7/23/2019 Information system review question http://slidepdf.com/reader/full/information-system-review-question 1/42 CHAPTER 1 INFORMATION SYSTEMS IN GLOBAL BUSINESS TODAY 1. How are informaion !"!em! ran!formin# $%!ine!! an& w'a i! 'eir re(aion!'i) o #(o$a(i*aion+ Describe how information systems have changed the way businesses operate and their products and services. Wireless communications, including computers and mobile hand-held computing devices, are keeping managers, employees, customers, suppliers, and business partners connected in every way possible. Email, online conferencing, the Web, and the Internet, are providing new and diverse lines of communication for all businesses, large and small. Through increased communication channels and decreased costs of the communications, customers are demanding more of businesses in terms of service and product, at lower costs. E-commerce is changing the way businesses must attract and respond to customers. Identify three major new information system trends. Three information system trends that are influencing the way businesses interact with employees, customers, suppliers, and business partners include emerging mobile digital platforms, growth of online software-as-a-service, and the growth of cloud computing. Table 1-1, page , outlines new !I" changes and their impact on business. The table is organi#ed by the three dimensions of information systems$ technology, management, and organi#ations. Describe the characteristics of a digital firm. • "ignificant business relationships with customers, suppliers, and employees are digitally enabled and mediated. • %ore business processes are accomplished through digital networks spanning the entire organi#ation or linking multiple organi#ations. • &ey corporate assets ' intellectual property, core competencies, and financial and human assets ' are managed through digital means. • They sense and respond to their environments far more rapidly than traditional firms. • They offer e(traordinary opportunities for more fle(ible global organi#ation and management, practicing time-shifting and space-shifting. Describe the challenges and opportunities of globalization in a “flattened” world. %ustomers no longer need to rely on local businesses for products and services. They can shop )*+ for virtually anything and have it delivered to their door or desktop. %ompanies can operate )*+ from any
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geographic location around the world. obs can ust as easily move across the state or across the ocean.
Employees must continually develop high-level skills through education and on-the-ob e(perience that
cannot be outsourced. usiness must avoid markets for goods and serves that can be produced offshore
much cheaper. The emergence of the Internet into a full- blown international communications system has
drastically reduced the costs of operating and transacting business on a global scale.
,. -'a ea/(" i! an informaion !"!em+ How &oe! i wor0+ -'a are i! mana#emen
or#ani*aion an& e/'no(o#" /om)onen!+
Define an information system and describe the activities it performs.
/n information system is a set of interrelated components that work together to collect, process, store,
and disseminate information to support decision making, coordination, control, analysis, and visuali#ation
in an organi#ation. In addition to supporting decision making, information systems may also helpmanagers and workers analy#e problems, visuali#e comple( subects, and create new products.
List and describe the organizational, management, and technology dimensions of information
systems.
• Or#ani*aion$ The organi#ation dimension of information systems involves issues such as
the organi#ation0s hierarchy, functional specialties, business processes, culture, and political
interest groups.
•
Mana#emen$The management dimension of information systems involves settingorgani#ational strategies, allocating human and financial resources, creating new products
and services and re-creating the organi#ation if necessary.
• Te/'no(o#"$ The technology dimension consists of computer hardware, software, data
management technology, and networking+telecommunications technology.
Distinguish between data and information and between information systems literacy and
computer literacy.
• ata are streams of raw facts representing events occurring in organi#ations or the physical
environment before they have been organi#ed and arranged into a form that people can
understand and use.
• Information is data that has been shaped into a form that is meaningful and useful to human
beings.
• Information systems literacy is a broad-based understanding of information systems. It
includes a behavioral as well as a technical approach to studying information systems.
1. -'a are $%!ine!! )ro/e!!e!+ How are 'e" re(ae& o informaion !"!em!+
Define business processes and describe the role they play in organizations.
/ business process is a logically related set of activities that define how specific business tasks are performed. usiness processes are the ways in which organi#ations coordinate and organi#e work
activities, information, and knowledge to produce their valuable products or services.
6ow well a business performs depends on how well its business processes are designed and
coordinated. Well-designed business processes can be a source of competitive strength for a company if it
can use the processes to innovate or perform better than its rivals. %onversely, poorly designed or
e(ecuted business processes can be a liability if they are based on outdated ways of working and impede
responsiveness or efficiency.
Describe the relationship between information systems and business processes.
Information systems automate manual business processes and make an organi#ation more efficient. ata
and information are available to a wider range of decision-makers more 4uickly when information
systems are used to change the flow of information. Tasks can be performed simultaneously rather than
se4uentially, speeding up the completion of business processes. Information systems can also drive new
business models that perhaps wouldn0t be possible without the technology.
,. How &o !"!em! !er3e 'e 3ario%! (e3e(! of mana#emen in a $%!ine!!+
Describe the characteristics of transaction processing systems #$%&' and the roles they play in
a business.
• Transaction processing systems 2T7"3 are computeri#ed systems that perform and record daily
routine transactions necessary in conducting business8 they serve the organi#ation0s operational
level. The principal purpose of systems at this level is to answer routine 4uestions and to track the
flow of transactions through the organi#ation.
• /t the operational level, tasks, resources, and goals are predefined and highly structured.
• !anagers need T7" to monitor the status of internal operations and the firm0s relationship with
its e(ternal environment.
• T7" are maor producers of information for other types of systems.
• Transaction processing systems are often so central to a business that T7" failure for a few hours
can lead to a firm0s demise and perhaps that of other firms linked to it.
Describe the characteristics of management information systems #(I&' and e!plain how (I&
differ from $%& and from D&&.
• !iddle management needs systems to help with monitoring, controlling, decision-making, and
administrative activities.
• !I" provide middle managers with reports on the organi#ation0s current performance. This
information is used to monitor and control the business and predict future performance.
parts of these processes or by helping organi#ations rethink and streamline these processes. "%! is
important to a business because through its efficiency it can coordinate, schedule, and control the delivery
of products and services to customers.
usiness benefits include$
ecide when and what to produce, store, and move
<apidly communicate orders
Track the status of orders
%heck inventory availability and monitor inventory levels
<educe inventory, transportation, and warehousing costs
Track shipments
7lan production based on actual customer demand
<apidly communicate changes in product design
C%!omer re(aion!'i) mana#emen !"!em! enable a business to better manage its relationships with
e(isting and potential customers. With the growth of the Web, potential customers can easily comparison
shop for retail and wholesale goods and even raw materials, so treating customers better has become very
important.
usiness benefits include$
• %<! systems provide information to coordinate all the business processes that deal with
customers in sales, marketing, and service to optimi#e revenue, customer satisfaction, and
customer retention. This information helps firms identify, attract, and retain the most profitable
customers8 provide better service to e(isting customers8 and increase sales.
