Chapter 14: Information Technology (IT) for Business
Chapter Overview
Information technology (IT) has had a tremendous impact on the business world in the last few
years. Think of how much the Internet alone affects your life. Some people feel completely ―out
of touch‖ going just one day without it. We are connected to the remotest corners of the world.
Businesses have a variety of IT resources at their disposal, and information systems and how
these systems are used play an integral role in businesses.
This chapter provides the latest details on business IT. It discusses the impacts IT has had on the
business world and identifies the IT resources businesses have at their disposal. It also describes
the role of information systems, the different types of information systems, and how businesses
use such systems. Finally, it looks at the various threats and risks IT poses for businesses, as well
as the ways in which businesses protect themselves from these threats and risks. Even if you are
apprehensive about IT and its uses, this chapter will help you become more familiar with and
comfortable with IT.
Learning Objectives
14-1. Discuss the impacts information technology is having on the business world.
14-3. Describe the role of information systems, the different types of information systems,
and how businesses use such systems.
14-5. Describe the ways in which businesses protect themselves from the threats and risks
information technology poses.
LIST OF IN-CLASS ACTIVITIES: INSTRUCTOR’S CHOICE
Activity
Description
Time Limit
1. Ice-Breaker: IT Devices
Students discuss various ways in which
technological devices allow the class as a
whole to create, store, exchange, and use
information.
20 min.
2. Small-Group Discussion:
CereProc and New Products,
Especially for Small Markets
Students examine how information
technology progress leads to the creation of
new products.
30 min.
3. Up for Debate: Is That Ethical?
Students are divided into teams to discuss the
ethical issues surfacing when an employer has
the ability to access and track employees’
computer usage.
30 min.
CHAPTER OUTLINE
Learning Objective 14-1:
Discuss the impacts information technology is having on the business world.
Information Technology Impacts: A Driver of Changes for Business
Information technology (IT) includes the various appliances and devices for creating, storing,
exchanging, and using information in diverse modes, including visual images, voice, multimedia,
and business data. E-commerce is the use of online networks and other electronic means for
retailing and business-to-business transactions. Businesses are using IT to bolster productivity,
improve operations and processes, create new opportunities, and communicate and work in ways
not possible before.
A. Creating Portable Offices: Providing Remote Access to Instant Information
Technology built into various devices offers businesses powerful tools that save time and
travel expenses by enabling employees, customers, and suppliers to communicate from any
location.
B. Enabling Better Service by Coordinating Remote Deliveries
Company activities may be geographically scattered, but remain coordinated through a
networked system that also provides better service for customers. Shipping from various
locations is more cost-effective and efficient than gathering all the items in one place to then
ship to the buyer.
C. Creating Leaner, More Efficient Organizations
Networks and technology allow organizations to operate with fewer employees and simpler
structures. IT communications provide better use of employee skills and greater efficiencies
from physical resources.
D. Enabling Increased Collaboration
Collaboration software and other IT communication devices enable greater collaboration
among internal units and with outside firms.
E. Enabling Global Exchange
The global reach of IT is enabling business collaboration on a huge scale and minimizes
delays, holds down costs, and maintains quality.
F. Improving Management Processes
With databases, specialized software, and interactive networks, instantaneous information is
now accessible and useful to all levels of management.
G. Providing Flexibility for Customization
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14-4
Customization and greater flexibility is also possible for service industries, including pet care
and travel.
H. Providing New Business Opportunities
IT is creating entirely new businesses where none existed before.
I. Improving the World and Our Lives
Numerous businesses across various industries use IT to create improvements that enhance
the standard of living.
KEY TEACHING TIPS
Remind students that information technology (IT) includes the various devices for
creating, storing, exchanging, and using information in diverse modes, including visual
images, voice, multimedia, and business data.
Students need to keep the meaning of standardization separate from mass-customization,
which allows companies to produce in large volumes and provide unique features and
options for customers.
QUICK QUESTIONS
How are portable offices bolstering productivity?
How has IT allowed marketers to provide better service?
How does IT allow firms to create leaner, more efficient organizations?
How has IT changed the nature of the management process within organizations?
