In today’s bustling world one would be hard pressed to walk into a business without some type of technology present.  Even a small town café usually has a credit card reader, a website, a cash register, and the occasional wireless internet capability. Then there are larger department stores with online shopping options, store credit cards, rewards programs, and smart cash register terminals that hold all kinds of information about their customers from phone numbers and addresses to purchase histories and preferences.  These are just a few examples of retail businesses. Industries of all types small and large also must maintain and secure many types of different hardware, software, networks, and web technology depending on their individual mission and infrastructure. Personal and proprietary business information is everywhere! A report from the CSRIC regarding Cyber Security’s best practices of 2010 noted “security incidents from federal agencies are on the rise, increasing by over 400 percent from fiscal years 2006 to 2009 (The Communications Security, Reliability and Interoperability Council, 2011).”  Protection of information cannot be an afterthought of a business operation. It only takes one breach for a company to lose money, resources and most importantly customers.  A survey conducted by the Ponemon Institute reported “more than 83% of respondents believe that the individuals affected by a data breach lost trust and confidence in the organization’s ability to protect their personal information. These perceptions often result in the loss of customer loyalty (Ponemon, 2008).”  

Lack of Cyber Security Guidance and Policy

Unfortunately, practicing cyber security is not as easy as patching a server or counting on the IT department and third party software vendors to ensure all vulnerabilities have been mitigated.  During cyber security assessments performed by the National Security Test Bed from 2004 to 2006, the most common and easily attackable vulnerabilities were clear text communications over networks, use of default user accounts and weak or documented passwords, poor authentication practices, unpatched components, and misconfigured firewalls (Fink, Spencer, & Wells, 2006).  All of these vulnerabilities have one commonality – they require user or administrator action to resolve.  Education of IT professionals in this realm is lacking.  In 2005, the President’s Information Technology Advisory committee estimated that “there are less than 250 active cyber security or cyber assurance specialists in the United States, many of whom lack formal training or extensive field experience (President’s Information Technology Advisory Committee, 2005).”  What about user education and responsibility?  The IT department cannot ensure the user does not document their password, leave their screen unlocked, lose a company laptop or take proprietary company information outside of the building.  In order to successfully secure information, every employee must be afforded cyber security training and guidance and understand company policies as well as non-compliance consequences for violations. The single most important cyber security vulnerability today is the lack of employee training, guidance and policies regarding information assurance protection.

A Plan for Large Businesses

It would be difficult for a business to give everyone the same level of cyber security training. Each employee has their own role in the organization and their own role in protecting systems and information. Larger businesses could create separate and unique training and policies for users versus administrators. One common practice of large corporations is to conduct this training online on an annual basis.  The problem with online or “computer based training” in many cases is that it is not tailored to the individual employee’s work tasks and is rather vague on policies and practices of computer, information and cyber security.  How does the account manager in the finance department tailor this training to their specific job and use of technology?  Will he or she know the dangers of using the default user account with newly installed software?  Will clicking through some online slides stop the front desk manager from writing her password down on a post-it note?  Will the system administrator feel confident that the new server he or she built is patched properly and ready to be added to the network?  Statistically, large businesses are still having an increase in breaches due to these types of behaviors by employees (Fink, Spencer, & Wells, 2006).  Training must be tailored to the position and conducted on the job when possible and employees should be held accountable for lax security practices.

The general recommendation by the National SCADA Test Bed to mitigate overall problems with security awareness and training is to use a proactive security model. This model tracks security practices as a cycle or an ongoing process, highlighting the need to continually assess systems over the typical 10 to 15 year lifespan (Fink, Spencer, & Wells, 2006).

Figure 1

Considerations for the steps of the Proactive Security Model follow (Fink, Spencer, & Wells, 2006):

• ·         Map Architecture – What technologies are present in the business? How are they connected? Do these technologies connect to any outside sources?
• ·         Conduct a Risk Assessment – Going through the architecture, what vulnerabilities exist? What is the impact of a breach? What areas are extremely high impacts? Is there a plan in place in case of a data loss?
• ·         Digital Asset Identification – Conduct an inventory of the physical locations of digital assets.  Are assets physically secured?
• ·         Profile Model – List assets in order of priority of protection. Identify critical assets
• ·         Identify and Remove Vulnerabilities – Patch vulnerabilities found during previous steps/inventories.  Remove unused programs and services.
• ·         Standardize Policies – Review or create policies for the protection of all assets and specifically critical assets. Ensure policies are standardized and all employees understand compliance with policies is critical.
• ·         Incident Response – Logs/documentation should be kept during installation and recovery of systems. Log files should be reviewed on a regular basis to track possible breaches/security incidents.
• ·         Training – On the job training should take place on a recurring basis in accordance with policies.  Training should be tailored for users and administrators.  Leadership must set the example for strong security practices.

