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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). Monday 10 th December 2007. Agenda. Introduction Capital One Analysis Why France The French move Pulling out of France Recommendation

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Monday 10 th December 2007

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  1. Prof. Michael Segalla« BEST IN FRANCE »Jamie Brownlee (UK)Daniela Sanchez Hernandez (Mexico)Anne-Lynke Kikstra (Netherlands)Jaeyoun You (Korea) Monday 10th December 2007

  2. Agenda • Introduction • Capital One • Analysis • Why France • The French move • Pulling out of France • Recommendation • Advice for new companies • Advice for France • Conclusion

  3. Introduction • Analysis • Recommendation • Conclusion

  4. Who is Capital One? • Listed in NYSE for first time 1994 • Headquartered in McLean, Virginia • 40 million customers • Products • Other products • Clients Added value: credit card loans

  5. « 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

  6. Capital One vs. Dow Jones and NASDAQ

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

  8. Introduction Analysis • Recommendation • Conclusion

  9. 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

  10. 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

  11. 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 • Strategicgeographical position (370 million European consumers) • Company values that fit with French culture

  12. Reasons for moving to France

  13. Competitors • Egg Banking • France 2002 - 2004 (ING, Netherlands) • Barclaycard • France 1998 (1 million selling spots)

  14. The French move • Joint Venture with Sofinco • Paris • Customer base and infrastructure. • Bank branches • 18 months negotiation

  15. The French move (2) • Ready to sign contract……BUTCrédit Agricole bought Sofinco • Decided to go alone • Moved in 1997 • Pulled out in 2002 The move lasted 5 years

  16. 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

  17. 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

  18. 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.

  19. What Capital One think they did well in France? (2) • Key values are Fairness and Reward • Inclusion of French associates • Severe scrutiny to banks

  20. Capital One’s views on similarities and differences in France

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

  22. Introduction • Analysis Recommendation • Conclusion

  23. 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 with a French financial services company • If they stayed… more and more credit cards

  24. 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

  25. 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

  26. Introduction • Analysis • Recommendation Conclusion

  27. 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!

  28. 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

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