• %<! systems consolidate customer data from multiple sources and provide analytical tools for
answering 4uestions such as$ What is the value of a particular customer to the firm over his+her
lifetime=
•%<! tools integrate a business0s customer-related processes and consolidate customer information from multiple communication channels, giving the customer a consolidated view of
the company.
• etailed and accurate knowledge of customers and their preferences help firms increase the
effectiveness of their marketing campaigns and provide higher-4uality customer service and
support.
5now(e&#e mana#emen !"!em! enable organi#ations to better manage processes for capturing and
applying knowledge and e(pertise. These systems collect all relevant knowledge and e(perience in the
firm, and make it available wherever and whenever it is needed to improve business processes and
management decisions. They also link the firm to e(ternal sources of knowledge.
• &!" support processes for ac4uiring, storing, distributing, and applying knowledge, as well as
processes for creating new knowledge and integrating it into the organi#ation.
• &!" include enterprise-wide systems for managing and distributing documents, graphics, andother digital knowledge obects8 systems for creating corporate knowledge directories of
employees with special areas of e(pertise8 office systems for distributing knowledge and
information8 and knowledge work systems to facilitate knowledge creation.
• &!" use intelligent techni4ues that codify knowledge and e(perience for use by other members
of the organi#ation and tools for knowledge discovery that recogni#e patterns and important
relationships in large pools of data.
!plain how intranets and e!tranets help firms integrate information and business processes.
ecause intranets and e(tranets share the same technology and software platforms as the Internet, they areeasy and ine(pensive ways for companies to increase integration and e(pedite the flow of information
within the company 2intranets alone3 and with customers and suppliers 2e(tranets3. They provide ways to
distribute information and store corporate policies, programs, and data. oth types of nets can be
customi#ed by users and provide a single point of access to information from several different systems.
usinesses can connect the nets to transaction processing systems easily and 4uickly. Interfaces between
the nets and T7", !I", "", and E"" systems provide input and output for users.
• Or#ani*aiona( !r%/%re7 Information systems reflect the type of organi#ational structure -
entrepreneurial, machine bureaucracy, divisionali#ed bureaucracy, professional bureaucracy, or
adhocracy.
Describe the major economic theories that help e!plain how information systems affect
organizations.
The two economic theories discussed in the book are transaction cost theory and agency theory. The
transaction cost theory is based on the notion that a firm incurs transaction costs when it buys goods in
the marketplace rather than making products for itself. Traditionally, firms sought to reduce transaction
costs by getting bigger, hiring more employees, vertical and hori#ontal integration, and small-
company takeovers. Information technology helps firms lower the cost of market participation
2transaction costs3 and helps firms shrink in si#e while producing the same or greater amount of output.
The agency theory views the firm as a ne(us of contracts among interested individuals. The owner
employs agents 2employees3 to perform work on his or her behalf and delegates some decision- makingauthority to the agents. /gents need constant supervision and management, which introduces
by providing information more easily so that managers can supervise a larger number of people with
fewer resources.
Describe the major behavioral theories that help e!plain how information systems affect
organizations.
ehavioral theories, from sociology, psychology, and political science, are useful for describing the
behavior of individual firms. ehavioral researchers theori#e that information technology could changethe decision-making hierarchy by lowering the costs of information ac4uisition and distribution. IT could
eliminate middle managers and their clerical support by sending information from operating units directly
to senior management and by enabling information to be sent directly to lower-level operating units. It
even enables some organi#ations to act as virtual organi#ations because they are no longer limited by
geographic locations.
5ne behavioral approach views information systems as the outcome of political competition between
organi#ational subgroups. IT becomes very involved with this competition because it controls who has
access to what information, and information systems can control who does what, when, where, and how.
!plain why there is considerable organizational resistance to the introduction of information
systems.
There is considerable organi#ational resistance to new information systems because they change many
important organi#ational dimensions, such as culture, structure, politics, and work. @eavitt puts forth a
model that says that changes in technology are absorbed, deflected, and defeated by organi#ational task
arrangements, structures, and people. In this model the only way to bring about change is to change the
technology, tasks, structure, and people simultaneously. In a second model, the authors speak of the need
to unfree#e organi#ations before introducing an innovation, 4uickly implementing the new system, and
then refree#ing or institutionali#ing the change.
Describe the impact of the Internet and disruptive technologies on organizations.
• Pro&%/ &iffereniaion$ Enable new products and services, or greatly change the customer
convenience in using e(isting products and services.
• Fo/%! on mar0e ni/'e$ Enable a specific market focus and serve this narrow target market
better than competitors.
• Sren#'en /%!omer an& !%))(ier!$ Tighten linkages with suppliers and develop intimacy with
customers.
Describe how information systems can support each of these competitive strategies and give
e!amples.
• Low4/o! (ea&er!'i)$ Ase information systems to improve inventory management, supply
management, and create efficient customer response systems. E(ample$ Wal-!art.
• Pro&%/ &iffereniaion$ Ase information systems to create products and services that are
customi#ed and personali#ed to fit the precise specifications of individual customers. E(ample$
;oogle, eay, /pple, @ands0 End.
• Fo/%! on mar0e ni/'e$ Ase information systems to produce and analy#e data for finely tuned
sales and marketing techni4ues. /naly#e customer buying patterns, tastes, and preferences closely
in order to efficiently pitch advertising and marketing campaigns to smaller target markets.
E(ample$ 6ilton 6otels, 6arrah0s.
• Sren#'en /%!omer an& !%))(ier inima/ie!$ Ase information systems to facilitate direct
access from suppliers to information within the company. Increase switching costs and loyalty to
the company. E(ample$ I!, /ma#on.com
!plain why aligning I$ with business objectives is essential for strategic use of systems.
The basic principle of IT strategy for a business is to ensure the technology serves the business and not
the other way around. The more successfully a firm can align its IT with its business goals, the more
profitable it will be. usiness people must take an active role in shaping IT to the enterprise. They cannot
ignore IT issues. They cannot tolerate failure in the IT area as ust a nuisance to work around. They mustunderstand what IT can do, how it works, and measure its impact on revenues and profits.
2. How &o 'e 3a(%e /'ain an& 3a(%e we$ mo&e(! 'e() $%!ine!!e! i&enif" o))or%niie! for
!rae#i/ informaion !"!em a))(i/aion!+
Define and describe the value chain model.
The value chain model highlights specific activities in the business where competitive strategies can best
be applied and where information systems will most likely have a strategic impact. The model identifies
specific, critical leverage points where a firm can use information technology most effectively to enhance
its competitive position. The value chain model views the firm as a series of basic activities that add a
margin of value to a firm0s products or services. The activities are categori#ed as either primary or support
activities. 7rimary activities are most directly related to production and distribution of the firm0s products
and services, which create value for the customer. "upport activities make the delivery of primary
activities possible and consist of organi#ation infrastructure. / firm0s value chain can be linked to the
value chains of its suppliers, distributors, and customers.
!plain how the value chain model can be used to identify opportunities for information
systems.