Small Business Approaches

Small businesses are lacking cyber security awareness and training more so than larger businesses that have more resources to devote to security (PRNewswire, 2010).  In a study conducted by NCSA/Visa Inc. 47 percent of small business owners reported their employees had received no security training.  The study also reported that only 43 percent of small businesses had a plan for responding to loss of customer data.  Another alarming statistic from the study noted that 85 percent of small business owners surveyed thought they were less of a target for cyber crime than larger companies (Kinney, 2011).  On the contrary, small businesses are more of a target for cyber criminals because criminals are less likely to be caught and information is in many cases unprotected and easy to access (Kinney, 2011). 

The proactive security model (figure 1) could easily be tailored to a small business’ architecture.  The best practice for any business to understand is to be proactive about security instead of reactive (Fink, Spencer, & Wells, 2006).  The bottom line for any business is to make security a priority, part of the business’ mission and train employees on a regular basis.  “Data protection is crucial to the success of a modern small business (Kinney, 2011).”  The National Cyber Security Alliance has published simple practices for small business owners; a few key points follow (Kinney, 2011):

• ·         Train employees on cyber security policies and practices and include tips in company newsletters and/or website
• ·         Limit access to work networks from home computers and have policies for secure practices when using mobile technology
• ·         Clean out old data and dispose of it securely
• ·         Ensure all new software is patched and older software is updated and maintained
• ·         Educate customers on your cyber security policies and safe practices through regular e-mails or right on your website

Outsourcing

Small business owners may not have the knowledge or resources on hand to train employees or manage technology securely and effectively.  Likewise, larger industries such as utility companies or construction contractors may not have an interest in managing their own IT services and security. In this case there are outsourcing options. Outsourcing has benefits and drawbacks.  Managers must weigh their options and decide what will work best for their business (Valacich & Schneider, 2011).  Although outsourcing may handle the security of internets and intranets, software applications and data, employees will still need training on safe practices and company policies as much of the hardware and associated software will be located onsite and accessed by employees on a daily basis.

One example of the beneficial use of outsourcing is the Enbridge Pipeline Company, which manages countless miles of oil pipeline.  Industries such as factories and plants are also great candidates for outsourcing because 70 percent of cyber threats are external as reported by the Columbia Institute of Technology (Powell, 2005).  Along with the pipeline comes the management of the systems and software applications that keep track of this complex infrastructure.  Putting out “systems security fires” was the last thing Enbridge management wanted to worry about.  The company paired up with CyrusOne, a company that services many energy related businesses and specializes in building complex hosting facilities staffed with a myriad of IT experts (Powell, 2005).  “Enbridge management sticks to strategic IT decisions while CyrusOne manages hardware failures and system optimization, memory allocation, and decisions to grow or shrink IT capacity (Powell, 2005).”  Enbridge notes many benefits of the decision to outsource (Powell, 2005):

• ·         Assurance that IT best practices are applied to all outsourced systems and networks for a set price via a Service Level Agreement which also covers the cost of the ever-changing scalability requirements of IT infrastructure
• ·          System security is maintained through the use of proper firewalls, security patches and traffic audits as well as power redundancy and router configurations
• ·         Access to expertise without having to hire, maintain, or train new employees.  Continuous reporting of data and application status also improves work-flow

While all of these benefits look appealing, Powell (2005) notes it is important to shop around and draft a contract exit strategy as not all outsource companies last or work out as positively as expected. 

A small business can also benefit in similar ways as a large business like Enbridge has and for a significantly lower cost.  The access to IT professionals and security experts as well as the benefit of being able to concentrate on the primary mission of the business and know that customer information is protected will cost less in many cases than one cyber attack incident.  The same rules apply to small businesses for finding the right outsource company; shop around, get references from other professionals in your arena, and have an exit strategy prior to entering any agreement.  Most importantly, a security training plan and security policies need to be present and applied on a regular basis as small businesses are big targets of cyber attacks and the most common breaches are due to lax security practices such as password complexity, network access, and default user accounts (Fink, Spencer, & Wells, 2006).  

Conclusion

            The single most important cyber security vulnerability today is the lack of employee training, guidance and policies regarding information assurance and protection.  Statics show that cyber attacks are growing at an alarming rate.  With the creation of new technologies at the same speed it is increasingly difficult for industry professionals to remain educated and also to ensure hardware, software, networks, and web transmissions are secure.  The use of technology is prominent in business and most businesses would be inoperable and significantly behind their competitors without it.  Companies hold important customer information and equally important business intelligence information in which the loss of can have catastrophic consequences. 

            There are however many solutions for businesses to apply to mitigate risks.  Applying the latest patches to software, protecting passwords, and configuring software properly are some obvious options.  All of the available solutions for risk mitigation require users and administrators to take action.  Businesses can ensure these actions are taken by developing security training programs tailored to employees’ individual positions and job tasks.  Equally important is the development and enforcement of cyber security policies and protocols.  Leadership must set a positive example by following and enforcing rules and taking a proactive stance on security rather than reactive.

