Case Study Description of Capital One: Leveraging Information-Based Marketing
In November 1997, Richard D. Fairbank, Chairman and CEO of Capital One Financial Corporation, was reflecting on the success of his company since its initial public offering (IPO) in 1994. The success had come primarily from one business: credit cards. Despite the phenomenal success of the company in this one market, Fairbank's vision for the company was not limited to credit cards. He wanted to diversify to reduce Capital One's vulnerability to consumer credit market saturation and downturns. Fairbank also saw an opportunity to extend Capital One's capabilities into other markets. He saw Capital One as not just a credit card or financial services company but rather as an information-based marketing company. Because Capital One's strategy would work well in other information-driven industries, Fairbank's idea was to concentrate on growing, data-rich industries--large enough to contribute significantly to the company's growth trajectory--and focus on products and marketing channels where Capital One could leverage its capabilities in scientific testing and mass customization. Despite having investigated over 50 diversification opportunities, Capital One was not pursuing any, largely because they were a poor fit or failed to capitalize on Capital One's core competencies. A recent hire, Mike Rowen, and his team, however, had just finished a four-month long investigation into the auto financing industry. It was up to Rowen and his team to decide whether to present auto financing as the right opportunity for leveraging Capital One's information-based strategic capabilities. The team knew that if it recommended going ahead, it would have to put forth a plan that would address any concerns or objections raised by Fairbank.
Swot Analysis of "Capital One: Leveraging Information-Based Marketing" written by James Lattin, Michael Rierson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that One's Fairbank facing as an external strategic factors. Some of the topics covered in Capital One: Leveraging Information-Based Marketing case study are - Strategic Management Strategies, Growth strategy, Performance measurement and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Capital One: Leveraging Information-Based Marketing casestudy better are - – there is backlash against globalization, increasing energy prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, technology disruption,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Capital One: Leveraging Information-Based Marketing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Capital One: Leveraging Information-Based Marketing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the One's Fairbank, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which One's Fairbank operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Capital One: Leveraging Information-Based Marketing can be done for the following purposes –
1. Strategic planning using facts provided in Capital One: Leveraging Information-Based Marketing case study
2. Improving business portfolio management of One's Fairbank
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of One's Fairbank
Strengths Capital One: Leveraging Information-Based Marketing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of One's Fairbank in Capital One: Leveraging Information-Based Marketing Harvard Business Review case study are -
Organizational Resilience of One's Fairbank
– The covid-19 pandemic has put organizational resilience at the centre of everthing that One's Fairbank does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of One's Fairbank in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– One's Fairbank is one of the leading recruiters in the industry. Managers in the Capital One: Leveraging Information-Based Marketing are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– One's Fairbank is present in almost all the verticals within the industry. This has provided firm in Capital One: Leveraging Information-Based Marketing case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to lead change in Sales & Marketing field
– One's Fairbank is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled One's Fairbank in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- One's Fairbank is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at One's Fairbank is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Capital One: Leveraging Information-Based Marketing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Capital One: Leveraging Information-Based Marketing Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– One's Fairbank has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Capital One: Leveraging Information-Based Marketing - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– One's Fairbank is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that One's Fairbank has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– One's Fairbank has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled One's Fairbank to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– One's Fairbank is one of the most innovative firm in sector. Manager in Capital One: Leveraging Information-Based Marketing Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Capital One: Leveraging Information-Based Marketing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Capital One: Leveraging Information-Based Marketing are -
Slow decision making process
– As mentioned earlier in the report, One's Fairbank has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. One's Fairbank even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, James Lattin, Michael Rierson suggests that, One's Fairbank is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– One's Fairbank has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Lack of clear differentiation of One's Fairbank products
– To increase the profitability and margins on the products, One's Fairbank needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, One's Fairbank has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Capital One: Leveraging Information-Based Marketing, is just above the industry average. One's Fairbank needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, One's Fairbank is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Capital One: Leveraging Information-Based Marketing can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, One's Fairbank has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of One's Fairbank supply chain. Even after few cautionary changes mentioned in the HBR case study - Capital One: Leveraging Information-Based Marketing, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left One's Fairbank vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Capital One: Leveraging Information-Based Marketing, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Capital One: Leveraging Information-Based Marketing, it seems that the employees of One's Fairbank don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities Capital One: Leveraging Information-Based Marketing | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Capital One: Leveraging Information-Based Marketing are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, One's Fairbank is facing challenges because of the dominance of functional experts in the organization. Capital One: Leveraging Information-Based Marketing case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help One's Fairbank to increase its market reach. One's Fairbank will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– One's Fairbank has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at One's Fairbank can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, One's Fairbank can use these opportunities to build new business models that can help the communities that One's Fairbank operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, One's Fairbank can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Buying journey improvements
– One's Fairbank can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Capital One: Leveraging Information-Based Marketing suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects One's Fairbank can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. One's Fairbank can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of One's Fairbank has opened avenues for new revenue streams for the organization in the industry. This can help One's Fairbank to build a more holistic ecosystem as suggested in the Capital One: Leveraging Information-Based Marketing case study. One's Fairbank can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for One's Fairbank in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Manufacturing automation
– One's Fairbank can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– One's Fairbank can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Capital One: Leveraging Information-Based Marketing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Capital One: Leveraging Information-Based Marketing are -
Technology acceleration in Forth Industrial Revolution
– One's Fairbank has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, One's Fairbank needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– One's Fairbank can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of One's Fairbank.
High dependence on third party suppliers
– One's Fairbank high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, One's Fairbank can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Capital One: Leveraging Information-Based Marketing .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. One's Fairbank needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for One's Fairbank in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. One's Fairbank can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. One's Fairbank will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of One's Fairbank business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of One's Fairbank
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of One's Fairbank.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for One's Fairbank in the Sales & Marketing sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that One's Fairbank is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Capital One: Leveraging Information-Based Marketing Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Capital One: Leveraging Information-Based Marketing needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Capital One: Leveraging Information-Based Marketing is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Capital One: Leveraging Information-Based Marketing is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Capital One: Leveraging Information-Based Marketing is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that One's Fairbank needs to make to build a sustainable competitive advantage.
