Monday 10th 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: credit card loans

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

« What’s in your wallet »

Capital One vs. Dow Jones and NASDAQ

Capital One vs. CompetitorsAXP: American Express CompanyBAC: Bank of America CorporationDFS: Discover Financial Services LLCCOF: 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

Inflation remains very low Falling interest rates Highest rate of growth in Europe

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

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

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

Ready to sign contract……BUT Crédit Agricole bought Sofinco

Decided to go alone Moved in 1997 Pulled out in 2002

The French move (2)

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

Constraints by regulatory companies Inflexibility destroyed Capital One’s

international strategy Discrimination: Gender

Why pull out of France? (2)

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.

Key values are Fairness and Reward Inclusion of French associates Severe scrutiny to banks

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

PROCESS DIFFERENT SAME ADAPTABLERecruitment X (need experience in and outside of France)

Compensation X (flexibility to go for top quartile)Management Development

X (inclusion of French associates to learn Values of Capital One)

Workforce planning

X (working life)

Performance Appraisal

X

Job design X Motivation X (needed to communicate more)

Communication policies

X (more formal but translators used)

International Transfers

X (high calibre French nationals spent a year in USA to prepare them)

Hiring X Real Estate X (cheaper

than London)Language X (associates were usually bilingual)

Capital One’s views on similarities and differences in France

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 with a French financial services

company 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