Information systems can be used at each stage of the value chain to improve operational efficiency, lower
costs, improve profit margins, and forge a closer relationship with customers and suppliers. 5rgani#ations
can use information systems to help e(amine how value-adding activities are performed at each stage of
the value chain. Information systems can improve the relationship with customers 2customer relationship
management systems3 and with suppliers 2supply chain management systems3 who may be outside the
value chain but belong to an e(tended value chain. Information systems can help businesses track
benchmarks in the organi#ation and identify best practices of their particular industries. /fter analy#ingvarious stages in the value chain, an organi#ation can devise a list of candidate applications for
information systems.
Define the value web and show how it is related to the value chain.
/ value web is a collection of independent firms that use information technology to coordinate their value
chains to collectively produce a product or service. It is more customers driven and operates in a less
linear fashion than the traditional value chain. The value web is a networked system that can synchroni#e
the business processes of customers, suppliers, and trading partners among different companies in an
industry or in related industries.
!plain how the value web helps businesses identify opportunities for strategic information
systems.
Information systems enable value webs that are fle(ible and adaptive to changes in supply and demand.
<elationships can be bundled or unbundled in response to changing market conditions. >irms can
accelerate their time to market and to customers by optimi#ing their value web relationships to make
4uick decisions on who can deliver the re4uired products or services at the right price and location.
Information systems make it possible for companies to establish and operate value webs.
De!/ri$e how 'e Inerne 'a! /'an#e& /om)eii3e for/e! an& /om)eii3e a&3ana#e.
The Internet has nearly destroyed some industries and severely threatened others. The Internet has also
created entirely new markets and formed the basis of thousands of new businesses. The Internet has
enabled new products and services, new business models, and new industries to rapidly develop.
ecause of the Internet, competitive rivalry has become much more intense. Internet technology is based
on universal standards that any company can use, making it easy for rivals to compete on price alone and
for new competitors to enter the market. ecause information is available to everyone, the Internet raises
the bargaining power of customers, who can 4uickly find the lowest- cost provider on the Web.
• escartes0 <ule of %hange. If an action cannot be taken repeatedly, it is not right to take
at all
• Atilitarian 7rinciple. Take the action that achieves the higher or greater value
• <isk /version 7rinciple. Take the action that produces the least harm or the least
potential cost
• 9Do >ree @unch: <ule. /ssume that virtually all tangible and intangible obects are
owned by someone else unless there is a specific declaration otherwise.
These principles should be used in conunction with an ethical analysis to guide decision making. The
ethical analysis involves identifying the facts, values, stakeholders, options, and conse4uences of actions.
5nce completed, you can consider which ethical principle to apply to a situation to arrive at a udgment.
+. "hy do contemporary information systems technology and the Internet pose challenges to
the protection of individual privacy and intellectual property
Define privacy and fair information practices.
Pri3a/" is the claim of individuals to be left alone, free from surveillance or interference from other
individuals or organi#ations, including the state. %laims of privacy are also involved at the workplace.
Fair informaion )ra/i/e! are a set of principles governing the collection and use of information about
individuals. >I7 principles are based on the notion of a mutuality of interest between the record holder
and the individual.
!plain how the Internet challenges the protection of individual privacy and intellectual
property.
%ontemporary information systems technology, including Internet technologies, challenges traditional
regimens for protecting individual privacy and intellectual property. ata storage and data analysis
technology enables companies to easily gather personal data about individuals from many different
sources and analy#e these data to create detailed electronic profiles about individuals and their
behaviors. ata flowing over the Internet can be monitored at many points. The activities of Web site
visitors can be closely tracked using cookies, Web beacons, and other Web monitoring tools. Dot all Web
sites have strong privacy protection policies, and they do not always allow for informed consent regarding
the use of personal information.
!plain how informed consent, legislation, industry self- regulation, and technology tools help
protect the individual privacy of Internet users.
The online industry prefers self-regulation rather than having state and federal governments passing
legislation that tightens privacy protection.
In >ebruary )F, the >ederal Trade %ommission 2>T%3 began the process of e(tending its fair
information practices doctrine to behavioral targeting. The >T% held hearings to discuss its program for
voluntary industry principles for regulating behavioral targeting. The online advertising trade group Detwork /dvertising Initiative, published its own self-regulatory principles that largely agreed with the
>T%. Devertheless, the government, privacy groups, and the online ad industry are still at loggerheads
over two issues. 7rivacy advocates want both an opt-in policy at all sites and a national o Dot Track list.
The industry opposes these moves and continues to insist on an opt-out capability being the only way to
avoid tracking. Devertheless, there is an emerging consensus among all parties that greater transparency
and user control 2especially making opt-out of tracking the default option3 is re4uired to deal with
behavioral tracking.
7rivacy protections have also been added to recent laws deregulating financial services and safeguarding
the maintenance and transmission of health information about individuals. The ;ramm-@each-liley /ct
of 1FFF, which repeals earlier restrictions on affiliations among banks, securities firms, and insurancecompanies, includes some privacy protection for consumers of financial services. /ll financial institutions
are re4uired to disclose their policies and practices for protecting the privacy of nonpublic personal
information and to allow customers to opt out of information-sharing arrangements with nonaffiliated
third parties.
The 6ealth Insurance 7ortability and /ccountability /ct of 1FFG 26I7//3, which took effect on /pril 1*,
)?, includes privacy protection for medical records. The law gives patients access to their personal
medical records maintained by healthcare providers, hospitals, and health insurers and the right to
authori#e how protected information about them can be used or disclosed. octors, hospitals, and other
healthcare providers must limit the disclosure of personal information about patients to the minimum
amount necessary to achieve a given purpose.
List and define three different regimes that protect intellectual property rights
• Trade secrets
• %opyright
• 7atent law
Traditional copyright law is insufficient to protect against software piracy because digital material
can be copied so easily. Internet technology also makes intellectual property even more difficult to protect because digital material can be copied easily and transmitted to many different locations
simultaneously over the Det. Web pages can be constructed easily using pieces of content from other
Web sites without permission.
CHAPTER :
IT INFRASTRUCTURE
1. -'a i! IT infra!r%/%re an& w'a are i! /om)onen!+
Define I$ infrastructure from both a technology and a services perspective.
Te/'ni/a( )er!)e/i3e is defined as the shared technology resources that provide the platform for the
firm0s specific information system applications. It consists of a set of physical devices and softwareapplications that are re4uired to operate the entire enterprise.
Ser3i/e )er!)e/i3e is defined as providing the foundation for serving customers, working with vendors,
and managing internal firm business processes. In this sense, IT infrastructure focuses on the services
provided by all the hardware and software. IT infrastructure is a set of firm-wide services budgeted by
management and comprising both human and technical capabilities.
List and describe the components of I$ infrastructure that firms need to manage.
IT infrastructure includes hardware, software, and services$
1. %omputing platforms$ Includes mainframes, midrange computers, desktop and laptop computers,
and mobile handheld devices ' anything that connect employees, customers, and suppliers into a
coherent digital environment.