Use In-Class Activity 1: Ice-Breaker: IT Devices
Time Limit: 20 minutes
HOMEWORK
The Impact of IT
Now might be a good time to assign Application Exercise 9 from the end-of-chapter materials as
homework. This assignment asks students to think about how IT systems affect their daily lives,
and whether their encounters with IT leave them at risk for identity theft.
At-Home Completion Time: 30 minutes
Learning Objective 14–2:
Identify the IT resources businesses have at their disposal and how these resources are
used.
IT Building Blocks: Business Resources
Businesses have numerous IT resources at their disposal.
A. The Internet and Other Communication Resources
The Internet is a gigantic global system of interconnected computers belonging to millions of
collaborating organizations and agencies—government, business, academic, and public—
linked together by voice, electronic, and wireless technologies. The World Wide Web and
its protocols provide the common language that allows information sharing on the Internet.
1. Intranets. Intranets are private networks of internal websites linked throughout an
organization that are accessible only to employees.
3. Electronic Conferencing. Electronic conferencing allows groups of people to
4. VSAT Satellite Communications. VSAT satellite communications have a transmitter-
receiver that sits outdoors with a direct line-of-sight to a satellite; the hub sends signals to
and receives signals from the satellite, exchanging voice, video, and data transmission. It
provides privacy because the organization’s system has total control over
communications among its facilities, without dependence on other companies.
B. Networks: System Architecture
A computer network is a group of two or more computers linked together by some form of
cabling or by wireless technology to share data or resources, such as a printer; a client-server
network is a common type of network used in businesses in which the clients are usually the
laptop or desktop computers being used, and the servers are any number of computers that
provide services shared by users. Cloud computing adds an externally located component, a
remote storage service, which enhances user flexibility.
1. Wide Area Networks (WANs). Wide area networks (WANs) are computers linked over
2. Local Area Networks (LANs). In local area networks (LANs), computers are linked in a
3. Wireless Networks. Wireless networks use airborne electronic signals to link network
4. Wi-Fi. A hotspot, or Wi-Fi access point, for the Internet is actually its own small
network, called a wireless local area network (Wireless LAN or WLAN).
C. Hardware and Software
Hardware includes the physical components, such as keyboards, monitors, system units, and
printers; software includes the programs that tell the computer how to function, particularly
system software and application software, and groupware.
KEY TEACHING TIP
Make sure students understand the distinction between intranets (private networks accessible
only to employees) and extranets (networks that allow outsiders limited access to a firm’s
internal information).
QUICK QUESTIONS
For what purposes might data conferencing be used? What about videoconferencing?
What are the clients and what are the servers in a client-server network?
What is the difference between a wide area network (WAN) and a local area network
(LAN)?
What are some benefits of Wi-Fi?
Use In-Class Activity 2: Small-Group Discussion: CereProc and New Products, especially
for Small Markets
Time Limit: 30 minutes
Learning Objective 14-3:
Describe the role of information systems, the different types of information systems, and
how businesses use such systems.
Information Systems: Harnessing the Competitive Power of IT
An information system is a system that uses IT resources and enables managers to take data—
raw facts and figures—and transform data into information—the meaningful, useful
interpretation of data. Information systems managers operate the systems used for gathering,
organizing, and distributing information.
A. Leveraging Information Resources: Data Warehousing and Data Mining
Data warehousing involves the collection, storage, and retrieval of data in electronic files.
2. Information Linkages with Suppliers. Coordinated planning avoids excessive
inventories, speeds up deliveries, and holds down costs throughout the supply chain while
1. Information Systems for Knowledge Workers. Knowledge information systems
support knowledge workers by providing resources to create, store, use, and transmit new
2. Information Systems for Managers. Each manager’s information activities and
information system needs vary according to his or her functional area.
a. Management Information Systems (MIS). Management information systems (MIS)
support managers by providing reports, schedules, plans, and budgets that can then be
used for making decisions.
b. Decision Support Systems (DSS). Decision support systems (DSS) are interactive
systems that create virtual business models and test them with different data to see
how they respond.
KEY TEACHING TIPS
Students often confuse this point: Data warehousing is the collection, storage, and
retrieval of data in electronic files; data mining is the application of electronic
technologies for searching, sifting, and reorganizing data to uncover useful information.
