Security risks

• Hackers and eavesdroppers. They try to gain unauthorized access to computer systems. They may attempt to damage a system or steal information. Data that is transmitted across telecommunications links is exposed to the risk of being intercepted or examined during transmission (eavesdropping).
• Viruses may destroy information or data.
• Hoaxes: These are virus that may be encountered by recipients and which can waste precious time by resending information to others.
• Denial of service attack: This involves an organized attack or the sending of excessive volumes of information deliberately to a server to slow it down or hinder its functions.
• Natural disasters such as fires and floods may damage the place where the system is stored.
• Hardware and software failure systems may malfunction for a number of reasons.
• Human error: Operators may accidentally damage or delete information held on a system.
• Operational injury such as repetitive strain injury (RSI) is a risk faced by computer operators.                                      (Any 3)

Risks can be minimized by the following:

• Antivirus may be used to prevent, remove and detect viruses.
• Firewall can be used to check the in-flow of certain files that may harm a system.
• Encryption: To conceal information from unauthorized users.
• Electronic signatures: This involves the use of keys to unscramble data that has been protected to reach rightful recipient who will have the unscrambling key.
• Authentication: This is a procedure that makes sure a message has come from an authorized sender.
• Dial-back security: This operates by requiring persons wanting access to dial into a network and identify themselves first.
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• Social groupings may act collectively against organisational interests, strengthened by collective power and information networks. Even if they are aligned with organisational goals, group/network maintenance may take a lot of time and energy away from tasks.
• The grapevine is notoriously inaccurate and can carry morale-damaging rumors.
• The informal organisation can become too important in fulfilling employees’ needs: individuals can suffer acutely when excluded from cliques and networks.
• Informal work practices may ‘cut corners’, violating safety or quality assurance measures.                                            (Any 3)

• Meeting employees’ needs as far as possible via the formal organisation: providing information, encouragement and social interaction.
• Harnessing the dynamics of the informal organization – for example by using informal leaders to secure employee commitments to goals or changes.
• Involving managers themselves in the informal structure so that they support information sharing, thereby eliminating undesired behaviors and attitudes.                                                                                                                                     (Any 2)

• Unity
  A shared organizational culture helps to unite employees of different demographics. Many employees within an organization come from different backgrounds, families and traditions and have their own cultures. Having a shared culture at the workplace gives them a sense of unity and understanding towards one another, promoting better communication and less conflict. In addition, a shared organizational culture promotes equality by ensuring no employee is neglected at the workplace and that each is treated equally.
• Loyalty
  Organizational culture helps to keep employees motivated and loyal to the management of the organization. If employees view themselves as part of their organization’s culture, they are more eager to want to contribute to the entity’s success. They feel a higher sense of accomplishment for being a part of an organization they care about and work harder without having to be coerced.
• Competition
  Healthy competition among employees is one of the results of a shared organizational culture. Employees will strive to perform at their best to earn recognition and appreciation from their superiors. This in turn increases the quality of their work, which helps the organization prosper and flourish.
• Direction
  Guidelines contribute to organizational culture. They provide employees with a sense of direction and expectations that keep employees on track. Each employee understands what his roles and responsibilities are and how to accomplish tasks prior to established deadlines.
• Identity
  An organization’s culture defines its identity. An entity’s way of doing business is perceived by both the individuals who comprise the organization as well as its clients and customers, and it is determined by its culture. The values and beliefs of an organization contribute to the brand image by which it becomes known and respected.

