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Chapter 6
Foundations of Business Intelligence: Database and
Information Management
Student Learning Objectives
1. What are the problems of managing data resources in a traditional file environment?
2. What are the major capabilities of database management systems (DBMS) and why is
a relational DBMS so powerful?
3. What are the principal tools and technologies for accessing information from
databases to improve business performance and decision making?
4. Why are information policy, data administration, and data quality assurance essential
for managing the firm’s data resources?
Learning Catalytics is a “bring your own device” student engagement, assessment, and
classroom intelligence system. It allows instructors to engage students in class with real-
time 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.
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
Analytic platform, 234
Entity, 218
Attribute, 218
Entity-relationship diagram, 229
Big data, 230
Field, 218
Bit, 218
File, 218
Byte, 218
Foreign key, 224
Data administration, 240
Hadoop, 232
Data cleansing, 242
Data definition, 226
Information policy, 240
Data dictionary, 226
Key field, 223
Data governance, 240
Non-relational database management systems, 224
Data inconsistency, 219
Normalization, 228
Data manipulation language, 226
Online analytical processing (OLAP), 235
Data mart, 231
Primary key, 223
Data mining, 236
Program-data dependence, 220
Data quality audit, 242
Record, 218
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Data redundancy, 219
Referential integrity, 229
Data warehouse, 231
Relational DBMS, 222
Database, 221
Sentiment analysis, 238
Database administration, 241
Structured Query Language (SQL), 226
Database management system (DBMS), 221
Text mining, 238
Database server, 239
Tuple, 223
Web mining, 238
Teaching Suggestions
The essential message of this chapter is the statement that “How businesses store,
organize, and manage their data has a tremendous impact on organizational
effectiveness.” Data have now become central and even vital to an organization’s
survival.
The opening vignette, “Better Data Management Helps the Toronto Globe and Mail
Reach Its Customers” shows that data are not easy to access and analyze without the
Section 6.1, “What are the problems of managing data resources in a traditional file
environment?” introduces basic key terms such as field, record, file, database, entity and
attribute. Try using a simple spreadsheet print-out to demonstrate these terms. The
section points out the drawbacks and difficulties organizations experience with traditional
Section 6.2, “What are the major capabilities of database management systems
(DBMS) and why is a relational DBMS so powerful?” This section introduces students
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Database design and management requirements for database systems are introduced.
Help your students see how a logical design allows them to analyze and understand the
data from a business perspective, while physical design shows how the database is
Section 6.3, “What are the principal tools and technologies for accessing information
from databases to improve business performance and decision making?” This section
focuses on how data technologies are actually used: data warehouses, data marts, and
data mining. It also introduces four new technologies: big data, Hadoop, and in-memory
computing and analytic platforms. Regardless of their career choice, students will
probably use some or all of these in their jobs. Data warehouses and data marts are
critical for those who want to use data mining, which in turn has many uses in
management analysis and business decisions.
Figure 6.12 is an important diagram for illustrating how all these technologies work
together.
Keep in mind as you teach this chapter that managing data resources can be very
6-4
Interactive Session: Technology: Driving ARI Fleet Management with Real-Time
Analytics
Case Study Questions:
1. Why was data management so problematic at ARI?
The sheer volume of data the company collects on fuel consumption, maintenance,
licensing, and compliance for more than one million vehicles in the United States,
2. Describe ARI’s earlier capabilities for data analysis and reporting and their
impact on the business.
ARI collects and analyzes more than 14,000 pieces of data per vehicle. Some fleets had
up to 10,000 vehicles, all operating simultaneously around the world. ARI provided its
3. Was SAP HANA a good solution for ARI? Why or why not?
It appears that SAP HANA was a good solution for ARI. HANA is SAP’s in-memory
4. Describe the changes in the business as a result of adopting HANA.
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Once HANA was integrated with SAP Business Objects Explorer, query responses were
Section 6.4, “Why are information policy, data administration, and data quality
assurance essential for managing the firm’s data resources?” This section introduces
students to some of the critical management issues surrounding corporate data. Students
should realize that setting up the database is only the beginning of the process. Managing
the data is the real challenge. In fact, the main point is to show how data management has
Interactive Session: Management: American Water Keeps Data Flowing
Case Study Questions
1. Discuss the role of information policy, data administration, and efforts to ensure
data quality in improving data management at American Water.