Reinforce that an information system enables managers to collect, process, and transmit
that information for use in decision making.
Make sure students understand that a management information system provides reports,
schedules, plans, and budgets that managers use to make decisions.
QUICK QUESTIONS
When does data become information?
How do knowledge workers benefit from knowledge information systems?
What is the role of a decision support system (DSS)?
What are some advantages that radio frequency identification can provide to individual
stores and to the supply chain as a whole?
HOMEWORK
System Architecture
Now might be a good time to assign Application Exercise 10 from the end-of-chapter materials
as homework. This assignment asks students to assess the impact of changes in IT on higher
education.
At-Home Completion Time: 1 hour
Learning Objective 14-4:
Identify the threats and risks information technology poses on businesses.
IT Risks and Threats
IT has attracted abusers that are set on doing mischief, with severity ranging from mild nuisance
to outright destruction.
A. Hackers
Hackers are cybercriminals who gain unauthorized access to a computer or network, either to
steal information, money, or property or to tamper with data. Hackers cost companies and
organizations billions in money and jobs annually.
B. Identity Theft
Identity theft is the unauthorized stealing of personal information to get loans, credit cards, or
other monetary benefits by impersonating the victim. It is among the fastest-growing crimes
in the U.S., with as many as 16.6 million victims each year.
C. Intellectual Property Theft
Intellectual property includes products of the mind—something produced by the intellect,
that has commercial value. Nearly every company faces the dilemma of protecting product
plans, new inventions, industrial processes, and other intellectual property. Its ownership and
right to its use may be protected by patent, copyright, trademark, and other means.
D. Computer Viruses, Worms, and Trojan Horses
A computer virus exists in a file that attaches itself to a program and migrates from
computer-to-computer as a shared program or as an e-mail attachment. Worms are a
particular kind of virus that travels from computer to computer within networked computer
E. Spyware is unintentionally downloaded on a computer and crawls around to monitor the
host’s computer activities. For example, Internet users open files that promise ―free
giveaways,‖ not suspecting that they are downloading spyware onto their systems.
F. Spam is junk e-mail sent to a mailing list or a newsgroup. It wastes time and bandwidth,
decreasing productivity. Its damage in lost time and productivity is between $28 and $66 billion
in the U.S. and could be $620 billion worldwide.
QUICK QUESTIONS
Can hackers ever do good?
How can identity theft be avoided?
What types of damage might a worm and a Trojan horse do?
Learning Objective 14–5:
Describe the ways in which businesses protect themselves from the threats and risks
information technology poses.
IT Protection Measures
Businesses guard themselves against intrusion, identity theft, and viruses by using firewalls,
dropping it in a dumpster. Documents must be shredded, pulverized, or burned, and
electronic records must be permanently removed.
C. Preventing Infectious Viruses: Anti-Virus Software
Anti-virus software protects systems by searching incoming e-mail and data files for
―signatures‖ of known viruses and virus-like characteristics and quarantining such messages.
D. Protecting Electronic Communications: Encryption Software
An encryption system works by encoding e-mails so that only intended recipients can open
them. The system works by scrambling an e-mail message so that it looks like garbled
nonsense to anyone who doesn’t possess the ―key,‖ another part of the software that decodes
encrypted e-mails.
E. Avoiding Spam and Spyware
Anti-spyware and spam filtering software on business systems helps employees avoid
privacy invasion and improves worker productivity.
F. Ethical Concerns in IT
It is apparent that IT developments and usage are progressing faster than society’s
appreciation for the potential consequences, including new ethical concerns. Ease of access
KEY TEACHING TIP
Reinforce that an encryption system works by scrambling an e-mail message so that it
looks like garbled nonsense to anyone who doesn’t possess the ―key,‖ another part of the
software that decodes encrypted e-mails.
Remind students of the ethical issues associated with current information technology.
Ease of access to computers, mobile devices, and the Internet, together with messaging
capabilities and social networking, promote widespread public exposure about people’s
QUICK QUESTION
What are a firewall’s two components for filtering incoming messages?
Use In-Class Activity 3: Up for Debate: Is That Ethical?
