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Value & Importance of Information

Value & Importance of Information. Value of Information. Information is a resource fundamental to the success of any business As such it has monetary value (i.e. its “worth” can be measured in money terms) and it can be bought and sold Good quality information can be used to:

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Value & Importance of Information

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  1. Value & Importance of Information

  2. Value of Information • Information is a resource fundamental to the success of any business • As such it has monetary value (i.e. its “worth” can be measured in money terms) and it can be bought and sold • Good quality information can be used to: • Maximise sales • Cut costs • Develop new products • Help make good management decisions

  3. Factors Affecting Value • The value of information depends on a number of factors. The value of information depends on it being: • Up-to-date* • Complete • Fit for intended use (relevant)* • Accurate* • From a reliable source • Comprehensible Potential use of the information is an important factor in its value. The more potential uses information has the more valuable it will be. * Use these if asked for THREE factors on an exam question

  4. Up-to date? • Dated information may be worse than useless to a business • Brokers who buy and sell shares need to have VERY up-to-date information because share prices change so rapidly. • A holiday company using results from a 2 year old survey to pre-book hotel places for next season may over or underbook places due to changing customer tastes. • A credit card company unaware that a customer now earns twice as much as when the card was issued may fail to increase his/her credit limit.

  5. Complete? • Incomplete information can be as damaging as inaccurate information as it may give an organisation a misleading picture on which they base management decisions. • Sales data taken from only two quarters of the year may give a distorted picture of average business performance • Analysis of national sales may give inaccurate results if only England and Scotland are included in the analysis

  6. Intended Use (Relevance)? • Information needs to be relevant to its intended use • A business buys market research results from a survey carried out in the south of England. Although the information gathered may be accurate and up-to-date it may not be relevant to the north, where the company does most of its business, because trends and spending habits are different. • A study of female buying habits will be largely irrelevant when targeting male customers

  7. Accuracy? • Data doesn’t have to be 100% accurate but must be accurate enough for its purpose • Incorrectly recorded stock levels may lead to empty shelves or over-ordering of new stock (both are BAD for the organisation) • Economic forecasts for variables such as interest rates, exchange rates and the cost of raw materials need to be accurate if businesses are to plan effectively for the future

  8. Source (Reliability)? • If the information source is reliable the organisation doesn’t need to spend as long/ as much money checking the validity of information • The news agency Reuters has a good reputation as a reliable news source and can charge more for information

  9. Comprehensible? • Information should be in a format that the reader can understand or take on board quickly • Managers may need to make rapid decisions • “A picture is worth a thousand words” i.e. summarised information can be valuable • The sales map on the right immediately highlights areas of high/low sales.

  10. Sources of Information • Organisations can obtain information from a number of internal/external sources some of which are “free” • By-product of processing – can you give examples? • The electoral roll • Internet • Government reports/surveys • Even when information is “free” there are costs involved in entering data and converting it into a usable format. These costs are called overheads.

  11. Overheads 1 • There are a number of factors involved in how costly information is to acquire and keep up-to-date: • How it’s collected • If collected directly people may have to be paid to give their opinions. It will cost money to produce and send out questionnaires. If collected indirectly the organisation may have to pay a third party to acquire the information. • How it’s input • If entered via a keyboard data entry operators will need to be paid. Even if automated methods such as OMR are used someone will have to be paid to operate the equipment

  12. Overheads 2 • Processing the information • The validity of information may need to be checked to ensure reliability. Once checked processing the data into a useable/useful format will require the purchase of hardware and software • Data Maintenance • How often does the data needed to be collected or updated. Some information “ages” very quickly and will need to be continually updated to remain relevant to the organisation

  13. Revision Tasks • Use your textbook and Internet sources to make notes on “Value and Importance of Information”. Your notes should cover: • Why information has value • Factors that determine the value of information • Overheads (costs) involved in ensuring that information is accurate and up-to-date • Answer the questions on this worksheet http://www.fatmax.org/as1/102/valueofinfo.doc

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