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
$0
$10
$20
$30
$40
$50
$60
$70
$80
$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
0
5
10
15
20
25
30
35
40
45
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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
11
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
13
COF vs. SPX (Indexed to November, 1994 to August, 2005)
0
200
400
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800
1000
1200
1400
1600
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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
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)