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4. Strategic Issues and Strategic fit with acquisition
Capital One’s pricing strategy is based on the risk of the customers’ credit history. The Information-Based Strategy (IBS) is used to exam customers’ credit score, credit uses and other parameters and match the result to customize credit card. Also, Capital One’s acquisition has made itself a natural diversified strategy. However acquisition is not a risk free for company to make innovations. There are issues that can be raised from acquiring companies. Firms may lose its internal ability to produce an innovation by acquiring other companies. In addition, the firms that acquire other company may only introduce fewer new products into the market. The effect of company’s acquisition may cause the lost of strategic control due to the new financial planning and business unit management.
Capital One’s decision on auto financing was an innovation. Seeing the potential growth of auto financing Capital One has acquired ONYX Acceptance Corporation and InsLogic as ONYX’s management team. The acquisition on these two franchises was a successful strategy which provides Capital One a greater chance to introduce innovation of auto financing by the geographic and dealership advantage of ONYX.
Capital One has also acquired eSmartloan.com and Hibernia National Bank in the early 2005. The aim of the acquisition was to use the outstanding reputation and skilled sales team of eSmartloan.com, and the financial leverage of Hibernia National Bank.
As the Capital One acquiring more company to make an expansion, Capital One was left with no innovation other than the first bank to offer automatic balance transfers. The strategy on using media to advertise consumer lending operation was not successful due to the large amount of expense and unpopularity of its advertisement.
The operation of non-consumer lending and Hibernia’s branch banking also raises issues on integration. The company lost its strategic control due to the...