GUEST SPEAKER Thursday, April 19 Dede Willis Vice President Operations Proligo LLC TOPIC “The Genomics Revolution”

TODAY Azul Casares Patagon.com 5:00 - 6:00 Presentation Room 218 6:00 - 7:00 Reception Room 248

Internet Market Potential 1999 2005 (Est). E-commerce market(1) $537 million $8.3 billion Online users (1) 11 million 67 million % that are online shoppers (1) 13% 34% Online advertising (2) $51 million $1.6 billion Internet services (3) $1.4 billion $8.1 billion … but: % of citizens on the Net (1) 2% 12% Sources: (1) Jupiter Communications, (2) Forrester Research, (3) International Data Corporation

Contrasting Environments ASSUMPTIONS in most REALITIES in most existing E-models developing countries Complexity rate of change Accessibility to Resources Environment Stability LOW HIGH

Economic Situation in Argentina Date Context Factors 1989 Hyperinflation (4,923% / year) 1990 Peso to U.S. dollar convertibility Foreign direct investment legal framework 1994 Mexican devaluation 1997 Asian market slump 1998 Russian default & Brazilian economic crisis Country risk Foreign investment interest rate Economic crisis and many banks went bankrupt Volume of stock trading: $13 M trades/day ($100 M in 1993) Brokerage firms: 50 active (180 in 1993)

Argentina: Country Risk 1993-1999

Internet Adoption in Argentina Date Factors 1990 Telecom system privatized: Telecom and Telefónica (monopolies to end on Nov. 1999) 1998 Low PC penetration (average wage $500/month) High access cost (5 ISPs: 60% market, other 200: 40%) Internet users: 400,000 (1.5% of the population) Actual buyers: 5% South American online buying: 26% own country Not enough locally relevant content or services Low credit card usage Inadequate fulfillment systems

Patagon.com Financial Destination Site and Its U.S. Models

AméricaEconomía (AE)/ Dow Jones Partnership Customer Individuals interested in Latin American financial markets: Investors, researchers, analysts, journalists, finance professionals Information (Content Providers) AméricaEconomía (AE)/ Dow Jones Partnership Patagon.com provided 10% equity, support in establishing AE’s Internet strategy, and advertising AE provided links to Dow Jones, its own financial information, access to its sales force, and advertising Advertising Fees Transaction Fee Hybrid Services Fee for service agreement to receive financial information. Joint marketing and preferred pricing programs, and primary ISP through Latin America Multimedios América Internet Service Provider Reciprocal links to direct traffic, and advertising exchange relationships Data Processing and Networking Patagon.com was offering its information content, and signing Microsoft as its exclusive supplier. Microsoft provided support, and a preferred customer status Other Ad hoc Partnerships Preferred computer hardware supplier

Organizational Capabilities Development at Patagon.com Phase 1 Phase 2 Phase 3 Phase 4 Business idea Starting firm Launching site Growing Business Resources & Competencies Leverage Diversification Strengthening 1997 1999

Phase 1. Developing Business Idea Leverage Diversification Strengthening Casares’ technology and business skills Adrian’s formal training at Harvard Visits to Internet companies (E*Trade, Yahoo!) Receive feedback from U.S. investors Skills and knowledge transformed into first business plan (became the firm’s map) Resources & Competencies

Phase 2. Starting the Company Leverage Diversification Strengthening Casares’ personal savings Financial information from public sources Web site modeled after a group of U.S. single purpose sites 5 people are hired IT: 1 computer, 2 programmers Resources & Competencies

Phase 3. Launching the Web Site Leverage Diversification Strengthening Funding from angel investor Advertising by StarMedia Alliances with info providers Consultants from InvestCapital Focus groups with InvestCapital’s clients Software development advice from Hong Kong Visits to Brazil and Mexico Hired 8 more employees IT: 3 computers, 4 programmer, 1 server Resources & Competencies

Phase 4. Growing the Business Leverage Diversification Strengthening Funds from U.S. investors Partnerships with AmericaEconomia (+sales force) Reciprocal links program to direct traffic Agreement with Microsoft, IMPSAT, Compaq Media child of EC in Argentina U.S. become advising partners Endeavor provided contacts Microsoft placed tow consultants full-time Informal advisory network of business leaders Hired 11 more employees (CFO and CSO) HQ in Miami. Offices in Brazil, Chile, and Mexico IT: 11 computers, 9 programmers, 5 servers. Resources & Competencies

THE PRIMARY OBJECTIVES OF “Patagon.com” Case Study were Explore how the Internet can simultaneously be a local, regional, transcontinental and multilingual medium for content and commerce. Review fundamental organizational, managerial and technological issues associated with doing business in marketplace & space. Understand the need to consider the macro-level strategy and the micro-level implementation. …And to do so in the context of one of the most dynamic online markets in the world.

Reference Montealegre, R. “Extending Chakravarthy’s Strategy Framework to Cope with Constrained and Unstable Environments: Imitative Catching-up E-Commerce at Patagon.com,” IEEE Transaction on Systems, Man, and Cybernetics, Vol. 3, No. 4, July 2000, pp. 472-89