An important step in creating a single source of data with enterprise-wide reporting was
to efficiently and effectively migrate the data from the old system to the new system. The
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2. Describe roles played by information systems specialists and end users in
American Water’s systems transformation project.
Management made business users responsible for the data. It was not just a responsibility
3. Why was the participation of business users so important? If they didn’t play
this role, what would have happened?
Because business users are the ones who primarily will use the data, it should be the way
4. How did implementing a data warehouse help American Water move toward a
more centralized organization?
All data pertaining to materials used by the company were standardized to make the data
5. Give some examples of problems that would have occurred at American Water if
its data were not “clean?”
If data are not clean, it makes the data warehouse much larger than necessary. For
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6. How did American Water’s data warehouse improve operations and
management decision making?
The company is focusing on promoting the idea that data must be “clean” to be effective
Review Questions
6-1 What are the problems of managing data resources in a traditional file
environment?
List and describe each of the components in the data hierarchy.
Figure 6.1 shows a sample data hierarchy. The data hierarchy includes bits, bytes,
fields, records, files, and databases. Data are organized in a hierarchy that starts with
Define and explain the significance of entities, attributes, and key fields.
• Entity is a person, place, thing, or event on which information is obtained.
• Attribute is a piece of information describing a particular entity.
• Key field is a field in a record that uniquely identifies instances of that unique
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List and describe the problems of the traditional file environment.
Problems with the traditional file environment include data redundancy and
confusion, program-data dependence, lack of flexibility, poor security, and lack of
data sharing and availability. Data redundancy is the presence of duplicate data in
multiple data files. In this situation, confusion results because the data can have
6-2 What are the major capabilities of database management systems (DBMS) and
why is a relational DBMS so powerful?
Define a database and a database management system and describe how it solves
the problems of a traditional file environment.
A database is a collection of data organized to service many applications efficiently
by storing and managing data so that they appear to be in one location. It also
A DBMS can reduce the complexity of the information systems environment, reduce
data redundancy and inconsistency, eliminate data confusion, create program-data
Name and briefly describe the capabilities of a DBMS.
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A DBMS includes capabilities and tools for organizing, managing, and accessing the
data in the database. The principal capabilities of a DBMS include data definition
language, data dictionary, and data manipulation language.
• The data definition language specifies the structure and content of the
database.
•
Define a relational DBMS and explain how it organizes data.
The relational database is the primary method for organizing and maintaining data in
information systems. It organizes data in two-dimensional tables with rows and
List and describe the three operations of a relational DBMS.
In a relational database, three basic operations are used to develop useful sets of data:
select, project, and join.
• Select operation creates a subset consisting of all records in the file that meet
stated criteria. In other words, select creates a subset of rows that meet certain
criteria.
Explain why non-relational databases are useful.
There are four main reasons for the rise in non-relational databases: cloud computing,
unprecedented data volumes, massive workloads for Web services, and the need to
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store new types of data. These systems use more flexible data models and are
designed for managing large data sets across distributed computing networks. They
are easy to scale up and down based on computing needs.
Define and describe normalization and referential integrity and explain how
they contribute to a well-designed relational database.
Normalization is the process of creating small stable data structures from complex
groups of data when designing a relational database. Normalization streamlines
relational database design by removing redundant data such as repeating data groups.
Define and describe an entity-relationship diagram and explain its role in
database design.
Relational databases organize data into two-dimensional tables (called relations) with
columns and rows. Each table contains data on an entity and its attributes. An entity-
6-3 What are the principal tools and technologies for accessing information from
databases to improve business performance and decision making?