            Large business’ can utilize the Proactive Security Model as a basis to create an ongoing security posture for the full lifespan of their systems.  Many large businesses have robust IT departments and resources to create more secure use of technology.  Small businesses have less resources to devote to information technology but and are at a larger risk for cyber attacks.  There are many options for small businesses to increase security, train employees, and make security a normal part of operations.

            Outsourcing is an option for those industries or smaller businesses that do not have the resources or education on staff to maintain a secure technological infrastructure.  There are benefits and drawbacks to outsourcing but managers must weigh their options and decide the best course of action for their company.  Although outsourcing may secure many of the businesses’ resources, it is important to train employees in secure practices as well as maintain and enforce up to date security policies for the protection of onsite technology resources and proprietary information.    

. 

References

Fink, R. K., Spencer, D. F., & Wells, R. A. (2006). Lessons Learned from Cyber Security Assesssments of SCADA and Energy Management Systems. U.S. Department of Energy.

Kinney, M. (2011, January 13). How small businesses can recognize Data Privacy Day. Retrieved September 16, 2011, from Staysafeonline.org: http://www.staysafeonline.org/blog/how-small-businesses-can-recognize-data-privacy-day

Ponemon, L. (2008). privacy breach Index Survey: Executive Summary. Ponemon Institute.

Powell, W. D. (2005). Outsourcing Helps Balance Data Security, Efficiency and Economics. Pipeline and Gas Journal , 30.

President’s Information Technology Advisory Committee. (2005). Cyber Security: A Crisis of Prioritization. Arlington: National Coordination Office for Information Technology Research and Development.

PRNewswire. (2010, October 27). Study Finds U.S. Small Businesses Lack Cybersecurity Awareness and Policies. Retrieved September 16, 2011, from www.prnewswire.com: http://www.prnewswire.com/news-releases/study-finds-us-small-businesses-lack-cybersecurity-awareness-and-policies-66372812.html

The Communications Security, Reliability and Interoperability Council. (2011). Cyber Security Best Practices. CSRIC Working Group 2A.

Valacich, J., & Schneider, C. (2011). Information Systems Today: Managing the Digital World. Edinburgh Gate, Essex, England: Pearson Educated Limited.

 Amy L. Wees

October 25, 2009

Teleconferencing Today

Imagine being able to have a conversation with people all over the world in different locations, just as if they were in the same room with you. Everyone could hear each other and talk to each other with no breaks in between just like holding a normal conversation. This is what teleconferencing has done for the world, specifically government agencies such as the military and other multi-location corporations. These agencies use teleconferencing on a daily basis to talk with vital contacts no matter their location. Teleconferencing allows for everyone to meet and discuss important information to allow a business to move forward. There is even an ability to add video to the teleconference to allow the contacts to view each other as they talk; but the main importance is the ability for many people in different locations to meet any place, anytime through the ease teleconference.

So how does teleconferencing work?  Well phones and sometimes computers are connected via telephone lines, satellites, or even an internet connection.  One could use a computer with a webcam connected to it and connect to others via an online chat system such as Skype or by using a special console unit where “video and audio are compressed and then transmitted from one point to another (Walters, 2009)”.  Many of our large government agencies and multi-national corporations have specific board rooms set up with all of the technology they need to hold meetings with clients or business partners whenever necessary.  These rooms will sometimes have several microphones hanging from the ceiling and a unit that will allow just a teleconference or a video teleconference.  Government agencies even have the ability to talk over secure telephone and video lines which are critical to their line of business.

The history of teleconferencing goes all the way back to the 1980’s using analog technology with two closed circuit televisions connected via cable lines.  Later NASA used radio frequencies to hold video conferences with the first manned space flights. Satellites were also used early on via mobile vehicles.  By the 1990’s video teleconferencing became commonplace enough for the general public to afford and more and more businesses and government agencies started using it.  When ISDN became available schools and even small companies were able to afford the technology (Walters, 2009).

The advantages of teleconferencing are many.  Obviously in a large agency with multiple locations teleconferencing allows minimal travel for meeting purposes, and also allows one person to deliver a message to many listeners at one time without the need of a large meeting facility.  At Wells Fargo Mortgage Company, with over 29,000 employees working in multiple locations, the co-presidents Cara Heiden and Mike Heid used a teleconference to deliver a semi-annual update to all of their employees at one time.  “We had up to 5,000 lines into that call, with two to three people on each line,” Heiden said in an interview. “We give them insight into how we’re going to finish out the year strong (Terris & Berry, 2009).”

Another advantage is low cost communication for small businesses.  One marketing company attempting to cut costs is communicating with clients via the internet through webcasting, webinars, and teleconferencing using services which are free or charging a very small fee.  As a marketing company, they do realize that the best communication is face to face but to reach more clients and cut costs, teleconferencing is the way to go (Swift, 2009).

