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

Information-Based Strategies in Newly Vulnerable Markets

Professor Matt Thatcher

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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)

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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

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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?

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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

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$0

$10

$20

$30

$40

$50

$60

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$90

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

Managed LoansBillions

Figure #4

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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5

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Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

Accounts

Millions

Figure #5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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39.26%

23.28% 22.94% 22.98%25.30%

23.09%21.69% 21.34% 21.16%

25.79%

27.61%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ROE

Figure #6

Figure #8

Note: Represents Domestic (US) Portfolios

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

Industry Outstandings Q2 05

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COF vs. SPX (Indexed to November, 1994 to August, 2005)

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11/16/94 11/16/95 11/16/96 11/16/97 11/16/98 11/16/99 11/16/00 11/16/01 11/16/02 11/16/03 11/16/04

COF - 1553

SPX - 271

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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)

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Music Industry

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Newspaper Industry

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Questions?

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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