• Unavoidable
  Every small business has a corporate culture, whether an owner is aware of it or not. While the owner is busy getting a business off the ground, the culture is growing at the same time, becoming an uneasy consensus of “how things are done.” Unfortunately, once this consensus becomes entrenched, it can be difficult to lead employees. The default culture becomes a drag on the owner’s efforts to move the company forward.
• Behaviour Driver
  Any culture, including corporate culture, institutionalizes behavioral norms. This “herd mentality” can discourage innovative thinking and individual initiative, especially if the company doesn’t value adaptability. Additionally, the leadership of a small business models behavior. A company’s management forms a “dominant coalition” that has a profound impact on corporate culture. If managers are at odds or negative, the institutional culture reflects that and encourages negativity in employees.
• Employees May not Accept it
  Employees can be leaders, too, even without legitimate power. Employee relationships form a social system and an informal organization that underlies the formal structure of a small business. This social system is “one of the most important factors of organizational culture,” the book says. An owner should be aware that no matter how much certain values such as hard work or responsibility are touted, if employees model contrary behavior, the corporate culture hurts the company.
• Difficult to Change
  The corporate culture gives employees a sense of identity and belonging that encourages participation in the company. A business doesn’t stand still, however. When an owner decides to make changes, it threatens employees’ identity. Some may see an opportunity, but it is natural for others to wonder what role they will have in the new situation. Others will fear a loss of status. Facing these uncertainties, employees may resent and resist change. Some may even become hostile.
• Misalignment
  No matter how glorious the words of a mission or vision statement, they cannot inspire employee action if the corporate culture will not support it. The culture provides the means of translating mission into action. Communication, relationships, interrelationships, empowerment, the sense that the true values of the organization are aligned with mission — all these determine whether employees can fulfill an owner’s vision for the small business.

Advantages of centralization.

• Decisions can be coordinated more easily, and management has better control over decisions.
• Goal congruence. Decisions taken centrally should are based on overall objectives, whereas decentralized decisions may be influenced by short-term or local objectives of the people making the decisions.
• Standardization. For example, in any country McDonald’s customers expect to find standard menus and pricing. If managers were allowed to take decisions about changing menus or prices, this could undermine the business model.
• Resource allocation. Centralized decision making allows resource usage to be coordinated effectively between different functions and divisions, based on overall corporate objectives.
• Economies of scale. Companies might be able to get bulk discounts if they coordinate all their purchasing requirements and make a single order.
• Quick decision making. When a quick decision is required in response to a crisis, it may not be practical to involve local managers.                                                                                                                                                                           (Any 3)

Disadvantages of centralization.

• Reduced morale and job satisfaction. Local managers and divisional staff may be frustrated at their inability to take decisions, and this could reduce their job satisfaction and motivation.
• The fact that senior managers take all the decisions and do not delegate any could also increase the pressure and stress on senior managers.
• Limited opportunities. If junior managers are not given any opportunities for decision making this could hinder their career development, by preventing them from gaining experience which could be useful in more senior management positions.
• Imperfect information. Local managers may have greater knowledge about operational activities or local market conditions than senior management or head office staff. Therefore, senior management may have to delegate some decisions, or else risk damaging the quality of decisions taken due to their imperfect information.
• Communication time. Although centralisation can be useful for making rapid decisions( eg in a crisis,) it may take longer for decisions taken centrally to be communicated to different divisions and functions than if the decisions had been taken locally.                                                                                                                                                                                (Any 2)

Stage 1: Customer needs
The product is designed to fulfil particular customer needs (such as quality, price or design)
Stage 2: Screening
The concept should be considered carefully to ensure it meets certain criteria such as profitability or taking market share.
Stage 3: Design
The design process can be in different forms such as building an electronic or physical prototype. Value engineering procedures may be followed to ensure all components add value.
Stage 4: Time-to-Market
This is the time a product or service takes to get to the market place. A short time span is desirable to reduce cost and to get ahead of the competition.
Stage 5: Testing

The product or service should be tested to check that it works, that it meets the needs of the customer and that the customer likes it.
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Michael Porter’s five forces

• Threat of new entrants to the industry
• The threat of substitute products and services
• Bargaining power of customers
• Bargaining power of suppliers
• The rivalry amongst current competitors in the industry
  Porter’s Five Forces is a model of analysis that helps to explain why different industries are able to sustain different levels of profitability. This model was originally published in Porter’s book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors” in 1980. The model is widely used, worldwide, to analyze the industry structure of a company as well as its corporate strategy. Porter identified five undeniable forces that play a part in shaping every market and industry in the world. The forces are frequently used to measure competition intensity, attractiveness and profitability of an industry or market.
  Competition in the Industry
  The importance of this force is the number of competitors and their ability to threaten a company. The larger the number of competitors, along with the number of equivalent products and services they offer, dictates the power of a company. Suppliers and buyers seek out a company’s competition if they are unable to receive a suitable deal.