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Define big data and describe the technologies for managing and analyzing it.
Traditional databases rely on neatly organized content into rows and columns. Much
of the data collected nowadays by companies don’t fit into that mold.
Big data describes datasets with volumes so huge they are beyond the ability of
typical database management system to capture, store, and analyze. The term doesn’t
Big data contains more patterns and interesting anomalies than smaller data sets. That
creates the potential to determine new insights into customer behavior, weather
patterns, financial market activity, and other phenomena.
In-memory computing: rather than using disk-based database software platforms, this
technology relies primarily on a computer’s main memory for data storage. It
List and describe the components of a contemporary business intelligence
infrastructure.
Business intelligence (BI) infrastructures include an array of tools for obtaining
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Powerful tools are available to analyze and access information that has been captured
and organized in data warehouses and data marts. These tools enable users to analyze
Describe the capabilities of online analytical processing (OLAP).
Data warehouses support multidimensional data analysis, also known as online
analytical processing (OLAP), that enables users to view the same data in different
ways using multiple dimensions. Each aspect of information represents a different
dimension.
OLAP represents relationships among data as a multidimensional structure, which
can be visualized as cubes of data and cubes within cubes of data, enabling more
Define data mining, describing how it differs from OLAP and the types of
information it provides.
Data mining provides insights into corporate data that cannot be obtained with OLAP
by finding hidden patterns and relationships in large databases and inferring rules
Explain how text mining and Web mining differ from conventional data mining.
Conventional data mining focuses on data that have been structured in databases and
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Web mining helps businesses understand customer behavior, evaluate the
effectiveness of a particular Web site, or quantify the success of a marketing
campaign. Web mining looks for patterns in data through:
Describe how users can access information from a company’s internal databases
through the Web.
Conventional databases can be linked via middleware to the Web or a Web interface
to facilitate user access to an organization’s internal data. Web browser software on a
client PC is used to access a corporate Web site over the Internet. The Web browser
software requests data from the organization’s database, using HTML commands to
communicate with the Web server. Because many back-end databases cannot
6-4 Why are information policy, data administration, and data quality assurance
essential for managing the firm’s data resources?
Describe the roles of information policy and data administration in information
management.
An information policy specifies the organization’s rules for sharing, disseminating,
acquiring, standardizing, classifying, and inventorying information. Information
policy lays out specific procedures and accountabilities, identifying which users and
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Explain why data quality audits and data cleansing are essential.
Data that are inaccurate, incomplete, or inconsistent create serious operational and
financial problems for businesses because they may create inaccuracies in product
pricing, customer accounts, and inventory data, and lead to inaccurate decisions about
Discussion Questions
6-5 It has been said that there is no bad data, just bad management. Discuss the
implications of this statement.
Student answers to this question will vary.
6-6 To what extent should end users be involved in the selection of a database
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management system and database design?
Student answers to this question will vary.
6-7 What are the consequences of an organization not having an information policy?
Student answers to this question will vary.
Hands-On MIS Projects
Management Decision Problems
6-8 Emerson process management: The data warehouse was full of inaccurate and
redundant data gathered from numerous transaction processing systems. The design team
assumed all users would enter data the same way. Users actually entered data in multiple
ways. Assess the potential business impact of these data quality problems. What
decisions have to be made and steps taken to reach a solution?
Managers and employees can’t make accurate and timely decisions about customer
6-9 Industrial supply company: The company wants to create a single data warehouse
by combining several different systems. The sample files from the two systems that
would supply the data for the data warehouse contain different data sets.
• What business problems are created by not having these data in a single standard
format?
Managers are unable to make good decisions about the company’s sales and
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• How easy would it be to create a database with a single standard format that could
store the data from both systems? Identify the problems that would have to be
addressed.
It may not be too hard to create a database with a single standard format if the
company used middleware to pull both data sets into the consolidated
• Should the problems be solved by database specialists or general business
managers? Explain.