There are however, a few disadvantages to teleconferencing.  Obviously the ability to look someone in the eye and communicate is lacking during a teleconference.  One may be confused about who they are speaking with and who should speak when.  There is not exactly a protocol set up for a teleconference meeting type situation.  Jeff Blackmon, a writer for the Central Penn Business Journal, thinks that face to face meetings are very important and businesses that are doing away with these types of communication are wrong.  He says “There’s a battle brewing — a brouhaha— about whether it makes sense for companies and associations to be meeting in exotic locations, or even airport hotels or company headquarters. The so-called experts claim these gatherings are often time-wasters and boondoggles. That’s bunk, and they’re wrong!  I spend lots of time in lots of cities helping clients generate lots of results…. My clients tell me there’s nothing like the power of bringing their people together. To shake hands.  To chat eyeball to eyeball.  To break bread.  To laugh and learn (Blackman, 2009).”  Mr. Blackmon definitely has a point that there are true benefits to meeting face to face.

The real question is: do the benefits of face to face meetings outweigh the benefits of having the technology to meet from different places?  With today’s technology being what it is many business managers and government agencies would not succeed in their business objectives without the use of this technology.  So meeting or no meeting, teleconferencing technology is not going anywhere.  In fact the technology is improving and being used more and more every day.

References

Blackman, J. (2009, September 4). Don’t buy into the bunk — meetings can have important meaning. Central Penn Business Journal , pp. Vol. 25 Issue 36, p32-32, 1/2p.

Swift, M. (2009, September). Marketing on a Shoestring. Bank Investment Consultant , pp. 17(9), 30-34.

Terris, H., & Berry, K. (2009, September 3). Everybody There? American Banker , pp. Vol. 174 Issue 167, p9-9, 1/9p.

Walters, P. (2009). What is Video Teleconferencing? Retrieved October 25, 2009, from www.ehow.com: http://www.ehow.com/about_5121450_video-teleconferencing.html

Mexican Immigration

By: Amy Wees

6/25/2008

Currently, the American and Mexican governments are attempting to come up with a solid plan for what to do with the hundreds of thousands of illegal Mexican immigrants whom reside in and continue to enter the United States daily.  Should the U.S. allow these immigrants to continue to come in droves and work without paying taxes?  Should we build a bigger fence to further secure our borders?  Might we come up with a plan to allow citizenship for some of these immigrants?  What impact will the decision have on the businesses that employ these immigrants?  While we are attempting to answer these questions, thousands of Mexicans will cross the vast mountains and desert into the U.S. to look for work, and hundreds will die during their journey.  What is the price of their lives?  Who is responsible and what can we do to find a positive solution for everyone involved?  This is our debate.  Mexican President Vicente Fox has expressed strong support of amnesty for illegal aliens while American President George W. Bush is proposing a Mexican guest worker program.  There have been strong opinions and inputs expressed by these governments, American business owners and citizens, and Mexicans themselves.

In July, 2001 the Center for Immigration Studies (CIS) compiled a study of the costs and benefits of Mexican immigration in America.  Some of the findings were as follows: Large scale immigration is a recent phenomenon as the immigrant population has climbed from 800,000 in 1970 to over 8 million today.  Two-thirds of Mexican immigrants do not have a high school diploma and are unskilled, causing a job competition and wage decrease for the nearly 10 million unskilled American natives looking for work.  This reduction in wages for the unskilled has had a minimum impact on the price margin of products as unskilled labor accounts for only a tiny fraction of the overall economic output.  Mexican immigrants account for 4.2 percent of America’s population and 10.2 percent of persons in poverty.  25 percent of families headed by illegal immigrants use at least one major welfare program while only 15 percent of American households use welfare.  However, these immigrants hold down labor costs for businesses that employ unskilled workers but taxpayers must pick up the responsibility of providing services to a larger poor population.  All of the above findings led the CIS to recommend that the U.S. create programs to improve the labor skills of legal immigrants and use greater resources to stop illegal immigration by enforcing the ban on hiring illegal aliens.  The CIS also disagrees with President Bush about the proposed guest worker programs, stating they are unlikely to solve the problems found in the study because the wages of unskilled American workers would still be adversely affected.  Also, the program would allow guest workers to receive welfare on behalf of their U.S. born children creating an even larger government deficit.

