Unit 5.1: Introduction to Databases

Introduction

In the modern business landscape, data is often called “the new oil”—a valuable resource that, when refined, can power strategic decisions and create a significant competitive advantage. But just like oil, raw data is useless until it is collected, stored, processed, and analyzed. This is where databases come in. A database is a structured and organized collection of data, and a Database Management System (DBMS) is the software that allows us to manage it.

For a business student, understanding databases is not about becoming a programmer; it’s about understanding the foundation upon which almost every business process is built. From tracking a single sale to managing a global supply chain, databases are the silent, powerful engines driving efficiency, intelligence, and growth in every business function.

Detailed Content

From Data to Business Intelligence

To understand databases, we must first understand the value chain of data itself.

  • Data: These are raw, unorganized facts and figures. By themselves, they lack context.
    • Example: 101, "Laptop", 45, "NPR 85000"
  • Information: This is data that has been processed, organized, and structured to give it meaning and context.
    • Example: “Order #101 includes 45 units of the product ‘Laptop’ at a price of NPR 85,000 each.”
  • Business Intelligence (Knowledge): This is information that has been analyzed to identify patterns and insights, leading to actionable decisions.
    • Example: “Sales of laptops have increased by 30% this quarter, driven by our new marketing campaign. We should increase our stock levels and consider a follow-up campaign.”

The primary goal of a database is to efficiently manage the transition from raw data to actionable business intelligence.

Types of Data in a Business Context

Businesses handle various types of data, which can be broadly categorized:

  • Structured Data: This data is highly organized and fits neatly into a predefined model, typically tables with rows and columns (like an Excel spreadsheet). It’s easy to store, query, and analyze.
    • Examples: Customer names, phone numbers, transaction IDs, dates, stock quantities, employee salaries.
  • Unstructured Data: This data has no predefined format or organization, making it more difficult to process and analyze. However, it often contains rich contextual insights.
    • Examples: Emails, customer support call transcripts, social media comments, product review videos, legal documents (PDFs).
  • Semi-structured Data: This is a mix of the two. It doesn’t reside in a relational database but has some organizational properties and tags to make it easier to process.
    • Examples: JSON or XML files, which are commonly used by web applications to transmit data.

While traditional databases excel at managing structured data, modern systems are increasingly designed to handle all three types.

flowchart TB
    subgraph HIERARCHY["📊 Data to Intelligence Hierarchy"]
        direction TB
        DATA["📝 DATA\n(Raw facts: 101, Laptop, 45)"]
        INFO["📋 INFORMATION\n(Processed: Order #101 = 45 Laptops)"]
        BI["💡 BUSINESS INTELLIGENCE\n(Insight: Laptop sales up 30%!)"]

        DATA -->|"Processing"| INFO
        INFO -->|"Analysis"| BI
    end

    subgraph DBCOMPONENTS["🗄️ Relational Database Components"]
        direction TB

        subgraph CUSTOMERS["Customers Table"]
            direction LR
            PK1["🔑 CustomerID\n(Primary Key)"]
            F1["FirstName"]
            F2["LastName"]
            F3["Phone"]
        end

        subgraph ORDERS["Orders Table"]
            direction LR
            PK2["🔑 OrderID\n(Primary Key)"]
            FK["🔗 CustomerID\n(Foreign Key)"]
            F4["OrderDate"]
            F5["Total"]
        end
    end

    subgraph DBMS["⚙️ Database Management System"]
        direction LR
        DEF["📐 Define"]
        MAN["✏️ Manipulate"]
        SEC["🔒 Secure"]
        BAK["💾 Backup"]
    end

    PK1 -.->|"Links to"| FK
    DBMS -->|"Manages"| DBCOMPONENTS

    style DATA fill:#ffebee,stroke:#c62828
    style INFO fill:#fff3e0,stroke:#ff9800
    style BI fill:#e8f5e9,stroke:#388e3c
    style CUSTOMERS fill:#e3f2fd,stroke:#1976d2
    style ORDERS fill:#e3f2fd,stroke:#1976d2
    style DBMS fill:#f3e5f5,stroke:#7b1fa2

Why Not Just Use Spreadsheets?

For a very small business, a spreadsheet (like Microsoft Excel) can work for tracking data. However, as a business grows, spreadsheets present significant limitations that databases are designed to solve:

Limitation Spreadsheet Problem Database Solution
Data Redundancy The same customer’s address might be typed out in the sales sheet, the shipping sheet, and the marketing sheet. The customer’s address is stored once in a Customers table and linked to sales, shipping, etc., via a unique ID.
Data Inconsistency If the customer moves, you might update the address in the sales sheet but forget the shipping sheet, leading to errors. Updating the single record in the Customers table automatically reflects the change everywhere it’s linked.
Data Security It’s difficult to control who can see or edit specific information. An employee might accidentally delete a whole column. A DBMS allows for granular user permissions. A sales intern can be given rights to view product prices but not to change them or see employee salaries.
Scalability Spreadsheets become extremely slow and unstable when they contain hundreds of thousands of records. Databases are designed to handle billions of records efficiently.
Concurrent Access It is very difficult for multiple users to reliably edit the same spreadsheet at the same time. A DBMS is built for concurrency, allowing many users (and applications) to read and write data simultaneously without corrupting it.

Core Components of a Relational Database

The most common type of database used in business is the relational database. It organizes data into tables that can be linked—or “related”—to each other.

