Capital One Company Critical Analysis

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Introduction

Recently capital one acquired North Fork Bancorp a few months after acquiring a New Orleans-based Hibernia for a $5b deal in November last year. All the bank’s executives are at a consensus that the planned strategy will offer the bank a diversification that is very vital credit card industry. Despite the allegations by some analysts that the acquisition of North Fork Bancorp has come too soon next to the bank’s recent Hibernia acquisition, Richard Fairbank, the bank CEO argues that the acquisition delivers on the bank’s strategic agenda and it balances and diversifies the company. The North Fork was acquired for $31.38, inclusive of a nearly 23% premium on its closing value prior to acquisition. The bank also reopened some of Hibernia’s branches which were closed following the New Orleans disruption.

Conduct an External Environmental Analysis, and identify key environmental forces that have immediate strategic implications for Capital One

There are several factors that are likely to affect Capital One in the carrying out of its acquisition. Firstly, there is stiff competition in the credit card industry. This means the market is relatively small and the bank might not realize its strategic goals. Competitors shrink the market and this may make capital one unable to recover the cost of the acquisition of the two banks.

The other factors are political factors. For instance, the criticism of Capital One may also affect its performance. There are those who argued that the acquisition was too soon for the bank. This exposes the weaknesses of the bank decision-makers and may make the customers lose confidence in the bank.

The resources in the economy also affect the business. Where resources are more, the bank will perform better because its customers have money (Donald, 2008, par.16)

. For Capital One, it can be riskier if there are no resources in the economy. People may not take a credit cards if they do not have money.

The other factor is government regulations and policies. Since Capital One is a leading bank, it is likely to be affected by government regulations and policies. Sometimes the government will restrict lending out so that the bank lends out less than it is able to offer. The lending policies are always under government regulations. The government through the central bank may even dictate the lending rates making the bank unable to exploit the whole potential in the market.

Conduct an Internal Environmental Analysis, and identify the capabilities and weaknesses within Capital One that have immediate strategic implication

After the acquisition of North Fork Bank, Capital One bank will have some strengths and weaknesses associated with that. For instance, the bank might have received some expertise from the other bank that will help the bank in making informed decisions. The other strength is that the bank’s capital base also broadens. This is because of additional premises and other assets which will help the bank to increase its operations and the number of people it reaches. The bank will also enjoy a synergetic advantage from the acquired team. Other strengths will include increased market share, financial leverage, industry know-how and positioning (Donald, 2008, par. 18).

On the other hand, the bank will have some internal weaknesses like a change of management which may take time for the new people to adjust. The bank might also have to hire some more people who are familiar with the resultant system after acquisition (Olsen, 2008 p.26). The bank might also have to lay off some people who are not supporting the bank policies. There are also financial weaknesses associated with the acquisition like legal costs, high cost of the takeover, intangible costs, short tern opportunity costs and potential devaluation of equity.

Evaluate the strategic fit of Capital One’s recent acquisitions, and discuss the key strategic issues raised

According to Grant (2007, p.6), the strategic fit of a company indicates the extent to which the organization is matching its resources and capabilities with the opportunity in the external environment. Capital One has a great opportunity of getting an increased market share and higher competitiveness. The acquisition of the two banks, Hibernia and North Fork, gives Capital One enough resources to exploit the opportunities. The bank has made a significant step in realizing its strategic fit by reopening the branches that were closed following the disruption in the New Orleans area. However, some analysts argued that the second acquisition was too soon or a haste decision by the bank. Some security analysts such as Jeff Davis argued that Capital One was fascinated by Hibernia’s growth in Texas. This was in contradiction to the strategy that Credit Card companies should be attracted by banks’ low-cost deposits. He further argued that this is a strategic issue and needs to be addressed. The other issue was that the second acquisition was made in haste after the company had spent a huge amount of money in acquiring Hibernia. The success of the acquisition was doubted by the analysts the CEO and other bank executives were convinced about its success.

Assess Capital One’s international position

Capita One has built a strong international network and has emerged as a market leader in export and import services. It has broken down the international trade complexities and has gained international recognition. The services deal with internationally include international fund transfer, trade financing, foreign drafts, clean collections and cash letters among others.

Reference

Grant, R. (2007). Contemporary Strategy Analysis: Concepts, Techniques, Applications, 6th Edition. New York. Blackwell

Donald, D. (2008). Mergers, Acquisitions, and Other Restructuring Activities. New York: Elsevier, Academic Press

Olsen, E. (2008). Internal and External Analysis. New York. Blackwell

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Capital One Company Critical Analysis

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