President Bush feels differently towards guest worker programs.  He said in a recent white house press release that our country is a nation of immigrants and that we wouldn’t be what we are today without the hard work and entrepreneurial spirit of immigrants.  A guest worker program would allow willing workers to enter the United States and fill jobs that American citizens are not filling.  The new laws the President is pushing call for more rationalization and humanity.  The current immigration laws do not follow through with punishment for American companies that look to the illegal labor market for workers, leading those immigrants who are here to work to be afraid and uncertain of their future.  Not to mention to have to create false paperwork and social security numbers to work in these jobs.  President Bush made a strong point that the system we have now is not working.  Laborers want the illegal immigrants to fill jobs American citizens will not, our borders are not secure, immigrants who do cross the borders are unsafe and practices such as this will cost the United States more money in the long run than if we were to offer Mexicans a chance to cross the borders legally to work for a period of time.  Of course none of these practices have been proven, but the U.S. government is working on making this a reality.

Mexican President Vicenza Fox has similar ideas to solve America’s immigration ordeal.  President Fox is campaigning in the United States to request money and resources to improve the economic development in Mexico so that it can absorb its own workforce.  He also recently met with congress to propose a guest worker program and the potential legalization of the several million undocumented Mexicans currently residing in the U.S.  He is touring the U.S. to meet with immigrants and business owners to gain support for his cause and make apparent America’s need for Mexican immigrants, legal or illegal.  Recently, Fox visited fruit orchards in Washington State where 6 out of 10 workers are immigrants.  Dave Carlson, the president of the Washington State Apple Commission stated to Fox “We need some type of guest-worker program; there are not enough people who are willing to do that work to get the job done.”  Washington’s Governor also shares this opinion as she arranged for Fox to visit the state in order to discuss expanding trade and improve ties with Mexico.  He and President Bush agree that something must be done to reform immigration.

What about the American public?  Isn’t this a country for the people and by the people?  In a May 2006 citizen poll given by the Pew Research Center, it was found that most American’s are divided about whether immigration is good for the country but the significant majority considers it to be a serious problem.  It also seems to be the general consensus that these migrant workers are filling jobs Americans don’t want and that illegal immigrants already in the country should have the option to stay.  These polls show general information about feelings towards immigration but some American’s feel very strongly against it.  A recent article in the Observer states that the benefits for border crossers do not outweigh the costs to the American public.  According to the author, there are over 30 percent of Mexican immigrants that are able use welfare benefits and this figure will only get worse as statistics show that even third generation descendents are likely to use welfare.  If laws allowing more Mexicans to enter legally are passed, this figure will double and our tax dollars will be devastated.

United States medical costs and state and federally supported programs are also a concern; with more unskilled workers that don’t carry medical benefits we could experience a significant problem with the U.S. medicare and social security programs possibly going under.  This is considering that 53 percent of Mexican immigrants do not have medical insurance compared to only 14 percent of natives.  Education and crime are an additional concern.  Statistics show that third generation Mexican-Americans are three times more likely to drop out of high school and to commit violent crimes.  This would drag down our standards as a nation and contributes significantly to our already overcrowded prison populations.  The observer claims the solution is to make it harder to come into the United States and that before allowing citizenship, Mexicans should be better screened based on wealth, skills and education.  So are we to test these immigrants when we do not require our own naturalized citizens to be tested and held accountable?

After analyzing the positions I must say I think the center for Immigration studies holds the best point.  We need to look at the facts, the statistics and behaviors of those entering the United States.  I don’t think a guest worker program is the answer.  Perhaps humanitarian efforts in Mexico would be a better idea.  I agree with President Fox in the idea of improving Mexico’s economy to absorb its own work force.  The United States has enough problems with our own poor; we do not need to take in millions more in the same situation.  Perhaps we could pay a bit more for a piece of fruit and offer a decent wage to farm workers.  I know this will not solve every problem but I’m not sure an increased population of migrant workers won’t either.  On the other hand, I have experienced first hand while working in the farming industry that our next generation of workers is not interested in this type of work and it is very hard to fill these positions.  Why not offer a screening program that allows immigrants to fill these positions for a specific period if they agree to pay taxes on the income they earn and work legally in the United States for a specific period of time with the agreement to return to Mexico when their contract is up?

In conclusion, border security needs to increase and at the same time a better immigrant screening process should be put into practice; one that allows immigrants to fill open positions in the United States if our own population has been given a chance and has not filled these positions, not a screening process that tests an immigrants aptitude of the United States.  This is not what our country was founded upon and it is not fair to scrutinize immigrants when we do not hold our own people accountable for the same basic educational skills.  It will be interesting to see what solutions unfold in the upcoming years.

