Managing Information

Question 1

Explain the strategic importance of information.

Answer 1

The first company to use new information technology to substantially lower costs or differentiate products
or services often gains first-mover advantage, higher profits, and larger market share. Creating a firstmover
advantage can be difficult, expensive, and risky, however. According to the resource-based view of
information technology, sustainable competitive advantage occurs when information technology adds
value, is different across firms, and is difficult to create or acquire.

Question 2

Describe the characteristics of useful information (that is, its value and costs).

Answer 2

Raw data are facts and figures. Raw data do not become information until they are in a form that can
affect decisions and behavior. For information to be useful, it has to be reliable and valid (accurate), of
sufficient quantity (complete), pertinent to the problems you’re facing (relevant), and available when you
need it (timely). Useful information does not come cheaply. The five costs of obtaining good information
are the costs of acquiring, processing, storing, retrieving, and communicating information.

Question 3

Explain the basics of capturing, processing, and protecting information.

Answer 3

Electronic data capture (bar codes, radio frequency identification [RFID] tags, scanners, and optical
character recognition) is much faster, easier, and cheaper than manual data capture. Processing
information means transforming raw data into meaningful information that can be applied to business
decision making. Data mining helps managers with this transformation by discovering unknown patterns
and relationships in data. Supervised data mining looks for patterns specified by managers, while
unsupervised data mining looks for four general kinds of data patterns: association/affinity patterns,
sequence patterns, predictive patterns, and data clusters. Protecting information ensures that data are
reliably and consistently retrievable in a usable format by authorized users, but no one else.
Authentication and authorization, firewalls, antivirus software for PCs and corporate email and network
servers, data encryption, virtual private networks, and Web-based secure sockets layer (SSL) encryption
are some of the best ways to protect information.
Be careful with wireless networks, which are easily compromised even when security and encryption
protocols are in place.

Question 4

Describe how companies can access and share information and knowledge.

Answer 4

Executive information systems, intranets, and corporate portals facilitate internal sharing and access to
company information and transactions. Electronic data interchange and the Internet allow external groups,
like suppliers and customers, to easily access company information. Both decrease costs by reducing or
eliminating data entry, data errors, and paperwork and by speeding up communication. Organizations use
decision support systems and expert systems to capture and share specialized knowledge with
nonexpert employees.