Information-Based Strategies in Newly Vulnerable Markets

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

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

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

5. Newly Vulnerable Markets • Changing competition between small, nimble new entrants and previously dominant incumbents • 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

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

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

11. Figure #6 ROE

12. Industry Outstandings Q2 05 Q2 04 Q1 05 Q2 05 Q1 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 Figure #8 Note: Represents Domestic (US) Portfolios

13. COF - 1553 SPX - 271

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

15. Music Industry

16. Newspaper Industry

17. Questions?

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