  • Tables (or Relations): The fundamental container for data, organized into columns and rows. A database might have a Customers table, a Products table, and an Orders table.
  • Fields (or Columns): A single piece of information about the items in the table. In a Customers table, fields would include CustomerID, FirstName, LastName, and PhoneNumber.
  • Records (or Rows): A single, complete entry in a table. One row in the Customers table represents all the information for one specific customer.
  • Primary Key: A field that uniquely identifies each record in a table. No two records can have the same primary key. For example, CustomerID or CitizenshipNumber would be excellent primary keys. This prevents duplicate entries.
  • Foreign Key: A field in one table that is the primary key in another table. This is the crucial component that creates the link between tables. For example, the Orders table would contain a CustomerID field (a foreign key) to link each order to the specific customer who placed it in the Customers table.

The Database Management System (DBMS)

A Database Management System (DBMS) is the software that acts as an intermediary between the user and the database. You don’t interact with the database files directly; you use the DBMS to manage them.

Think of the database as a massive, highly organized library. The DBMS is the team of expert librarians who manage the collection, help you find what you need, ensure no books are misplaced, and control who has access to restricted sections.

Key Functions of a DBMS:

  • Data Definition: Creating and defining the structure of the database (tables, fields, relationships).
  • Data Manipulation: Retrieving, inserting, updating, and deleting data. This is typically done using a programming language called SQL (Structured Query Language).
  • Access Control: Managing security and user permissions.
  • Concurrency Control: Allowing multiple users to access the data at the same time without conflict.
  • Backup and Recovery: Creating backups and restoring data in case of system failure.

Business Applications

Databases are not just an IT concern; they are the operational backbone of every major business function.

  • Finance & Accounting:
    • Application: General ledger systems, accounts payable/receivable, and payroll systems are all built on databases.
    • Example: When an accountant generates a quarterly profit and loss statement, the system queries a database to pull all revenue and expense transactions recorded during that period. This ensures accuracy and provides an auditable trail.
  • Human Resources (HR):
    • Application: Employee information systems store everything from personal details and contact information to salary history, performance reviews, and leave records.
    • Example: An HR manager can quickly query the database to find all employees who are due for a performance review this month or to generate a report on employee turnover rates by department.
  • Operations & Supply Chain Management:
    • Application: Inventory management, supplier management, and logistics tracking systems rely heavily on databases.
    • Example: A system like Daraz’s warehouse management uses a database to track the exact location and quantity of every item. When a customer places an order, the database is updated in real-time to reflect the new stock level, automatically triggering a re-order from the supplier if it falls below a certain threshold.
  • Marketing & Sales:
    • Application: Customer Relationship Management (CRM) systems are essentially complex databases designed to store every interaction a customer has with the company.
    • Example: A marketing team can query the CRM database to create a targeted email campaign for all customers in Kathmandu who have purchased a specific product in the last six months, personalizing the offer based on their purchase history.

Real-World Examples from Nepal

1. The Banking Sector: Nabil Bank or NIC Asia Bank

Core banking systems are one of the most classic and critical applications of databases.

  • How they use databases: A central, highly secure database stores all customer information (names, addresses, citizenship details), account details (account numbers, balances, types), and a complete history of every transaction (deposits, withdrawals, transfers, loan payments).
  • Business Impact: This single source of truth allows for seamless operations. When you withdraw money from an ATM in Pokhara, the system instantly queries the central database to check your balance, records the transaction, and updates your new balance. This same updated information is immediately visible to a bank teller in Biratnagar or to you on your mobile banking app. The database ensures data integrity—a core principle meaning data is reliable and accurate.

2. E-commerce: Daraz Nepal

Daraz’s entire platform is powered by a complex network of databases.

  • How they use databases: They manage multiple, interconnected databases for:
    • Products: Details on millions of items from thousands of different sellers, including stock levels.
    • Customers: User profiles, login credentials, shipping addresses, and order history.
    • Orders: Tracking the status of every order from payment confirmation to shipping and delivery.
  • Business Impact: When you browse Daraz, the website is constantly querying the product database to show you available items. When you place an order, a new record is created in the orders database, your information is pulled from the customer database, and the stock level is updated in the product database. This high level of integration, enabled by a DBMS, is what makes a complex marketplace possible.

3. Digital Wallets: eSewa / Khalti

The business model of a digital wallet is entirely dependent on the speed, security, and reliability of its database.

  • How they use databases: Every user has an account record with a current balance. Every single transaction—be it a mobile top-up, utility bill payment, or a fund transfer—is recorded as a new entry in a massive transaction table, linked to the user’s account.
  • Business Impact: The DBMS must ensure transactional integrity. When you pay your internet bill via eSewa, the system performs a transaction that must be atomic—it either completes fully (money is deducted from your wallet AND credited to the ISP) or it fails completely (no change occurs). The database prevents a state where money is deducted but the payment isn’t made, which is critical for maintaining user trust.

Key Takeaways

  • A database is an organized collection of data, essential for turning raw facts into business intelligence.
  • Databases solve critical limitations of spreadsheets, such as data redundancy, inconsistency, and lack of security and scalability.
  • The DBMS is the software used to create, manage, and query a database.
  • Relational databases use tables, records, fields, and keys (primary/foreign) to structure data and create relationships.
  • Databases are fundamental to all modern business functions, including Finance, HR, Operations, and Marketing.

Review Questions

  1. In your own words, explain the difference between data and information. Provide a specific example from a business context (e.g., a retail store).
  2. A growing restaurant in Thamel uses an Excel sheet to manage its inventory of ingredients. What are three specific problems they will likely face, and how would a database solve each one?
  3. Describe the roles of a Primary Key and a Foreign Key in linking an Orders table with a Customers table.
  4. How does a company like Nepal Telecom (NTC) use a database to manage its pre-paid mobile customers? List at least three key pieces of data (fields) that would be stored for each customer.