). Telecommunications services$ ata, voice, and video connectivity between employees,
customers, and suppliers.
?. ata management$ "tore, manage and analy#e data.
*. /pplication software$ Includes enterprise resource planning, customer relationship management,
supply chain management, and knowledge management systems.
H. 7hysical facilities management$ evelop and manage the physical installations for computing,
telecommunications, and data management.
G. IT management$ 7lanning and developing the infrastructure, coordinate IT services among
business units, manage accounting for IT e(penditures, and provide proect management.
. IT standards$ 7olicies that determine which information technology will be used, when, and how.
C. IT education$ Employee training in system use and management training for IT investments.
F. IT research and development$ <esearch future IT proects and investments that can help the firm
differentiate itself from competitors.
,.-'a are 'e !a#e! an& e/'no(o#" &ri3er! of IT infra!r%/%re e3o(%ion+
List each of the eras in I$ infrastructure evolution and describe its distinguishing
characteristics.
1. ;eneral-purpose mainframe and minicomputer era 21FHF to present3$ %onsists of a mainframe
performing centrali#ed processing that could be networked to thousands of terminals and eventually
some decentrali#ed and departmental computing using networked minicomputers.
). 7ersonal computer era 21FC1 to present3$ ominated by the widespread use of standalone
desktop computers with office productivity tools.
?. %lient+server era 21FC? to present3$ %onsists of desktop or laptop clients networked to more
powerful server computers that handle most of the data management and processing.
*. Enterprise computing era 21FF) to present3$ efined by large numbers of 7%s linked together
into local area networks and the growing use of standards and software to link disparate networks
and devices into an enterprise-wide network so that information can flow freely across theorgani#ation.
H. %loud and mobile computing era 2) to present3$ / model of computing where firms and
individuals obtain computing power and software applications over the Internet, rather than
purchasing their own hardware and software.
Define and describe the following "eb server, application server, multitiered client/server
architecture.
1. Web server$ "oftware that manages re4uests for Web pages on the computer where they are
stored and that delivers the page to the user s computer.
). /pplication server$ "oftware that handles all application operations between browser-basedcomputers and a company0s back-end business applications or databases.
?. !ultitiered client+server architecture$ %lient+server network in which the work of the entire
network is balanced over several different levels of servers
Describe (oore*s Law and the Law of (ass Digital &torage
1. Moore8! Law7 The number of components on a chip with the smallest manufacturing costs per
component 2generally transistors3 had doubled each year. !oore later reduced the rate of growth
to a doubling every two years.
). Law of Ma!! Di#ia( Sora#e7 The amount of digital information is roughly doubling every
year. The cost of storing digital information is falling at an e(ponential rate of 1 percent a year.
?. oth of these concepts e(plain developments that have taken place in computer processing,
memory chips, storage devices, telecommunications and networking hardware and software, and
software design that have e(ponentially increased computing power while e(ponentially
reducing costs.
Describe how networ) economics, declining communication costs, and technology standards
affect I$ infrastructure.
1. Newor0 e/onomi/!$ !etcalfe0s @aw helps e(plain the mushrooming use of computers by
showing that a network s value to participants grows e(ponentially as the network takes on more
members. /s the number of members in a network grows linearly, the value of the entire system
grows e(ponentially and theoretically continues to grow forever as members increase.
). De/(inin# /omm%ni/aion /o!!7 <apid decline in communication costs and the e(ponential
growth in the si#e of the Internet is a driving force that affects the IT infrastructure. /s
communication costs fall toward a very small number and approach #ero, utili#ation of
communication and computing facilities e(plodes.
?. Te/'no(o#" !an&ar&!7 ;rowing agreement in the technology industry to use computing and
communication standards that define specifications that establish the compatibility of products
and the ability to communicate in a network. Technology standards unleash powerful economies
of scale and result in price declines as manufacturers focus on the products built to a singlestandard. Without economies of scale, computing of any sort would be far more
*. e(pensive than is currently the case.
2. -'a are 'e /%rren ren&! in !ofware )(aform!+
Define and describe open source software and Linu! and e!plain their business benefits.
5pen-source software provides all computer users with free access to the program code so they can
modify the code, fi( errors in it, or to make improvements. 5pen-source software is not owned by
any company or individual. / global network of programmers and users manage and modify the
software. y definition, open-source software is not restricted to any specific operating system or
hardware technology.
@inu( is the most well-known open-source software. It0s a ADI-like operating system that can be
downloaded from the Internet, free of charge, or purchased for a small fee from companies that
provide additional tools for the software. It is reliable, compactly designed, and capable of running
on many different hardware platforms, including servers, handheld computers, and consumer
electronics. @inu( has become popular during the past few years as a robust low-cost alternative to
ADI and the Windows operating system.
Thousands of open-source programs are available from hundreds of Web sites. usinesses can
choose from a range of open-source software including operating systems, office suites, Web
browsers, and games. 5pen-source software allows businesses to reduce the total cost of ownership.
It provides more robust software that0s often more secure than proprietary software.
Define 0ava and 1ja! and e!plain why they are important.
;a3a$ ava is a programming language that delivers only the software functionality needed for a
particular task. With ava, the programmer writes small programs called applets that can run on
another machine on a network. With ava, programmers write programs that can e(ecute on a variety
of operating systems and environments. >urther, any program could be a series of applets that are
distributed over networks as they are needed and as they are upgraded.
ava is important because of the dramatic growth of Web applications. ava is an operating system-
independent, processor-independent, obect-oriented programming language that can run on multiple
hardware platforms. It provides a standard format for data e(change on Web sites
A<a$ /a( is short for /synchronous ava"cript and !@. It allows a client and server to e(change
small pieces of data behind the scene so that an entire Web page does not have to be reloaded each
time the user re4uests a change. It0s another Web development techni4ue for creating interactive Web
applications that make it easier and more efficient for Web site users to complete forms and other
interactive features.
Define and describe "eb services and the role played by 2(L.
Web services offer a standardi#ed alternative for dealing with integration across various computer
platforms. Web services are loosely coupled software components based on !@ and open Web
standards that are not product specific and can work with any application software and operating system.
They can be used as components of Web-based applications linking the systems of two different
organi#ations or to link disparate systems of a single company. Web services are not tied to a particular
operating system or programming language. ifferent applications can use them to communicate with
each other in a standard way without time-consuming custom coding.
usinesses use Web services to tie their Web sites with e(ternal Web sites creating an apparently
seamless e(perience for users. The benefit derives from not having to re-create applications for each
business partner or specific functions within a single company.
!@ provides a standard format for data e(change, enabling Web services to pass data from one process
to another. It performs presentation, communication, and storage of data whereas 6T!@ simply
describes how data is presented on Web pages. !@ allows computers to manipulate and interpret data
automatically and perform operations on data without human intervention.
