Capital One - 2007

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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)

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

SAME 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

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

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