Monday 10 th December 2007

Prof. Michael Segalla « BEST IN FRANCE » Jamie Brownlee (UK) Daniela Sanchez Hernandez (Mexico) Anne-Lynke Kikstra (Netherlands) Jaeyoun You (Korea)

Agenda

    Introduction  Capital One Analysis   Why France The French move  Pulling out of France Recommendation   Advice for new companies Advice for France Conclusion

Introduction

 Analysis  Recommendation  Conclusion

Who is Capital One?

      Listed in

NYSE

for first time

1994

Headquartered in

McLean, Virginia 40

million customers

Products Other products Clients



Added value: cred it card loans

« What’s in your wallet »

   Capital One: one of the America's

largest consumer franchises with almost 50 million customer accounts worldwide

One of America’s most recognised brands.

Now, the fourth largest customer of the United States Postal Service

Capital One vs. Dow Jones and NASDAQ

Capital One vs. Competitors AXP: American Express Company BAC: Bank of America Corporation DFS: Discover Financial Services LLC COF: Capital One

 Introduction

Analysis

 Recommendation  Conclusion

Why move to France (Major points)?

      France 1st country after UK (

1997

)

French wealth

(disposable income)

Banking infrastructure Population History

French GNP

$1,550 billion

(EU 20% larger than the North-American market)

France appeared to be very attractive

Why move to France (Major points)? (3)



Inflation remains very low



Falling

interest rates



Highest rate of growth

in Europe French financial setup seemed appealing

Why move to France (Minor points)?



Frontier

and

direct link

(6 largest European markets) 

Human capital

> Motivation, quality and productivity 

Balance of trade

(20.3 billion dollars) 

Quality of life



Strategic geographical position

(370 million European consumers) 

Company values

that fit with French culture

Reasons for moving to France

French wealth (GNP) Disposable wealth Banking infrastructure Population History EU-France's dominant position Geography of France in EU¡ Inflation and falling interest rates High number of foreign banks in France

Competitors

•

Egg Banking

• France 2002 - 2004 (ING, Netherlands) •

Barclaycard

• France 1998 (1 million selling spots)

The French move

 Joint Venture with

Sofinco

 Paris  Customer base and infrastructure.

 Bank branches  18 months negotiation

The French move

(2)

 Ready to sign contract……

BUT Cr

édit Agricole

bought

Sofinco

 Decided to

go alone

 Moved in

1997

 Pulled out in

2002

The move lasted 5 years

Why pull out of France?

 Ancient usury laws  Labour laws (35 h/w and redundancy costs)  Key constraint costs  Lobbying : French Banks effectively

blocked

changes

French financial companies seem nationalistic and they want to keep the French economy strong

Why pull out of France?

(2)



Constraints by

regulatory companies 

Inflexibility

destroyed Capital One’s international strategy 

Discrimination:

Gender

Capital One did not feel welcome

What Capital One think they did well in France?

 Lived up to French

expectations-culture, language, consumer and law adaptation



Call centres

 

Marketing mix

Worked to get their

values ‘translated’

to acceptability in France.

What Capital One think they did well in France? (2)

 Key values are

Fairness and Reward



Inclusion

of French associates  Severe

scrutiny to banks

Capital One’s views on similarities and differences in France PROCESS Recruitment Compensation Management Development Workforce planning Performance Appraisal Job design Motivation Communication policies International Transfers Hiring Real Estate DIFFERENT X (working life) X (cheaper than London) Language SAME X X X ADAPTABLE X (need experience in and outside of France) X (flexibility to go for top quartile) X (inclusion of French associates to learn Values of Capital One) X (needed to communicate more) X (more formal but translators used) X (high calibre French nationals spent a year in USA to prepare them) X (associates were usually bilingual)

Regrets… As said in the interview with the Former Managing Director of Capital One France

 Introduction  Analysis

Recommendation

 Conclusion

Advice: What would Capital One have done differently?

     They

should not have gone alone

They would have looked at taking deposits to help fund the lending on credit.

Auto loans Partnership

company with a French financial services If they stayed…

more and more credit cards

Advice: What Capital One suggest for other banking companies?

  

No production of products in France

– Instalment loans Have a

Pan-European

strategy Be conscious that France is

not flexible

:

NOT WILLING TO CHANGE

No

Greenfield Operations

Advice: What Capital One suggest for other banking companies? (2)



Vary the interest rate

 Before coming – understand the extent of the

cultural differences

 Be prepared to

adapt

(local human investment)  4 years testing at low volume levels-crucial to

understand

the market  Base

production outside

France

 Introduction  Analysis  Recommendation

Conclusion

Conclusion

 France offers a lot of benefits to foreign companies  Foreign companies need to be

conscious

of and

adapt

to the French culture, norms and values  It is true that certain modifications should be made (e.g. French Banks should be more accepting to foreign banks entering the French Market)  And last but not least, DO NOT ENTER THE FRENCH MARKET ALONE!

With thanks to:

Alan Wolfson

, Former Managing Director, Capital One France (7 Queen Alexandra Mansions, 3 Grape Street London WC28DX, UK)

Fergus Brownlee

, Former Principal Managing Director and Executive Vice President, Capital One Europe (Streatley House, Streatley-on-Thames, Berkshire, RG89HY, UK)

Capital One