Both the database specialist and general business managers should help solve
the problems. Data administrators are responsible for developing information
• Who should have the authority to finalize a single company-wide format for this
information in the data warehouse?
Owners and managers are the only ones who have the authority to finalize the
format for the information in the data warehouse. They could develop an
Achieving Operational Excellence, Building a Relational Database for Inventory
Management
Software skills: Database design, querying and reporting
Business skills: Inventory management
6-10 This exercise requires that students know how to create queries and reports
using information from multiple tables. The solutions provided were created using
the query wizard and report wizard capabilities of Access. Students can, of course,
create more sophisticated reports if they wish.
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The answers to the following questions can be found in the Microsoft Access File named:
MIS14ch06solutionfile.mdb.
• Prepare a report that identifies the five most expensive bicycles. The report should
list the bicycles in descending order from most expensive to least expensive, the
quantity on hand for each, and the markup percentage for each.
Improving Decision Making: Searching Online Databases for Overseas Business
Resources
Software skills: Online databases
Business skills: Researching services for overseas operations
6-11 List the companies you would contact to interview on your trip to determine
whether they can help you with these and any other functions you think vital to
establishing your office.
Rate the databases you used for accuracy of name, completeness, ease-of-use, and
general helpfulness.
The U.S. Department of Commerce Web site contains a fair amount of economic
(Learning Objective 6.3: What are the principal tools and technologies for accessing
information from databases to improve business performance and decision making?
AACSB: Analytical thinking, Application of knowledge.)
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Collaboration and Teamwork Project
6-12. In MyMISLab, you will find a Collaboration and Teamwork Project dealing
with the concepts in this chapter. You will be able to use Google Drive, Google Docs,
Google Sites, Google +, or other open source collaboration tools to complete the
assignment.
Case Study: Does Big Data Bring Big Rewards?
6-13 Describe the kinds of “big data” collected by the organizations described in this
case.
Green Mountain Coffee analyzes structured and unstructured audio and text data to learn
more about customer behavior and buying patterns. The company had many unanswered
questions about its customers and how they were asking for a specific products, which
products generated the most questions, and which products and categories created the
most confusion.
AutoZone uses big data to help it adjust inventory and product prices at some of its 5,000
stores. To help it target deals at the local level, the company analyzes information
6-14 List and describe the business intelligence technologies described in this case.
Green Mountain Coffee uses Calabrio Speech Analytics to glean insights from multiple
interaction channels and data streams. It gathers precise information and uses it to
produce materials, Web pages, and database entries to help representatives for their jobs
more effectively.
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Google used special analytics platforms to try to determine how many people were
contracting influenza based on the number of search queries users were entering in its
6-15 Why did the companies and services described in this case need to maintain
and analyze big data? What business benefits did they obtain? How much were they
helped by analyzing big data?
Green Mountain Coffee management is now able to identify issues more rapidly before
they create problems for customers because it maintains and properly analyzes big data.
AutoZone uses big data to help it adjust inventory and product prices at 5,000 stores.
6-16 Identify three decisions that were improved by using big data.
• Travelers can obtain information about airlines tickets and hotel rooms faster and
easier and make their own arrangements.
6-17 Should all organizations try to analyze big data? Why or why not? What
management, organization, and technology issues should be addressed before a
company decides to work with big data?
6-20
Based on the information provided about Sears’ failed attempts at boosting sales and
market share, big data is not a magic bullet. Having a lot of data without the
organizational structure to support it doesn’t accomplish much. Sears has spent gobs of
money on technology. Unfortunately it hasn’t had the organizational success to increase
profits.
Sears has been slow to reduce operating costs, keep pace with current merchandising
6-18 Identify the five problems of a traditional file environment and explain how a
database management system solves them.
Visit MyMISLab for suggested answers.
6-19 Discuss how the following facilitate the management of big data: Hadoop, in-
memory computing, analytic platforms.
Visit MyMISLab for suggested answers.
For an example illustrating the concepts found in this chapter, view the
videos in mymislab.com.