Capital One Financial Corporation: Advantage Sustainability Analysis

This case study analyzes Capital One's information-based strategy and its sustainability. Capital One leverages IT to record, organize, and analyze consumer data, focusing on exploiting information through scientific models to assess creditworthiness. They customize products and offers using data mining, differentiating themselves from competitors. Capital One utilizes direct marketing to record customer interactions and tailor products, enabling them to roll out products nationally without large fixed costs. The company updated its IT system in 1994, using object-based systems, and now handles a massive database. The analysis explores how Capital One assesses creditworthiness, records transactions, and customizes products. The case study examines the company's ability to turn its business into a scientific process and roll out products quickly. It also discusses the risks associated with relying on potentially inadequate data and how Capital One supplements this data with large transaction volumes.

How sustainable is Capital One’s advantage?
Capital One makes use of IT through the Information based strategy mainly for recording,
organizing and then analyzing the data which is based on different characteristics and the
consumer behavior. The focus is on exploiting information through construction of certain
scientific models that could easily handle the potential cardholders with creditworthiness through
the FICO scoring. The customization of the product is for the existing ones which is through the
data mining, sorting and the customization of offers. This mainly differs from other
organizations and so they are working on compiling the data manually through accepting
applicants who are based on the debt income ratios.
The Capital One tends to see the direct marketing for recording interaction with customers. It
also allows them to customize the products for each customer so that the interactions are done
uniquely. The direct marketing is mainly for ensuring that the collection policies and the cross-
selling decisions are directly subjected to the testing through use of different experiments. This
tend to enable the ability for rolling products on a national scale and then providing the work
without any large fixed costs. The potential is mainly to reinvent the business economy with few
products that are directly marketed and then there are firms which are seen to be exploited
through the use of statistical analysis (Anand, Rukstad & Paige, 2000). It has been seen that in
1994, Capital One IT system was updated, where the solutions are for replacing aging of
mainframe computers, which is an object-based system. The technology is never used for a large
scale, where two thirds of Capital One’s competitors work on outsourcing the functions of IT.
The companies in 5 years are working on handling the largest database of Oracle and 23
terabytes of data. The sustainability is considered to leverage the extensive branch networks and
brand awareness to assess the creditworthiness, where the banks are making use of the different
range of acceptable metrics across the banks. The ability to record the transactions and customize
the products for the customer is to mainly ensure that the interactions are done in a unique
manner. Here, the ability is to turn the business in a scientific manner where there are decisions
for the product designing, marketing and the communication channels. The ability to roll out
products on a national scale and at a full speed has been worked upon without any incurring of
the larger fixed costs. The company Capital One is working on identifying the risks profiles from
observing data which might be inadequate (Anand et al., 2000). The strategy is to supplement the

data with the larger volumes that are for handling the transactions for the cardholders. Here, the
individuals with the high credit risks are likely to response for the credit risks where the offer is
depending upon the channels, marketing and follow up.
Reference
Anand, B. N., Rukstad, M. G., & Paige, C. (2000). Capital one financial corporation.