Capital one Financial Corporation is the bank holding corporation. The bank is specialized in auto loans, credit cards, banking, and the saving accounts. The bank is headquartered in Virginia. The mission of the bank is to provide best services to consumers and help them in succeeding with ingenuity, humanity and simplicity to banking. The bank was founded with the belief of revolutionizing the industry with the hep of technology and information. And thus, it began with credit cards. The bank is ranked as eighth biggest bank overall and fifth-biggest consumer bank. The bank is working its best in enabling big talents with big space (Capital one, 2019).
As being working in competitive industry across the globe, Capital One has to look forward for industrial analysis. Porter five forces model will help the bank in having strategic industrial analysis. As the model determines the opportunities and threats for the company in the competitive market. It helps the company in decision making process and e-examining the strategies. Here is the detailed Porter five forces analysis of Capital One Financial;
Bargaining Power of Buyers
Customers are very important for banks, as the are the one who avail the services provided by them. Banks have both individual consumers and corporate clients. The buying power of customers in case of Capital one financial is low to medium. This is mainly because of their less bargaining power on the asset’s interest rates. As the interest rates are determined by the state banks. Moreover, there are many financial service providers in the industry, which reduces the switching cost. Corporate clients are important for the banks as they avail the services in huge sum. Thus, it is necessary for the Capital one to increase its consumer base in both individual and corporate category (Li, Spankeren, Stoiber and Sun, 2015).
Bargaining Power of Suppliers
In the banking industry, suppliers are mainly the payment network firms. As the banking industry is majorly service industry, the bargaining power of the suppliers are low. Moreover, suppliers have low bargaining power, as they provide raw materials like cheque books, cards, office supplies etc. Their impact on the bank is not that significant, as there are numerous suppliers available in the industry. Hence, Capital one is having a favorable position in this regard. However, the company has listed its suppliers and have efficient supply chain network (Koroma, 2019).
Threats of New Entrants
The banking industry is facing medium to high threats from the new entrants. This is mainly because of the basic requirement of huge capitalization cost involved in establishing the business. The financial industry requires efficient and effective network channels, as it will involve online facilities, payment methods. New entrants also have to compete with largest banks in the industry and has to face intense competition. It is necessary for them to invest more in research and development to attract consumers and build strong brand name. The regulations and policies have to be followed which are strict (Luo, Li, and Yang, 2017).
Threats from the Substitute Products
Threats from the substitute products are high for the Capital one Financial. This is mainly because of the biggest substitute of credit card is debit card. Many people prefer debit card in order to avoid interest payments. Moreover, cash, Checks etc. are also the alternatives. There are many banks providing the services of loan and savings and also the credit unions are available. The bank is facing the substitution threats from non-financial providers, who are entering in the financial industry. Non-depository institutions are also one of the major substitutes for the Capital one financial. Online payment methods and networks like Paypal are increasing and consumers preferences are also changing (Li, Spankeren, Stoiber and Sun, 2015).
Rivalry of Existing Players
The competition in the banking industry is intense. Capital One financial is facing the competition from both local and international banks in the market. Almost every bank provides the services of debit and credit card. The bank is facing competition from the other financial providers who specifically deals in loan and credit cards. It is necessary for the bank to increase the service portfolio and increase the customer base (Li, Luo, and Yang, 2017).
References
Capital one, 2019. Our company. [Online], Available at: https://www.capitalone.com/about/corporate-information/our-company/, [Accessed on: 23rd December, 2019].
Li. J, Luo. X, and Yang. Q, 2017. Capital one bank. [Online], Available at: https://www.business.illinois.edu/finance/rcmp/research/COF2017-11.pptx, [Accessed on: 23rd December, 2019].
Li. J, Spankeren. T, Stoiber. J, and Sun. Y, 2015. Capital one financial corporation. [Online], Available at: https://www.business.illinois.edu/finance/rcmp/research/COF2015-3.pptx. [Accessed on: 23rd December, 2019].
Koroma, P. 2019. PORTERS FIVE FORCES MODEL IN BANKING INDUSTRIES ECOBANK SIERRA LEONE LTD. [Online], Available at: https://www.academia.edu/31072899/PORTERS_FIVE_FORCES_MODEL_IN_BANKING_INDUSTRIES_ECOBANK_SIERRA_LEONE_LTD?auto=download, [Accessed on: 23rd December, 2019].