1. Information-Based Strategies in Newly Vulnerable Markets Professor Matt Thatcher

2. 2 Last Class l Course website –http://faculty.unlv.edu/thatcher/mis748 l Required reading materials –Spinello (2003) l Assignments –Remember the “late policy” l Frameworks of ethical analysis (Spinello, Ch. 1) –teleological (ends/outcome) –deontological (duties/rights)

3. 3 Last Class l Course topics –Information-based strategies –Consumer privacy and information access –Workplace privacy and information access –Freedom of speech on the internet –Intellectual property rights –Computer crimes and computer security –IT liability, safety, and reliability –IT roles and responsibilities –Social impacts of computers

4. 4 Today l Essential concepts and theoretical background of newly vulnerable markets l The case of Capital One Financial –what happened? –why did it happen? –can it keep happening? –where else can it happen? l Recording industry l Newspaper industry l Other examples of newly vulnerable markets?

5. 5 Newly Vulnerable Markets l Changing competition between small, nimble new entrants and previously dominant incumbents l What makes a market newly vulnerable? –easy to enter »advances in IT affect costs of production/distribution or ability to target –attractive to attack »customer profitability gradient (cpg) –difficult to defend »historical precedent »regulation »organizational structure/culture

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9. Billions Figure #4 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

10. Millions Figure #5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

11. 11 ROE Figure #6

12. Figure #8 Note: Represents Domestic (US) Portfolios Q2 04Q1 05Q2 05Q1 to Q2 JPM Chase$128.8B$133.4B$137.3B 2.95% Citigroup$112.9B$115.8B$114.5B (1.10%) MBNA$81.6B$74.8B$75.0B 0.29% Bank of America$52.0B$57.9B$59.3B 2.35% Capital One$45.2B$46.6B$46.4B (0.50%) Discover$44.4B$45.1B$44.4B (1.70%) American Express$38.3B$39.5B$42.0B 6.33% HSBC$18.1B$19.5B$19.9B 2.21% Providian$17.2B$18.1B$18.6B 2.64% Wells Fargo$8.7B$10.1B$10.6B 4.74% Source: Company Reports/ Visa and MasterCard Industry Outstandings Q2 05

13. 13 COF - 1553 SPX - 271

14. 14 Other Newly Vulnerable Industries? l Sufficient CPG l Sufficiently obscure CPG l Low enough stakes / fast enough learning –remember health insurance industry l Morally, ethically, and legally acceptable to exploit CPG l Regulators permit retaining secrecy of pricing algorithm (or results of data mining)

15. 15 Music Industry

16. 16 Newspaper Industry

17. 17 Questions?

18. 18 Next Class l Consumer privacy and access to information –Read: Spinello, Ch. 5 (Intro and Cases 5.1 – 5.3) –Due: Case Report (1) l Identify your term paper topic