Time Limit: 30 minutes
Learning Catalytics is a “bring your own device” student engagement, assessment,
and classroom intelligence system. It allows instructors to engage students in class
with realtime diagnostics. Students can use any modern, web-enabled device
(smartphone, tablet, or laptop) to access it. For more information on using
Learning Catalytics in your course, contact your Pearson Representative.
IN-CLASS ACTIVITIES
In-Class Activity 1: Ice-Breaker: IT Devices
Activity Overview:
This activity asks students to come up with a list of technological devices that reflect the many
ways in which the class as a whole creates, stores, exchanges, and uses information.
Time Limit: 20 minutes
What to Do:
1. Ask the class as a whole to brainstorm, coming up with a list of technological devices that
they use in their personal lives, at work, or at school to create, store, exchange, and use
information.
2. Ask the class to comment on these questions:
a. Do students in the class as a whole use more or fewer devices than what you expected
prior to brainstorming?
b. In what way(s) do you see your individual use of these devices changing in the coming
years?
c. In what way(s) have these devices impacted your personal lives, such as at school, at the
bank, while shopping, and so on?
In-Class Activity 2: Small-Group Discussion: CereProc and New Products,
Especially for Small Markets
Activity Overview:
This activity encourages students to think about how information technology can be used to
develop new products and services even in difficult economic times.
Time Limit: 30 minutes
What to Do:
1. Divide the class into small groups and ask them to read the Entrepreneurship and New
Ventures feature in the textbook. (10 minutes)
2. Ask students to discuss the following questions within their small groups (10 minutes):
a. What do you think about the idea of CereVoice and Voice Creation? If you were given
the opportunity, would you invest in CereProc’s products?
3. Regroup the class as a whole and discuss each group’s conclusions. (10 minutes)
Don’t Forget:
In-Class Activity 3: Up for Debate: Is That Ethical?
Activity Overview:
This activity asks students to discuss the ethical issues that may arise from an employer having
the ability to access and track employees’ computer usage.
Time Limit: 30 minutes
What to Do:
1. Divide the class into small groups and ask them to consider this tidbit that a coworker
overheard at the water cooler: ―I guess it was as simple as that! Once Jeremy looked into
2. Reassemble the class as a whole and discuss each group’s conclusion. (15 minutes)
ANSWERS FOR END OF CHAPTER ACTIVITIES
QUESTIONS FOR REVIEW
14-1. Compare and contrast an intranet with an extranet.
An intranet is an organization’s private network of internally linked websites, accessible only
14-2. How can electronic conferencing increase a company’s productivity and efficiency?
14-3. What are the advantages and risks of cloud computing?
The cloud enhances user flexibility, especially for employees working remotely because users
14-4. Why should companies be concerned about hackers?
14-5. What is intellectual property? Provide at least three examples.
Intellectual property is a product of the mind, something produced by the intellect, with great
QUESTIONS FOR ANALYSIS
14-6. Describe how a company might use data warehousing and data mining in its information
system to better plan for new products.
Data warehousing involves the collection, storage, and retrieval of data in electronic files;
14-7. How could an airline use data mining to make better business decisions?
An airline can use data mining to analyze its flights and flight schedule. Which flights are
14-8. How do your bank, employer, and e-mail provider protect your personal information
from unauthorized use?
Step one is the use of strong passwords, by customers and employees. Any of these
organizations should be using firewalls, special software, and encryption of data. Use of anti–
APPLICATION EXERCISES
14-9. Consider your daily activities—as a consumer, student, parent, friend, homeowner or
renter, car driver, employee, and so forth—and think about the ways that you are involved
with IT systems. Make a list of your recent IT encounters and then recall instances in those
encounters that you revealed personal information that could be used to steal your identity.
Are some encounters on your list riskier than others? Why or why not?
Answers will vary, but most students will mention their access to ATMs and their use of
credit cards, often daily, in making consumer purchases. Students use IT regularly in course
14-10. After reading the first section of this chapter, consider how IT has changed the business of
higher education. Identify at least three functions, services, or activities that would not have
been available even 10 years ago. How do you think that colleges and universities will
change in the future because of advances in IT?
Copyright © 2019 Pearson Education, Inc.
14–17
Answers will vary, but many students will mention online classes and testing, applying and
registering for college/classes online, and accessing their academic records online.
