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Chapter 5

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York University
Administrative Studies
ADMS 3930

Chapter 5 Managing Information 1. Strategic Importance of Information First-Mover Advantage - It is the strategic advantage that companies earn by being the first in an industry to use new information technology to substantially lower costs or to differentiate a product or service from competitors. Sustaining a Competitive Advantage - Sustaining a competitive advantage through information technology is not easy to do Companies need to address three critical issues in order to sustain a competitive advantage through information technology - First, does the information technology create value for the firm by lowering cost or providing a better product or service? If information technology doesn’t add value, investing in it would put a firm at a competitive disadvantage to companies that choose information technologies that do add value. - Second, is the information technology the same or different across competing firm? If all the firms have access to the same information technology and use it in the same way, no firm has an advantage over another - Third, is the firm’s use of information technology difficult for another company to create or buy? If so, a firm has established a sustainable competitive advantage over competitors through information technology. If not, the competitive advantage is just temporary, and competitors should eventually be able to duplicate the advantages the leading firm has gained from information technology. - The key to sustaining a competitive advantage is using information technology to continuously improve and support the core functions of a business. 2. Characteristics and Costs of Useful Information Accurate Information - To be accurate, information must be reliable and valid - Example: Maintains of airplane Complete Information - To be complete, the amount of information must be sufficient to identify the problem and begin to identify potential solutions. - Example: providing more information of the plane Relevant Information - Information is relevant when it pertains to the problem, so that decision makers can use it to define the problem and begin to identify potential solutions Page 1 of 5 Chapter 5 Managing Information - Example: Classified maintains problems into three relevant categories Timely Information - To be timely, the information must be available when needed to define a problem or begin to identify possible solutions Acquisition Costs is the cost of obtaining data that you don’t have Processing Costs is the cost of turning raw data into usable information Storage Costs is the cost of physically or electronically archiving information for later use and retrieval. - One of the reasons that credit card companies hire companies such as Equifax Canada to help them identify good customer prospects is that they maintain databases of extremely useful information Retrieval Costs is the costs of accessing already-stored and processed information. - It is not easy for company to retrieve information. First you have to find the information. Then you’ve got to convince whoever has it to share it with you. Then the information has to be processed into a form that is useful for you. By the time you get the information you need, it may not be timely anymore. Communication Costs is the cost of transmitting information from one place to another 3. Capturing, Processing, And Protecting Information Capturing Information There are two basic methods of capturing information: - Manual capture of information is a labor-intensive process by which data are recorded and entered by hand into a data storage device. - The problem with manual capture of information is that it is slow, expensive, and often inaccurate - Bar codes and document scanners are the most common methods of electronically capturing data. - Bar codes represent numerical data by varying the thickness and pattern of vertical bars. The primary advantage that bar codes offer is that the data they represent can be read and recorded in an instant with a hand-held or pen-type scanner  Reduce data entry errors by 75%, and save money Page 2 of 5 Chapter 5 Managing Information - Electronic scanners, which convert printed text and pictures into digital images, have become an increasingly popular method of electronically capturing data. Processing Information - Dffn’: transforming raw data into meaningful information that can be applied to business decision-making. - Example: evaluating sales data to determine the best- and worst-selling products, examining repair records to determine product reliability, or monitoring the cost of long-distance phone calls are all examples of processing raw data into meaningful information - One promising tool to help managers dig out from under the avalanche of data is data mining. Data mining is the process of discovering unknown pattern and relationship in large amounts of data - Data warehouse that stores huge amounts of data that have been prepared for data mining analysis by being cleaned of errors and redundancy The data in a data warehouse can then be analyzed using two kinds of data mining: 1. Supervised data mining usually begins with the user telling the data mining software to look and test for specific patterns and relationships in a data set. - Example: a grocery store manag
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