3ame and describe the three e!ternal sources for software.
Sofware )a/0a#e! an& ener)ri!e !ofware$ 7rewritten commercially available set of software
programs that eliminates the need for a firm to write its own software program for certain functions like
payroll processing or order handling. @arge-scale enterprise software systems provide a single,
integrated, worldwide software system for firms at a cost much less than they would pay if they
developed it themselves.
C(o%&4$a!e& !ofware !er3i/e! an& oo(!$ / business that delivers and manages applications and
computer services from remote computer centers to multiple users using the Internet or a private
network. Instead of buying and installing software programs, subscribing companies can rent the same
functions from these services. Asers pay for the use of this software either on a subscription or a per-
transaction basis. The business must carefully assess the costs and benefits of the service, weighing all
people, organi#ational, and technology issues. Ita must ensure it can integrate the software with its
e(isting systems and deliver a level of service and performance that is acceptable for the business
.
O%!o%r/in# /%!om a))(i/aion &e3e(o)men$ /n organi#ation contracts its custom software
development or maintenance of e(isting legacy programs to outside firms, fre4uently firms that operate
offshore in low-wage areas of the world. /n outsourcer often has the technical and management skills to
do the ob better, faster, and more efficiently. Even though it0s often cheaper to outsource the
maintenance of an IT infrastructure and the development of new systems to e(ternal vendors, a businessmust weight the pros and cons
Define and describe software mashups and apps.
Ma!'%)! are new software applications and services based on combining different online software
applications. Asers create new software applications and services by combining different online software
applications into a new application. The idea is to take different sources and produce a new work that is
9greater than: the sum of its parts. Web mashups combine the capabilities of two or more online
applications to create a kind of hybrid that provides more customer value than the original sources alone.
A))! are small pieces of software programs that are downloaded to computers or cell phones. /pps turnmobile handheld devices into general-purpose computing tools. They cost much less than full-fledged
• Project operation creates a subset consisting of columns in a table, permitting the user to
create new tables that contain only the information re4uired.
!plain 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 fle(ible 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.
They can process structured and unstructured data captured from Web sites, social media, graphics.
Traditional relational databases aren0t able to process data from most of those sources. Don-relational
databases can also accelerate simple 4ueries against large volumes of structured and unstructured data.
There0s no need to pre-define a formal database structure or change that definition if new data are added
later.
2. -'a are !ome im)oran &aa$a!e &e!i#n )rin/i)(e!+
Define and describe normalization and referential integrity and e!plain how they contribute to
a well-designed relational database.
Dormali#ation is the process of creating small stable data structures from comple( groups of data whendesigning a relational database. Dormali#ation streamlines relational database design by removing
redundant data such as repeating data groups. / well-designed relational database will be organi#ed
around the information needs of the business and will probably be in some normali#ed form. / database
that is not normali#ed will have problems with insertion, deletion, and modification.
<eferential integrity rules ensure that relationships between coupled tables remain consistent. When one
table has a foreign key that points to another table, you may not add a record to the table with the foreign
key unless there is a corresponding record in the linked table.
Define and describe an entity-relationship diagram and e!plain its role in database design.
<elational databases organi#e data into two-dimensional tables 2called relations3 with columns and rows.
Each table contains data on an entity and its attributes. /n entity-relationship diagram graphically depicts
the relationship between entities 2tables3 in a relational database. / well-designed relational database will
not have many-to-many relationships, and all attributes for a specific entity will only apply to that entity.
Entity-relationship diagrams help formulate a data model that will serve the business well. The diagrams
also help ensure data are accurate, complete, and easy to retrieve.
1. -'a are 'e )rin/i)a( /om)onen! of e(e/omm%ni/aion! newor0! an& 0e" newor0in#
e/'no(o#ie!+
Describe the features of a simple networ) and the networ) infrastructure for a large company.
/ simple network consists of two or more connected computers. asic network components include
computers, network interfaces, a connection medium, network operating system software, and either a
hub or a switch. The networking infrastructure for a large company relies on both public and private
infrastructures to support the movement of information across diverse technological platforms. It includes
the traditional telephone system, mobile cellular communication, wireless local-area networks,
videoconferencing systems, a corporate Web site, intranets, e(tranets, and an array of local and wide-area
networks, including the Internet. This collection of networks evolved from two fundamentally different
types of networks$ telephone networks and computer networks.
3ame and describe the principal technologies and trends that have shaped contemporary
telecommunications systems.
%lient+"erver computing, the use of packet switching, and the development of widely used
communications standards such as T%7+I7 are the three technologies that have shaped contemporary
telecommunications systems.
%lient+"erver computing has e(tended to networking departments, workgroups, factory floors, and other
parts of the business that could not be served by a centrali#ed architecture. The Internet is based on
client+server computing. 7acket "witching technology allows nearly full use of almost all available lines
and capacity. This was not possible with the traditional dedicated circuit-switching techni4ues that wereused in the past. T%7+I7 is a suite of protocols that has become the dominant standard of network
communications. 6aving a set of protocols for connecting diverse hardware and software components has
provided a universally agreed upon method for data transmission.
,. -'a are 'e main e(e/omm%ni/aion! ran!mi!!ion me&ia an& ")e! of newor0!+
3ame the different types of physical transmission media and compare them in terms of speed
and cost.
Typical speeds and costs for several of the transmission media are provided below.
Me&i%m S)ee& Co!
Twisted wire up to 1 !bps @ow
!icrowave up to GL !bps
"atellite up to GL !bps
%oa(ial cable up to 1 ;bps
>iber-optic cable up to GL Tbps 6igh
Define a L13, and describe its components and the functions of each component
/ @/D is a telecommunications network that is designed to connect personal computers and other digitaldevices within a half-mile or H-meter radius. @/Ds typically connect a few computers in a small office,
all the computers in one building, or all the computers in several buildings in close pro(imity. @/Ds
re4uire their own dedicated channels.
%omponents of a typical @/D consists of$ computers 2dedicated server and clients3, a network operating
system 2D5"3 residing on a dedicated server computer, cable 2wiring3 connecting the devices, network
interface cards 2DI%3, switches or a hub, and a router.
• 3I6 each computer on the network contains a network interface device.
• 6onnection medium Jfor linking network components8 can be a telephone wire, coa(ial
cable, or radio signal in the case of cell phone and wireless local-area networks 2wi-fi
networks3.
• 35& routes and manages communications on the network and coordinates network resources.
• Dedicated server provides users with access to shared computing resources in the network.
The server determines who gets access to data and in what se4uence.
• 6lient computers are connected to one another.
• &witches or hub act as a connection point between the computers. 6ubs are very simpledevices that connect network components and send data packets to other connected devices.
/ switch has more intelligence than a hub and can filter and forward data to a specified
destination.
• 7outer a special communications processor used to route data packets through different
networks, ensuring messages are sent to the correct address.
3ame and describe the principal networ) topologies.