(Learning Objectives 1 and 2 – AACSB – application of knowledge)
BUILDING A BUSINESS: CONTINUING TEAM EXERCISE 14-11 TO 14-15
(Learning Objectives 2, 3, 4, 5 – AACSB – interpersonal relations and teamwork, analytical
and reflective thinking, application of knowledge)
Students should develop a comprehensive IT plan that focuses on meeting customers’ needs;
improving efficiencies, operations, and processes; and bolstering productivity, while creating
new opportunities. They should also address the various threats and risks it poses for their
businesses, as well as the ways to protect themselves from threats and risks information
technology might pose for their business.
TEAM EXERCISE: NEW AGE HELP DESK 14-16 TO 14-20
(Learning Objectives 1, 2, 3, 4, and 5 – AACSB – ethical understanding and reasoning,
interpersonal relations and teamwork, reflective thinking)
14-16. Many of the company’s employees work from home. What benefits can the company and
employee expect from allowing employees to do so? Are there some jobs where working from
home is not appropriate?
14-17. The company has not had a consistent policy about the technology for those working from
home. Should the company provide employees with a computer to use in their home office, or is
this a responsibility of the employee? What are the benefits and costs of each?
14-18. How will you provide technical support to employees working from home? Would this be
easier if the company provided the employee with a computer? Why, or why not?
14-19. Are there additional data security risks with employees working from home? Describe the
14-20. Briefly outline the policies, procedures, and guidelines that your department should
propose in your first year on the job.
Students should initially focus on reviewing the types of tasks that lend themselves to working
EXERCISING YOUR ETHICS: TO READ OR NOT TO READ
(Learning Objectives 1, 2, and 5 – AACSB – ethical understanding and reasoning,
reflective thinking)
14-21. Given the factors in this situation, what, if any, ethical issues exist?
The ethical issues focus on the trust issues between employees and employer.
14-22. Do you think that the company is wise to monitor employees in this manner? Why, or
why not?
Answers will vary, but many students will recognize that companies do monitor employees’
14-23. If you discovered that an employee was spending a lot of time on non-work–related
searches, how would you address the issue with the employee?
Answers will vary, but many students will suggest that their advice would depend on the
CASES:
THINK BEFORE YOU CLICK
(Learning Objectives 1, 2, 3, 4, 5 – AACSB – analytical and reflective thinking, application
of knowledge)
14-24. Think about recent spam e-mails and text messages that you have received. What kinds of
information were the intruders seeking?
14-25. Were you able to identify the e-mails and messages to be ―scams‖ before opening them,
or did you discover their real contents after you opened them? What might have alerted you
to the risks?
14-26. In what ways might the ―opened‖ message from a scammer be harmful to you? To your
IT devices and systems?
An open message may carry a virus, spyware, or worm that can capture personal information
14-27. What steps can you take (or have you taken) to protect against such intrusions? What
costs would be involved for gaining that protection?
14-28. Consider the various IT systems you use daily. What kinds of protection do they have to
protect against invasion by cyber pirates?
Again, answers will vary depending on the IT devices used by students.
SELLING CUSTOMER SEARCH DATA
(Learning Objectives 1, 2, 3, 5 – AACSB – analytical and reflective thinking, application of
knowledge)
14-29. How and where do you see your browsing data affecting the ads that you see?
Students will have noticed that after they search for a product, they will see numerous ads for
14-30. Do you appreciate the targeting marketing that more and more companies use, or do you
feel that it is limiting your options? If so, how?
Student answers may vary with some appreciating the targeting marketing, and others feeling
14-31. As a consumer, how do you feel about your Internet Service Provider selling your
browsing data? How do you feel about that as a business owner, marketing manager or
entrepreneur? What arguments could you make to Congress either for or against enacting
tougher restrictions on data like purchasing patterns, search history, and page visits?
Students may not be bothered by their ISPs selling their browsing data. They have grown up
14-32. As part of the marketing department of a consumer products company, how would you
use browsing history to help market your products?
Browsing history can provide information about the type of people who purchase, or are
14-33. What kinds of measures could you implement in order to protect your privacy? Would
you do those things, or do you feel that Internet privacy is an oxymoron?
There are many lists of suggested measures to protect one’s online privacy. Students will