REFERENCES:

President Bush Proposes New Temporary Worker Program. (2004, January 7). Retrieved June 9, 2006 from http://www.whitehouse.gov/news/releasess/2004/01/print/20040107-3.html

Objectivist: Border crossers cost us plenty. (2006, June 7). Retrieved June 8, 2006 from http://www.observertoday.com/articles.asp?articleID=1600

The State of American Public Opinion on Immigration in Spring 2006. (2006, May 17). Retrieved June 7, 2006 from http://pewhispanic.org/factsheets/factsheet.php?FactsheetID=18
 
Fox defends Mexican immigration in Washington state tour. (2006, May 24). Retrieved June 7, 2006 from http://www.contracostatimes.com/mld/cctimes/news/14654157.htm
 
Immigration from Mexico: Study examines Costs and Benefits for the United States. (2001, July 12). Retrieved June 7, 2006 from http://www.cis.org/articles/2001/mexico/release.html
 
 
 

Qatar Cultural Awareness Information for Employees

Wees Furniture Company Employee Handbook (fictional)

By: Amy Wees

Wees Furniture Company (fictional)

Qatar Division

Introduction

            The Qatari Emir (head of state) recently invested in a multi-billion dollar project to increase tourism, business, and education in the region.  There will be a great need for high quality American furniture to accommodate new hotels, schools, and other tourist facilities.  As a result, the Wees Furniture Company has opened a new division in Qatar in partnership with local furniture business professionals.

As an employee being sent to this new facility, you will be expected to adhere to local customs and courtesies and also understand how to best communicate with your Qatari counterparts in making sales calls and business partnerships in the area.  This briefing is designed to introduce you to Qatar, its people, and culture and help you settle in and feel comfortable in providing excellent customer service for Wees Furniture Qatar.

Please review the associated power point presentation for visual aid.

Introduction

Qatar (pronounced “cutter”) is a peninsula in the Persian Gulf 4,247 square miles in area (about the size of Connecticut) located in the Middle East (also referred to as South West Asia or “the gulf”).  The capital of Qatar is Doha.  Nearby countries include Iran, Iraq, Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates.  The land in Qatar is mostly desert and barren and the weather is warm with very hot humid conditions in the summer. (Funk & Wagnalls, 2002)

History

            The history of Qatar is long and complicated, as is most history in the Middle East.  Although the state has been inhabited since the Stone Age, Islam was introduced in 7^th century a.d. and remains the primary religion and source of cultural values in the area today.  After 7 a.d. Qatar became a part of the Ottoman Empire and Iranians ruled the state until the 18^th century when the Saudi Arabian Wahhabis won control.  The Thani dynasty and Ottoman Turks ruled during the 19^th century leading into modern history. (Funk & Wagnalls, 2002)

In 1916, although still being ruled by the Thani dynasty, Qatar became a British protectorate until 1971 when the British left the area.  At that time Qatar joined the United Nations with Emir Ahmad bin Ali Al-Thani at its head and claimed its official independence on September 3, 1971 (U.S. Department of State, 2010).  The Al-Thani had a family history in the region for over 200 years and in 1972 Ahmad’s cousin Khalifa bin Hamad took over as emir and attempted to modernize Qatar by bringing in fertilizer and steel industries and working closely with Saudi Arabia and other western countries.  In 1995 Khalifa’s son Crown Prince Hamad over threw his father and took the reins.  Crown Prince Hamad expanded ties with Isreal and modernized the government to include allowing more freedom of speech in the media and holding municipal elections allowing women to vote and run for public office for the first time in 1999. (Funk & Wagnalls, 2002)  A municipal council was formed as a result of these elections.

Most recently in 2001 the UN International Court ruled that the nearby island of Bahrain would maintain its territory but would no longer own land in the Qatar peninsula.  Qatar and Saudi Arabia also came to a border agreement and signed a treaty to that effect.  There has been no change in the ruling of the country from the Al-Thani family.  After public disapproval of Crown Prince Hamad’s oust with his father over the thrown and abuse of his power as emir, he relinquished his position to his younger brother Sheikh Tamin bin Hamad Al-Thani (Qatar, 2010).  A new constitution was approved by the public and came into effect in June, 2005. (U.S. Department of State, 2010) Sheikh Tamin was also named Commander-in-Chief of the Armed Forces and made significant changes to corrupt public offices as well as appointed the first women to the Qatari cabinet (Qatar, 2010).

Politics

Qatar is a traditional sheikdom (meaning it is ruled by a Sheik).  Although there are modern elements to the political system with recent changes made in voting rights and the constitution, Qatar remains an absolute monarch with the Al-Thani family holding many senior government posts (Qatar, 2010).  After public disapproval of the corruption of Al-Thani cabinet members, the new constitution calls for 35 of the 40 cabinet members of the Consultative Council to be elected by the people, the remaining five to be appointed by the Sheik (Qatar, 2010).

There are no political parties in Qatar but the sheikdom has several modern governmental committees and departments similar to those in democracies such as five secular courts (criminal, civil, labor, appeal and religious), a human rights committee, trade, education, environmental and commerce departments just to name a few (Al-Khatib & Al-Abdulla, 2001).

Qatar has been a leader in the Middle East peace process and has set a positive example for accepting and welcoming foreigners despite numerous historical battles over territory and religion with many neighboring countries.  Qatar has opened embassies in neighboring countries and Western countries and has even built a bridge to the island of Bahrain (Qatar, 2010).  The country has made many strides toward a positive political system but foreigners looking to open businesses in the nation do report some difficulty in certain areas that have not yet been completely defined.

