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Chapter 6
Foundations of Business Intelligence: Database
and Information Management
Learning Objectives
1. What are the problems of managing data resources in a traditional file environment
and how are they solved by a database management system?
2. What are the major capabilities of database management systems (DBMS) and why is
a relational DBMS so powerful?
Chapter Outline
6.1 Organizing Data in a Traditional File Environment
6.2 The Database Approach to Data Management
6.3 Using Databases to Improve Business Performance and Decision Making
6.4 Managing Data Resources
Establishing an Information Policy
Ensuring Data Quality
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, 256
Attribute, 241
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Data cleansing, 267
Data definition, 249
Data dictionary, 249
Data governance, 266
Database server, 263
Entity, 241
Entity-relationship diagram, 253
Field, 241
File, 241
Record, 241
Referential integrity, 253
Relational DBMS, 246
Sentiment analysis, 260
Structured Query Language (SQL), 250
Text mining, 260
Tuple, 247
Web mining, 260
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.
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Section 6.1, “Organizing Data in a Traditional File Environment,” introduces basic
key terms like field, record, file, database, entity and attribute. Try using a simple
spreadsheet print-out to demonstrate these terms. The section points out the drawbacks
Section 6.2, “The Database Approach to Data Management” This section introduces
students to more file organization terms and concepts. A database management system is
comprised of three components: a data definition language, data dictionary, and data
manipulation language. If you have access to a relational DBMS during class time, you
can demonstrate several of the concepts presented in this section.
Section 6.3, “Using 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
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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
technical, but many students will need and want to know the business uses and business
values. In the end, effectively managing data is the goal. Doing it in a way that will
enable your students to contribute to the success of their organization is the reason why
most students are in this course.
Interactive Session: Technology: Big Data, Big Rewards
Case Study Questions:
1. Describe the kinds of “big data” collected by the organizations described in this
case.
British Library: It collects data from typical library resources like books, periodicals,
and newspapers. In addition, it must store and collect data from Web sites that no
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2. List and describe the business intelligence technologies described in this case.
The British Library and Vestas use Hadoop so it can process large amounts of data
quickly and efficiently. Hertz uses sentiment analysis to determine customer
3. Why did the companies described in this case need to maintain and analyze big
data? What business benefits did they obtain?
The British Library is able to maintain historical records of events and provide users
with more information about its past. It can now process information requests more
quickly and easily. The technology it uses provides an insight engine that helps
4. Identify three decisions that were improved by using “big data.”
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Vestas used its big data to help find the best places to install its wind turbines. It is
able to manage and analyze location and weather data with models that are much
5. What kinds of organizations are most likely to need “big data” management and
analytical tools? Why?
Organizations that have an active presence on the Web or on social media sites need
Interactive Session: Organizations: Controversy Whirls Around the Consumer
Product Safety Database
Case Study Questions
1. What is the value of the CPSC database to consumers, businesses, and the U.S.
government?
Consumers: The database provides the public with access to the full repository of
product safety complaints the agency has received. Users can submit complaints
online directly into the database. Visitors to the database can search for products, read
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2. What problems are raised by this database? Why is it so controversial? Why is
data quality an issue?
The database is open to abuse from customers with an axe to grind, or trial lawyers
seeking to tarnish a product or manufacturer’s reputation for personal gain.
3. Name two entities in the CPSC database and describe some of their attributes.
Two possible entities in the database are:
4. When buying a crib, or other consumer product for your family, would you use
this database? Why or why not?
Answers will vary based on personal experiences and preferences. However, it’s
Section 6.4, “Managing 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 changed and the
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Review Questions
1. What are the problems of managing data resources in a traditional file
environment and how are they solved by a database management system?
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.
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
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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
minimizes redundant data. A database management system (DBMS) is special
security.
2. What are the major capabilities of DBMS and why is a relational DBMS so
powerful?
Name and briefly describe the capabilities of a DBMS.
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
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
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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
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
store new types of data. These systems use more flexible data models and are
3. What are some important database design principles?
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
Define and describe an entity-relationship diagram and explain its role in
database design.
