Bank Management U.S. Bank Performance Analysis
Capital One Bank is ranked 98th on the fortune 500 companies. It has 755 branches, including thirty café style locations and 2,000 ATMs (Schwert 788). Capital One bank is ranked fifth in credit issuance, after Citigroup, Bank of America, American Express, and JPMorgan Chase (Schwert 788). In the fourth quarter of 2018, 75% of the company’s revenue was from credit cards, 14% from consumer banking, and 11% from commercial banking (Schwert 788).
We shall use SWOT analysis to conduct the performance analysis of Capital One Bank. We will review how Capital One Bank’s performances can be improved. We begin by looking into the history of the bank and how it has transformed throughout the years.
Capital One bank was formed on July 27, 1994 when Signet Financial Corp announce a corporate spin-off of its credit card division (Greenwood 480). Richard Fairbank was the first CEO of the bank. In 0ctober 1994, this subsidiary was renamed to Capital One, and at that time, it generated all its revenue from a single product, credit cards (Greenwood 481). Later on, the bank began operations in Canada in 1996, and it started expanding into auto loans in 1998 and acquired auto financing company Summit Acceptance Corporation in the same year (Greenwood 480). The following year, the banktarted offering loans, insurance, and phone service due to its vast experience in the collection of consumer data. The bank then acquired People First Financial in 2001 (Greenwood 482). Additionally, Capital One Bank stretched into retail banking with the focus on subprime customers and then, unpredictably, eluded being acquired by the larger well established and diverse banks. The bank’s first big acquisition came in 2011 when it bought Chevy Chase Bank for $520 million in cash and stock (Greenwood 482). Between 2011 and 2018, the bank made other acquisitions and entered into agreements with other financial institutions with the aim of boosting its revenue and market share. We will carry out a SWOT analysis to have a clear picture of the position of Capital One Bank.
ü Successful track record of integrating complimentary firms through mergers and acquisitions
ü High level of customer satisfaction
ü Technologically advanced
ü Market share
ü Not highly successful at integrating firms with different work culture from it.
ü The bank has not been able to tackle challenges by new entrants in the market as PayPal.
ü The marketing of the products is unsatisfactory.
ü High attrition rate in the workforce
ü Decreasing the cost of transportation
ü Economic uptick and an increase in customer spending
ü The new and changing technology
ü New trends in consumer behavior
ü No regular supply of innovative products
ü Possibility of lawsuits
ü Changing consumer buying behavior
One of the bank’s greatest strengths is having a successful track record of integrating complimentary firms through mergers and acquisitions. For example, it has combined a number of technology companies, such as Paribus and Confyrm, the past years to modernize its operations and build a reliable supply chain (Schwert 811). The mentioned move has given the firm the power to remain afloat and operational in the competitive market.
Another strength is having a high level of customer satisfaction. The bank has a dedicated customer relationship management department that is highly invested in satisfying the needs of its customers and attracting more (Schwert 811). Capital One bank tends to have great reviews and recommendations.
Capital One Bank has integrated advanced technology. The bank invests in research and development, continuously innovating and adapting the new technologies to keep abreast of the digital era and increase the ease of use of the innovations, thus offers convenience to its customers. The bank has, in previous years, been ranked among top companies in regards to technological advancement.
The marketing of the products has been substandard, and the corporation has been unable to deal with issues brought by new entrants. Even though the product is a success in terms of sale, its positioning and selling proposition is not clearly defined, which leaves room for competitors to attack these segments (Schwert 821). Moreover, the bank is unable to tackle challenges present by the new entrants, which has led it to lose small market share in the niche categories (Schwert 820). Brand loyalty is compromised by the emergence of new entrants in the market.
The bank is not highly successful at integrating firms with different work culture from its own (Schwert 821). Capital One bank has a rigid work schedule structure, which makes it hard to work with firms with a different work schedule and work culture (Schwert 821). This integration requires Capital One bank to constantly training the workforce, which causes a high attrition rate in the workforce. The bank wastes a lot of money in training of its employees.
While the firm faces some issues, there are avenues of which it can take advantage to grow. For instance, decreasing the cost of transportation, occasioned by lower shipping prices, would bring down the cost of Capital One bank’s products, thus providing an opportunity for the company to either boost its profitability or pass on the benefits to the customers to gain market share (Schwert 826). The new trends in consumer behavior can open up a new market for the bank by building new revenue streams that will bolster its profitability and ease its operations (Schwert 826). The emerging technology can help in determining the current and ever-changing consumer behaviors, thus enable the corporation to match the consumers’ demands while growing its market share.
The corporation faces several threats, for instance, changing consumer buying behavior from physical channels to online avenues could be a threat to the existing physical infrastructure driven supply chain model: the change could reduce the client base of the firm (Schwert 829). The bank could also face lawsuits in various markets given the different laws and continuous fluctuations of product standards in those markets (Schwert 829). The bank lacks a regular supply of innovative products to give it an edge over other players in the market in regards to first-mover advantage. Over the years, the bank has been using innovative products by other players to develop something almost similar. This habit reduces the chances of Capital One bank of ever overtaking the other dominant players in the market because the corporation will always have to wait for the other corporations to make moves before it does.
Greenwood, Robin. “Strengthening and Streamlining Bank Capital Regulation.” Brookings Papers on Economic Activity, vol. 2, 2017, pp. 479-565. https://muse.jhu.edu/article/688913
Schwert, Michael. “Bank Capital and Lending Relationships.” The Journal of Finance vol. 73. no. 2, 2018, pp. 787-830. https://doi.org/10.1111/jofi.12604
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