Economics

            When Middle Eastern countries are depicted in movies, the buildings and cars are often elaborate and ritzy.  Qatar is no different as it is one of the richest nations in the gulf due to the vast reserves of oil and natural gas, even though the country only produces a fraction of total Organization of the Petroleum Exporting Countries (OPEC) output.  Oil has been produced for export since 1949 (Qatar produced 800,000 barrels per day in 2005) and contributed to modernization and build-up of schools, hospitals, roads, and government utility facilities during the oil boom of the 1970’s.  During the 1980’s there were declining oil prices and this led to some of the previous infrastructure projects being left unfinished due to lack of government funds and investments.  Luckily the oil prices have since recovered and remain a steady flow of income for the government (Qatar, 2010).

Qatar’s economy also depends on export of liquid natural gas as the country has the third largest reserve in the world.  Demand for natural gas is high because of lack of reserves and as a result the Sheikdom and many other countries have invested in Qatar’s natural gas industry.  The government has also established joint ownership with private owners in other small and medium scale industries as well as a Qatari stock exchange to encourage foreign investments.  The plan has apparently worked as more and more business investor’s flock to Qatar to take advantage of new opportunities after the recent investments by the Emir in education and tourism projects.  The future is bright for the country with recent GDP growth of 11 percent and over $60 million invested in new projects (Qatar, 2010).  Today, oil and natural gas income account for 60 percent of GDP and 80 percent of exports.  Based on the amount of product reserves, Qatar has a very good balance of trade.  Cement, fertilizer and other petroleum products are also manufactured here and herding accounts for most of the agricultural profession (Funk & Wagnalls, 2002).

Qatar uses the riyal (pronounced “ree-al”) for currency and according to the XE.com currency conversion website; one U.S. dollar is worth 3.64 Qatari riyals.  In 2006 there were revenues of $21 billion and $17 billion in expenditures.  In addition to ongoing infrastructure projects, there is also free healthcare and education.  Media such as books, radio and television is somewhat controlled by the Sheikdom but the news network Al-Jazeera, frequently cited for its free speech and uncensored content, gives a voice to many in the Middle East who may not otherwise be able to speak out publicly; including terrorists.  Telephones, cell phones and internet are commonly used and available in the area (Funk & Wagnalls, 2002).

People

            According to the 2004 census, the population of Qatar was 774,029 with foreign nationals accounting for 80 percent of the population.  The estimated population in 2008 was 958,000 with an estimated 75 percent or more being non-nationals.  Many foreigners are migrant laborers from neighboring Arab states.  The largest urban areas are the cities of Doha and Rayyan.  While the official language is Arabic, English is commonly used in business and government practices (Funk & Wagnalls, 2002).  Children generally attend school from ages six to sixteen and the literacy rate is 89 percent (U.S. Department of State, 2010).

The population is mostly made of men (70 percent) because many migrant workers who come from nearby countries are young and single or do not make enough money to move their families to Qatar.  Foreign employers also prefer to hire single men so that they are not responsible for their families as well as the employee.  Men outnumber women in the workforce nearly three to one and although younger women are often more educated than their male counterparts, cultural norms in the region keep women from additional employment and educational opportunities (Berrebi, Martorell, & Tanner, 2009).

Lifestyles and the Labor Market

The government, law and lifestyle in Qatar are based on the Islamic religion of Sunni Muslim natives, even though they make up a lessor part of the mostly Arab population.  Women have more freedom in the workplace and government than in other Gulf nations but most still wear the traditional veils over their faces in public, have arranged marriages and listen to male family member’s guidance and commands (Qatar, 2010).

Qatar’s wealth is shared with citizens and residents through government subsidy of many living expenses such as taxes, water, electricity, and other services (Berrebi, Martorell, & Tanner, 2009).  Education and higher education is also made available at little or no cost to Qataris and foreigners.  Survey results show men having more education than women, but more women reaching higher education levels annually.  Unemployment is also higher for women than men, perhaps as a result of women not wanting to participate in the labor force.  Unfortunately, in 2001 the unemployment rate for first time job seekers was about 12 percent.  This is due to long waiting periods for government jobs and a lack of education and training for Qatari’s to obtain jobs in the public market.  The Monarchy tends to favor Qatari citizens over foreigners and is looking to improve the overall education system so that citizens can compete with the demanding industrial work in the region (Berrebi, Martorell, & Tanner, 2009).  One example of this favoritism is business ownership; in order for a foreigner to open a business in Qatar, a Qatari citizen must own at least 51 percent of the new business, an attempt to ensure Qatari participation in all business interests.

