One's strategic positioning in the post-financial crisis banking landscape

Capital One Financial Assessment

External Environmental Analysis

The past two and a half years have been unquestionably volatile and even dangerous for the banking and financial industries, and Capital one was not entirely spared form this adversity. The new landscape in these sectors, however, is one with fewer players and thus a greater consolidation of market share amongst the surviving institutions. The right company could take advantage of an abundance of opportunity that now exists in these markets. New credit card regulations and a closer scrutiny of financial practices will dictate new methods of practice to large financial institutions, at least in the short-term; this will provide new challenges to companies unable to adapt quickly, but will provide excellent opportunities for companies that are better able to weather the changes in the current financial and regulatory climate.

There are also several threats that could inhibit growth and limit profitability if not prepared for and adequately responded to. New regulations have already begun to take effect on the credit card industry specifically and the financial industry as a whole, with definite negative effects on Capital One's bottom line. The general downward trend in the entire industry, however, can actually be taken as a positive sign in the long run. The financial industry cannot disappear entirely, and surviving companies will not only have a larger market share, but will be positioned to help design the market and create, through negotiations with regulators, the environment in which they do business. The worst of the threat is over; Capital One is well positioned to take advantage of the changing landscape. Response to regulation and a rapid expansion of market share are key strategic priorities.

Internal Environmental Analysis

Capital One has already shown a great deal of versatility and durability in its short history, surviving as a monoline when most others went under or were sold off through aggressive and innovative marketing campaigns, and later through entrance into the banking industry. These are key strengths that the company leadership and culture still possess, and their recent acquisition of Chevy Chase Bank shows that they are still viable, diversifying, and as aggressive as ever. Their overall gain in assets despite significant losses in stocks and profits in 2008 shows that Capital One is strategically positioned to continue their growth in the banking sector despite -- and in many ways because of -- the recent turmoil.

At the same time, Capital one definitely has some internal weaknesses. Their heavy dependence on profits from their credit card operations has already taken a hit from the new consumer protection laws, and these effects will continue to develop in the coming years. At the same time, consumer confidence has dropped significantly, and people spending less -- especially on their credit cards -- will also have an adverse effect on the company's ability to maintain profits and find new consumers. The company's internal focus will need to shift dramatically in order to maintain or increase its current market position.

Acquisition Strategy

Capital One's most recent acquisition, Chevy Chase Bank, only seems out of pace given the company's general public profile. The company has previously acquired two other regional banks, and is possibly poised to enter banking on a national level. Though there was a definite strategy shift when the company decided to enter banking, this acquisition strategy has remained strong despite the economic downturn and is a likely reason for their weathering of the chaos.

Given the continued uncertainty many financial firms and banks are still facing, the continuing strategy of acquisitions might be riskier than when the company acquired their first bank in 2005. Continued growth is necessary for increased profitability and market share, but determining the correct acquisitions is difficult in the current climate. Balancing growth and risk management are key strategic concerns in the immediate future.

International Position

Though Capital One has not begun extensive international operations, the company has already begun to earn a reputation as one of the best credit card companies to use internationally and when traveling. This growing reputation could help to position the company for a large entrance into international markets; as its products and services are already receiving positive attention in foreign markets, Capital One has some unique advantages over other firms that remain operational entirely and solely in the United States.

Capital One is also far behind other companies that have been long established in international markets, however, meaning that this entrance would introduce them to much fiercer competition than what they are currently experiencing in the domestic market. Again, a delicate balance between managing risk and taking advantage of unique and time-dependent growth opportunities must be central to Capital One's continued strategy and growth.