The principal network topologies include$
• &tar topology: /ll devices on the network connect to a single hub and all network traffic
flows through the hub.
• 4us topology: 5ne station transmits signals, which travel in both directions along a single
transmission segment. /ll of the signals are broadcast in both directions to the entire network,
with special software to identify which components receive each message.
• 7ing topology: %onnects network components in a closed loop. !essages pass from
computer to computer in only one direction around the loop and only one station at a time
may tansmit.
2. How &o 'e Inerne an& Inerne e/'no(o#" wor0 an& 'ow &o 'e" !%))or /omm%ni/aion
an& e4$%!ine!!+
Define the Internet, describe how it wor)s and e!plain how it provides business value.
The Internet is a vast network of computers that connects millions of people all over the world. The
Internet uses the client+server model of computing and the T%7+I7 network reference model. Every
computer on the Internet is assigned a uni4ue numeric I7 address. Do one owns the Internet, and it has no
formal management organi#ation. 6owever, worldwide Internet policies are established by organi#ations
and government bodies, such as the Internet /rchitecture oard and the World Wide Web %onsortium.
The Internet must also conform to the laws of the sovereign nation-states in which it operates, as well as
the technical infrastructure that e(ist within the nation-state.
The Internet enables employees to gain remote access to the company0s internal systems through its Web
site. They are able to better service customers and suppliers, improve operational efficiency, increase
productivity, lower operational costs, have a broader market base, and reach more individual customers
on a global scale by establishing a Web presence. The cost of email and other Internet services tend to be
far lower than e4uivalent voice, postal, or over night delivery costs, making the Internet a very
ine(pensive communication medium. It is also a very fast method of communication, with messages
arriving anywhere in the world in a matter of seconds or minutes.
!plain how the Domain 3ame &ystem #D3&' and I% addressing system wor).
The Internet is based on the T%7+I7 networking protocol suite. Every computer on the Internet is assigned
a uni4ue Internet 7rotocol 2I73 address, which currently is a ?)-bit number represented by four strings of
numbers ranging from to )HH separated by periods.
/ domain name is the English-like name that corresponds to the uni4ue ?)-bit numeric I7 address for
each computer connected to the Internet. The omain Dame "ystem 2D"3 converts I7 addresses to
domain names so that users only need to specify a domain name to access a computer on the Internetinstead of typing the numeric I7 address. D" servers maintain a database containing I7 addresses
mapped to their corresponding domain names.
When a user sends a message to another user on the Internet, the message is first decomposed into
packets using the T%7 protocol. Each packet contains its destination address. The packets are then sent
from the client to the network server and from there on to as many other servers as necessary to arrive at a
specific computer with a known address. /t the destination address, the packets are reassembled into the
orginal message.
List and describe the principal Internet services.
Table -) lists and describes the maor Internet services$
• mail — person-to-person messaging8 document sharing.
• 3ewsgroups Jdiscussion groups on electronic bulletin boards.
• 6hatting and instant messaging Jinteractive conversations.
• $elnet — logging on to one computer system and doing work on another.
• 8ile $ransfer %rotocol #8$% ) Jtransferring files from computer to computer.
• "orld "ide "eb Jretrieving, formatting, and displaying information 2including te(t, audio,
graphics, and video3 using hyperte(t links.
Define and describe 9oI% and virtual private networ)s and e!plain how they provide value to
businesses.
9oice over Internet %rotocol #9oI% ) enables Internet technology to be used for telephone
voice transmission over the Internet or private networks. MoI7 offers the advantage of
avoiding tolls charged by local and long-distance telephone networks. MoI7 provides
businesses an opportunity to reduce costs because they no longer have to maintain separate
networks or provide support services and personnel for each different type of network. It
gives organi#ations fle(ibility because phones can be added or moved to different offices
• 9irtual private networ)s are secure, encrypted, private networks that have been configured
within a public network to take advantage of the economies of scale and management
facilities of large networks, such as the Internet. M7Ds are low-cost alternatives to private
W/Ds. M7Ds give businesses a more efficient network infrastructure for combining voice
and data networks.
List and describe alternative ways of locating information on the "eb.
• &earch engines are a facility on the Web that helps you find sites with the information and+or
services you want. E(amples$ ;oogle, NahooO, and !"D.
• Intelligent agent shopping bots use intelligent agent software for searching the Internet for
shopping information. E(amples$ !y"imon and >roogle.
• Blogs are informal yet structured Web sites where subscribing individuals can publish stories,
opinions, and links to other Web sites of interest.
• 7ich &ite &ummary or 7eally &imple &yndication #7&& ) is a simple way for people to have
content they want pulled from Web sites and fed automatically to their computers, where it
can be stored for later viewing. It0s commonly used with blogs.
• "i)is are collaborative Web sites where visitors can add, delete, or modify content on the
site, including the work of previous authors.
• "eb :.; provides second-generation interactive Internet-based services that enable people to
collaborate, share information, and create new services online. Web ). software applications
run on the Web itself instead of the desktop and bring the vision of Web-based computing
closer to reali#ation.
• "eb +.; #&emantic "eb' reduces the amount of human involvement in searching for and
processing Web information. It0s still in its infancy but promises to establish specific
meanings for data on the Web, categories for classifying the data, and relationships between
classification categories.
6ompare "eb :.; and "eb +.;.
Web ). refers to second-generation interactive Internet-based services that enable people to collaborate,
share information, and create new services online. Web ). is distinguished by technologies and services
like cloud computing, software mashups and widgets, blogs, <"", and wikis. These software applications
run on the Web itself instead of the desktop and bring the vision of Web-based computing closer to
reali#ation. Web ). tools and services have fueled the creation of social networks and other onlinecommunities where people can interact with one another in the manner of their choosing.
Web ?. focuses on developing techni4ues to make searching Web pages more productive and meaningful
for ordinary people. Web ?. is the promise of a future Web where all digital information and all contacts
can be woven together into a single meaningful e(perience. "ometimes referred to as the semantic Web,
Web ?. intends to add a layer of meaning atop the e(isting Web to reduce the amount of human
involvement in searching for and processing Web information. It also focuses on ways to make the Web
more 9intelligent,: with machine-facilitated understanding of information promoting a more intuitive and
effective user e(perience. Web ?. will use cloud computing, software-as-a-service, ubi4uitous
connectivity among mobile platforms and Internet access devices, and transformation of the Web into a
• %ommunications$ Tapping, sniffing, message alternation, theft and fraud, radiation
• %orporate servers$ 6acking, viruses and worms, theft and fraud, vandalism, denial of service
attacks
•
%orporate systems$ Theft of data, copying data, alteration of data, hardware failure, andsoftware failure. 7ower failures, floods, fires, or other natural disasters can also disrupt
computer systems.
• 7oor management decisions$ 7oorly designed safeguards that protect valuable data from
being lost, destroyed, or falling into the wrong hands.
Define malware and distinguish among a virus, a worm, and a $rojan horse.