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4. What are the principal tools and technologies for accessing information from
databases to improve business performance and decision making?
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
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
eliminates bottlenecks that result from retrieving and reading data in a traditional
database and shortens query response times. Advances in contemporary computer
hardware technology makes in-memory processing possible.
List and describe the components of a contemporary business intelligence
infrastructure.
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Business intelligence (BI) infrastructures include an array of tools for obtaining
useful information from all the different types of data used by businesses today,
including semi-structure and unstructured big data in vast quantities. Data
Describe the capabilities of online analytical processing (OLAP).
Data warehouses support multidimensional data analysis, also known as online
analytical processing (OLAP), enables users to view the same data in different ways
using multiple dimensions. Each aspect of information represents a different
dimension.
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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files. Text mining concentrates on finding patterns and trends in unstructured data
contained in text files. The data may be in email, memos, call center transcripts,
survey responses, legal cases, patent descriptions, and service reports. Text mining
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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
5. 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
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
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Discussion Questions
1. It has been said that there is no bad data, just bad management. Discuss the
implications of this statement.
Just because a company has a lot of data doesn’t mean it has a lot of information.
Rows and columns of numbers don’t mean much if a company cannot use the data to
its competitive advantage. If data are poorly organized and maintained, a business may
use them poorly and make bad decisions. For instance, if ABC Widgets, Inc., doesn’t
2. To what extent should end users be involved in the selection of a database
management system and database design?
End users should be integral players in the selection of a database management
system and the database design. Developing a database environment requires much
more than just selecting the technology. It requires a change in the organization’s
3. What are the consequences of an organization not having an information policy?
Without an information policy anyone could:
• Reorganize data.
• Maintain it in non-conforming ways that would make it difficult to use the
Hands-On MIS Projects
Management Decision Problems
1. 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
activity because of inaccurate and redundant data. The company could be wasting
2. 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.
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1. 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
2. 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 database.
3. Should the problems be solved by database specialist or general business
managers? Explain.
Both the database specialist and general business managers should help solve the
4. 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
Achieving Operational Excellence, Building a Relational Database for Inventory
Management
Software skills: Database design, querying and reporting
Business skills: Inventory management
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This exercise requires that students know how to create queries and reports using
1. Prepare a report that identifies the five most expensive bicycles. The report should list
the bicycles in descending order from most expensive to lease expensive, the quantity
on hand for each, and the markup percentage for each.
2. Prepare a report that lists each supplier, its products, their quantities on hand, and
Improving Decision Making: Searching Online Databases for Overseas Business
Resources
Software skills: Online databases
Business skills: Researching services for overseas operations
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.
What does this exercise tell you about the design of databases?
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Students may not understand that the World Wide Web is one massive data warehouse,
Video Cases
You will find a video case illustrating some of the concepts in this chapter on the Laudon
Collaboration and Teamwork: Identifying Entities and Attributes in An
Online Database
With your team of three or four students, select an online database to explore, such
as AOL Music, iGo.com or the Internet Movie Database. Explore one of these Web
sites to see what information it provides. Then list the entities and attributes that the
company running the Web site must keep track of in its databases. Diagram the
relationship between the entities you have identified. If possible, use Google Sites to
post links to Web pages, team communication announcements, and work
assignments; to brainstorm; and to work collaboratively on project documents. Try
to use Google Docs to develop a presentation of your findings for the class.
There are hundreds of Internet Movie Databases so students will have to select the one
Case Study: Lego: Embracing Change by Combining BI with a Flexible Information
System
1. Explain the role of the database in SAP’s three-tier system.
The data base is the last tier in SAP’s multi-tier system. It provides a persistence
2. Explain why distributed architectures are flexible.
Distributed architectures, such as client-server for instance, are flexible because a change
(or failure) in one of its components does not affect the others. There is a clear logical
3. Identify some of the business intelligence features included in SAP’s business
software suite.
Business intelligence refers to the computational techniques that help to analyze and
4. What are the main advantages and disadvantages of having multiple databases in
a distributed architecture? Explain.
The main advantage of having a distributed architecture that supports multiple databases
is the flexibility we have to choose the most appropriate database for a particular