      Potential of New Entrants into an Industry
A company’s power is also affected by the force of new entrants into its market. The less money and time it costs for a competitor to enter a company’s market and be an effective competitor, the more a company’s position may be significantly weakened.
      Power of Suppliers
This force addresses how easily suppliers can drive up the price of goods and services. It is affected by the number of suppliers of key aspects of a good or service, how unique these aspects are and how much it would cost a company to switch from one supplier to another. The fewer number of suppliers, and the more a company depends upon a supplier, the more power a supplier holds.
     Power of Customers
This specifically deals with the ability customers have to drive prices down. It is affected by how many buyers, or customers, a company has, how significant each customer is and how much it would cost a customer to switch from one company to another. The smaller and more powerful a client base, the more power it holds.
     Threat of Substitutes
Competitor substitutions that can be used in place of a company’s products or services pose a threat. For example, if customers rely on a company to provide a tool or service that can be substituted with another tool or service or by performing the task manually, and this substitution is fairly easy and of low cost, a company’s power can be weakened.

                                                                                                         (1 mark for each stated force and 2 marks per explanation)

• Step 1. Detailed personnel planning
• Step 2. Job analysis, so that for any given job there are two things:
  -A statement of the component tasks, duties, objectives and standards (a job description)
  -A definition of the kind of person needed to perform the job (a person specification)
• Step 3. Identification of vacancies, by way of the personnel plan (if vacancies are created by demand for new labour) or requisitions for replacement staff by a department which has ‘lost’ a current job-holder.
• Step 4. Evaluation of the sources of labour, again by way of the personnel plan, which should outline personnel supply and availability. At macro- and micro-levels. Internal and external sources and media for reaching both will be considered.
• Step 5. Review of applications, assessing the relative merits of broadly suitable candidates.
• Step 6. Notifying applicants of the selection process.
• Step 7. Preparing employment contracts, induction and training programmes.
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• Accuracy: Figures in a report should add up, the degree of rounding should be appropriate, there should be no typographical errors, items should be allocated to the correct category and assumptions should be stated for uncertain information. Information must be reliable.
• Complete: Information should include everything relevant to the decision being considered. If relevant, comparative information should be included. Information should be consistent, for example it should be collected on the same basis each time, to allow for meaningful comparison. Excessive information should be avoided.
• Cost-effective: It should not cost more to obtain the information than the benefit derived from its use. Information collection and analysis should be efficient. Presentation should be clear, such that users do not waste time working out what the information means.
• Understandable: The needs of the user are paramount. The information must be easy to read and well presented.
• Relevant: Information that is not needed for a decision should be omitted. All significant information that is relevant to the decision being considered should be included.
• Accessible: The choice of medium to provide the information should be appropriate (face-to-face, email, letter, written report) and consider the needs of the user.
• Timely: The information should be available when it is needed and in time for required action to be effective.
• Easy to use: As well as being understandable (clear and well presented) and accessible (correct choice of medium) the information should be presented in a manner that the user can easily use or pass on as required.
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• The organisation is owned and run by an individual who makes all business decisions.
• A trading name may be used, but there is no legal distinction between the individual and the business.
• It is easy to set up and close down the business.

• The business is owned and run by two or more individuals.
• A partnership name may be used, but the partnership is not a legal entity.
• The partners are liable for the conduct and debts of the business.

• A limited company has a separate legal personality from its owners (shareholders).
• The shareholders cannot normally be sued for the debts of the business unless they have given some personal guarantee.
• Their risk is generally restricted to the amount that they have invested in the company when buying the shares. This is called limited liability.

• Improved efficiency- the main argument is that private companies have a profit incentive to cut costs and be more efficient.
• Lack of political interference- it is argued that governments are usually poor economic managers. They are motivated by political pressures rather than sound economic and business sense.
• Remove political issues- governments are concerned with winning the next election. They may be unwilling to invest in infrastructure improvement which bring long term benefit.
• Increased competition- often privatisation of state owned monopolies occurs alongside deregulation to allow more firms to enter the industry and increase the competitiveness of the market.
• The government will raise revenue from the sale. Selling state owned assets can raise significant revenue.

• Privatisation does not necessarily increase competition. Whether competition is increased depends on the nature of the market.
• The sale proceeds is one-off benefit. The government loses out on future dividends from the profits of public companies.
• Some industries perform an important public service that should not have profit as the primary objective, for example health care.
• Private companies may exploit the public, leading to higher costs and lower standards.
• If a private sector monopoly is created, it will require monitoring and regulation.
• Private sector organisations are also guilty of favouring short term results over the organisation’s longer term prospects.