!alware 2for malicious software3 is any program or file that is harmful to a computer user. Thus, malware
includes computer viruses, worms, Troan horses, and also spyware programs that gather information
about a computer user without permission.• Mirus$ / program or programming code that replicates itself by being copied or initiating its
copying to another program, computer boot sector or document.
• Worm$ / self-replicating virus that does not alter files but resides in active memory and
duplicates itself without human intervention.
• Troan horse$ / program in which malicious or harmful code is contained inside apparently
harmless programming or data. / Troan horse is not itself a virus because it does not
replicate but is often a way for viruses or other malicious code to be introduced into a
computer system.
Define a hac)er and e!plain how hac)ers create security problems and damage systems.
/ hacker is an individual who gains unauthori#ed access to a computer system by finding weaknesses in
security protections used by Web sites and computer systems. 6ackers not only threaten the security of
computer systems, but they also steal goods and information, as well as damage systems and commit
cybervandalism. They may intentionally disrupt, deface, or even destroy a Web site or corporate
information system.
Define computer crime. %rovide two e!amples of crime in which computers are targets and two
e!amples in which computers are used as instruments of crime.
The epartment of ustice defines computer crime as 9any violations of criminal law that involve a
knowledge of computer technology for their perpetration, investigation, or prosecution.: %omputer crime
is defined as the commission of illegal acts through the use of a computer or against a computer system.
Table C-) provides e(amples of computer crimes.
%omputers as targets of crime$
• reaching the confidentiality of protected computeri#ed data
• /ccessing a computer system without authority
• &nowingly accessing a protected computer to commit fraud
• Intentionally accessing a protected computer and causing damage, negligently or deliberately
• &nowingly transmitting a program, program code, or command that intentionally causes
transactions by authenticating a user0s identify. igital certificates are data fields used to establish the
identity of the sender and to provide the receiver with the means to encode a reply. They use a trusted
third party known as a certificate authority to validate a user0s identity. oth digital signatures and digital
certificates play a role in authentication. /uthentication refers to the ability of each party to know that the
other parties are who they claim to be.
Distinguish between fault-tolerant and high-availability computing, and between disaster
recovery planning and business continuity planning.
>ault-tolerant computer systems contain redundant hardware, software, and power supply components
that can back the system up and keep it running to prevent system failure. "ome systems simply cannot be
allowed to stop, such as stock market systems or some systems in hospitals. >ault-tolerant computers
contain e(tra memory chips, processors, and disk storage devices to backup a system and keep it running.
They also can use special software routings or self-checking logic built into their circuitry to detect
hardware failures and automatically switch to a backup device.
6igh-availability computing, though also designed to ma(imi#e application and system availability, helps
firms recover 4uickly from a crash. >ault tolerance promises continuous availability and the elimination
of recovery time altogether. 6igh-availability computing environments are a minimum re4uirement for
firms with heavy electronic commerce processing re4uirements or for firms that depend on digital
networks for their internal operations.
isaster recovery planning devises plans for the restoration of computing and communications services
after they have been disrupted by an event such as an earth4uake, flood, or terrorist attack. isaster
recovery plans focus primarily on the technical issues involved in keeping systems up and running, such
as which files to back up and the maintenance of backup computer systems or disaster recovery services.
usiness continuity planning focuses on how the company can restore business operations after a disaster
strikes. The business continuity plan identifies critical business processes and determines action plans for
handling mission-critical functions if systems go down.
Identify and describe the security problems posed by cloud computing.
/ccountability and responsibility for protection of sensitive data reside with the company owning that
data even though it0s stored offsite. The company needs to make sure its data are protected at a level that
meets corporate re4uirements. The company should stipulate to the cloud provider how its data are stored
and processed in specific urisdictions according to the privacy rules of those urisdictions. The companyneeds to verify with the cloud provider how its corporate data are segregated from data belonging to other
companies and ask for proof that encryption mechanisms are sound. The company needs to verify how
the cloud provider will respond if a disaster strikes. Will the cloud provider be able to completely restore
the company0s data and how long will that take= Will the cloud provider submit to e(ternal audits and
security certifications=
Describe measures for improving software =uality and reliability.
Asing software metrics and rigorous software testing are two measure for improving software 4uality and
reliability.
"oftware metrics are obective assessments of the system in the form of 4uantified measurements. !etrics
"tudents can answer this 4uestion by including information outlined in Table 1-1, which lists several business and technology trends shaping e-commerce today.
Li! an& &e!/ri$e 'e ei#' %ni%e fea%re! of e4/ommer/e.
Table 1-) outlines eight uni4ue features of e-commerce which include$
• E-commerce technology is %$i%io%! meaning that it is available ust about everywhere a
computer can connect to the Internet.
• It has #(o$a( rea/' permitting commercial transactions to cross cultural and national
boundaries far more conveniently and cost effectively than is true in traditional commerce.
• It operates according to %ni3er!a( !an&ar&! shared by all nations around the world, whereas
most traditional commerce technologies differ from one nation to the ne(t.• It provides information ri/'ne!! enabling an online merchant to deliver to an audience of
millions comple( and rich marketing messages with te(t, video, and audio in a way not
possible with traditional commerce technologies, such as radio, television, or maga#ines.
• It is inera/i3e meaning it allows for two-way communication between merchant and
consumer and enables the merchant to engage a consumer in ways similar to a face-to-face
e(perience but on a much more massive, global scale.
• It increases informaion &en!i" 2the total amount and 4uality of information available to all
market participants3.
• It permits )er!ona(i*aion an& /%!omi*aion Jmerchants can target their marketing
messages to specific individuals by adusting the message to a person0s name, interests, and
past purchases.
• So/ia( e/'no(o#" enables user content creation and distribution and supports social
igital markets are said to be more 9transparent: than traditional markets. Table 1-? describes
distinguishing features of digital markets. The Internet has created a digital marketplace where
millions of people are able to e(change massive amounts of information directly, instantly, and for free. Information asymmetry is reduced. igital markets are very fle(ible and efficient, with reduced
search and transaction costs, lower menu prices, and the ability to change prices dynamically based
on market conditions. igital markets provide many opportunities to sell directly to the consumer,
bypassing intermediaries, such as distributors or retail outlets. 5ther features include delayed
gratification, price discrimination, market segmentation, switching costs, and network effects.
igital goods are goods that can be delivered over a digital network and include music, video,
software, newspapers, maga#ines, and books. 5nce a digital product has been produced, the cost of
delivering that product digitally is e(tremely low. Dew business models based on delivering digital
goods are challenging bookstores, publishers, music labels, and film studios that depend on delivery
of traditional goods.
,. -'a are 'e )rin/i)a( e4/ommer/e $%!ine!! an& re3en%e mo&e(!+
Name an& &e!/ri$e 'e )rin/i)a( e4/ommer/e $%!ine!! mo&e(!.
Table 1-H identifies seven Internet business models.
• E4ai(er7 "ells physical products directly to consumers or individual businesses.
• Tran!a/ion $ro0er7 "aves users money and time by processing online sale transactions and
generates a fee each time.
• Mar0e /reaor7 7rovides a digital environment where buyers and sellers meet, search for
and display products, and establishes prices for those products8 it can provide online auctionsand reverse auctions.
• Conen )ro3i&er7 %reates revenue by providing digital content, such as digital news, music,
photos, or video over the Web.
• Comm%ni" )ro3i&er7 7rovides an online meeting place where people with similar interests
can communicate and find useful information.
• Pora(7 7rovides an initial point of entry to the Web along with speciali#ed content and other
services.
• Ser3i/e )ro3i&er7 7rovides Web ). applications such as photo sharing, video sharing, and
user-generated content as services. 7rovides other services such as online data storage and
backup.
Name an& &e!/ri$e 'e e4/ommer/e re3en%e mo&e(!.
There are si( e-commerce revenue models$
• A&3eri!in# revenue$ ;enerates revenue by attracting a large audience of visitors who can
then be e(posed to advertisements. It0s the most widely used revenue model in e-commerce.
• Sa(e! revenue$ %ompanies derive revenue by selling goods, information, or services to
customers.
• S%$!/ri)ion revenue$ / Web site offering content or services charges a subscription fee for
access to some or all of its offerings on an ongoing basis.
• Freefreemi%m revenue$ asic services or content are free while advanced or special features
cost e(tra.
• Tran!a/ion fee revenue$ / company receives a fee for enabling or e(ecuting a transaction.
• Affi(iae revenue$ "ites that steer customers to an affiliate business receive a referral fee or
percentage of the revenue from any resulting sales.
2. How 'a! e4/ommer/e ran!forme& mar0ein#+
E)(ain 'ow !o/ia( newor0in# an& 'e wi!&om of /row&! 'e() /om)anie! im)ro3e 'eir
mar0ein#.
Detworking sites sell banner, video, and te(t ads8 sell user preference information to marketers8 and
sell products such as music, videos, and e-books. %orporations set up their own social networking
profiles to interact with potential customers and 9listen: to what social networkers are saying about
their products, and obtain valuable feedback from consumers. /t user-generated content sites, high-
4uality video content is used to display advertising. 5nline communities are ideal venues to employ
viral marketing techni4ues.
%reating sites where thousands, even millions, of people can interact offers business firms new ways
to market and advertise products and services, and to discover who likes or dislikes their products. Ina phenomenon called 9the wisdom of crowds: some argue that large numbers of people can make
better decisions about a wide range of topics or products than a single person or even a small
committee of e(perts. In marketing, the wisdom of crowds concept suggests that firms should consult
with thousands of their customers first as a way of establishing a relationship with them, and second,
to better understand how their products and services are used and appreciated. /ctively soliciting
customer comments builds trust and sends the message to customers that the company cares what
they are thinking and that customer advice is valuable.
Define $e'a3iora( ar#ein# an& e)(ain 'ow i wor0! a in&i3i&%a( -e$ !ie! an& on a&3eri!in#
newor0!.
ehavioral targeting refers to tracking the click-streams of individuals for the purpose of understanding their interests and intentions, and e(posing them to advertisements which are uni4uely
suited to their behavior. Altimately, this more precise understanding of the customer leads to more
efficient marketing and larger sales and revenues. ehavioral targeting of millions of Web users also
leads to the invasion of personal privacy without user consent.
ehavioral targeting takes place at two levels$ at individual Web sites and on various advertising
networks that track users across thousands of Web sites. !ost e-commerce Web sites collect data on
visitor browser activity and store it in a database. They have tools to record the site that users visited
prior to coming to the Web site, where these users go when they leave that site, the type of operating
system they use, browser information, and even some location data. They also record the specific pages visited on the particular site, the time spent on each page of the site, the types of pages visited,
and what the visitors purchased. >irms analy#e this information about customer interests and behavior
to develop precise profiles of e(isting and potential customers.
CHAPTER 11
1. -'a i! 'e ro(e of 0now(e&#e mana#emen an& 0now(e&#e mana#emen )ro#ram! in $%!ine!!+
Define 0now(e&#e mana#emen an& e)(ain i! 3a(%e o $%!ine!!e!.
&nowledge management is the set of processes developed in an organi#ation to create, gather, store,
maintain, transfer, apply, and disseminate the firms knowledge. &nowledge management promotes
organi#ational learning and incorporates knowledge into its business processes and decision making./s the te(tbook points out, knowledge management enables the organi#ation to learn from its
environment and incorporate this new knowledge into its business processes. &nowledge
management helps firms do things more effectively and efficiently, and cannot be easily duplicated by
other organi#ations. This 9in-house: knowledge is a very valuable asset and is a maor source of
profit and competitive advantage
De!/ri$e 'e im)oran &imen!ion! of 0now(e&#e.
Table 11-1 describes the important dimensions of knowledge$
• 5now(e&#e i! a firm a!!e7 an intangible asset8 re4uires organi#ational resources8
e(periences network effects as its value increases as more people share it.
• 5now(e&#e 'a! &ifferen form!7 can be either tacit or e(plicit8 involves know-how, craft,
and skill8 involves knowing how to follow procedures8 involves knowing why, not simply
when, things happen.
• 5now(e&#e 'a! a (o/aion7 it0s a cognitive event involving mental models and maps of
individuals8 has both a social and an individual basis of knowledge8 is 9sticky, situated, and
conte(tual.
• 5now(e&#e i! !i%aiona(7 it0s conditional8 it0s related to conte(t.
wor0! an& 'e 0in&! of )ro$(em! for w'i/' ea/' i! !%ie&.
>u##y logic is a rule-based /I technology that tolerates imprecision by creating rules that use
appro(imate or subective values and incomplete or ambiguous data. >u##y logic represents more
closely the way people actually think than traditional I>-T6ED rules. >or e(ample, if we all agree
that 1) degrees is hot and -* degrees is cold, then is H degrees hot, warm, comfortable, or cool=The answer is fu##y at best and cannot be programmed in an I>-T6ED manner. apan0s "endai
subway system uses a fu##y logic system to control acceleration so it will operate more smoothly.
;enetic algorithms 2adaptive computation3 are a variety of problem-solving methods that are
conceptually based on the method that living organisms use to adapt to their environment 2process of
evolution.3 ;enetic algorithms control the generation, variation, adaptation, and selection of possible
problem solutions using genetically-based processes. /s solutions alter and combine, the worst ones
are discarded and the better ones survive to go on and produce even better solutions. ;enetic
algorithms are particularly suited to the areas of optimi#ation, product design, and the monitoring of
industrial systems. 5rgani#ations can use genetic algorithms to minimi#e costs and ma(imi#e profitsand schedule and use resources efficiently. ;enetic algorithms are ideal when problems are dynamic