The labor force statistics are a result of the lack of skills of Qatari’s to work in the private sector and have led to a very segregated work force between citizens and foreigners in business.  70 percent of foreigners work in the private sector which accounts for 80 percent of Qatar’s total workforce.  Foreign women work mostly in the household sector because they have come to the nation to be servants.  Qatari women generally do not work in the household sector at all; instead 85 percent of them work in the public sector, over half as educators.  Only four percent of Qataris work in the private sector, the rest entirely employed by the government.  Many Qatari men are more educated than their non-Qatari migrant counter parts but stay out of the private sector because of the incentive to gain shared wealth from the government petroleum and natural gas industries.  Sadly as a result of this incentive, Qatar’s private sector is run almost entirely by foreigners (Berrebi, Martorell, & Tanner, 2009).

For a Qatari business owner there are positive and negative elements to hiring foreigners.  Some feel that foreigners will not share or respect the land, society and cultural practices, and the pride of the nation.  Others feel that the benefits of cheap labor from unskilled workers, the need for household servant work, benefits from highly skilled foreigners and the overall contribution to Qatar’s competiveness and economic growth is worth the risk.  At the end of the day, the government does realize that it is necessary for more Qataris to take part in the private sector in order for Qatar to maintain its identity and culture and compete with global industrialization (Berrebi, Martorell, & Tanner, 2009).  As a result of this realization, the Monarchy has created “Qatarization”, a set of laws in the public sector to ensure that a certain percentage of new hires in specified industries are Qatari citizens.  This “Qatarization” has made little impact thus far because of the preference of Qataris to work for the government but hopes are that better future educational programs will improve the situation (Berrebi, Martorell, & Tanner, 2009).

Culture, Traditions and Expectations

A visitor to Qatar can expect a wave of different cultures and nationalities.  In a paper written by Sharon Nagy about social diversity in Qatar she describes this experience:

“A visitor to Qatar’s capital, Doha, is likely to be assisted at the airport by a Nepalese luggage handler, driven to their hotel by a Yemeni taxi driver, greeted by an Indian front-desk clerk and checked inot a room prepared by a Sri Lankan housekeeper.  An outing to the malls puts one in contact with Filipina and Ethiopian retail clerks.  While on a trip to the market, most purchases are made from Iranian or Indian merchants.  Even business meetings are likely to be attended by a mixture of Qatari, Lebanese, Egyptian or European collegues.  A range of clothing styles is seen in Doha’s public spaces – from saris and salwar khameez to business suits and blue jeans.  Businesses, services, and administrative procedures are designed to accommodate and serve the various nationalities.  While the fast-food restaurants at major intersections appeal to the range of nationalities, many other restaurants cater to the palates of south Asian, Filipino, Egyptian, or African residents.  The supermarket shelves are stocked to satisfy the range of tastes, everything from torillas and poppadoms to vegemite and peanut butter.  Schools, too, have been established for the children of foreign residents teaching the curriculum of the home country (Nagy, 2006).”

Despite all of the diverse nationalities present in Qatar, there are less poor in the area than in other Middle Eastern states.  Most of the foreigners present in Qatar came there first for work or for investment, not because of colonization from a European power.  You will still find areas that cater to certain nationalities but the crime levels are low and acceptance of foreigners to these areas is high.  “An Indian barber – for example, would not refuse an Arab or European customer (Nagy, 2006).”

The most important and most formalized form of social differentiation in Qatar is nationality; specifically, whether one is a Qatari citizen or not.  It is a big deal to be a Qatari and if, for example, you were born and raised in Qatar but your parents are of a different nationality, you may have trouble being recognized as a “true Qatari”.  Even though some foreigners have lived in Qatar for more than 10 years or for the greater part of their lives, there is no formal procedure for naturalization and therefore these foreigners remain visitors to the area.  These “visitors” are mostly controlled by their employers who act as their Qatari sponsors and “in many cases hold the employee’s passport and provide housing, clothing, meals, and sometimes even their free-time (Nagy, 2006).”  The power to distribute political and economic resources as well as to control a foreign employee’s legal, economic and social status is held by the Qatari sponsors in most cases and therefore the Sunni Muslim traditions are held up in business practices despite foreign presence in the region. (Nagy, 2006)

Nationality is also linked to occupation and financial status in Qatar.  For example, it is common to describe someone as the ‘French doctor’, ‘Indian Engineer’ or ‘Filipina Nurse’ and this has contributed to discrimination in hiring practices because recruitment for specific jobs is done through the home country (Nagy, 2006).  Salaries are commonly set to be a bit higher than what is received in the home country during recruitment so with incentives such as employer provided housing and significant tax savings the move is worthwhile to many.  Salaries do differ by nationality because they are based on salaries in the home country, therefore a medical professional from the Philippines may make more than one from Indonesia.  The justification for the difference in economic status is that these workers are still better off than they would have been in their home country (Nagy, 2006).  U.S. businesses in Qatar also follow these recruiting practices.

Housing is another way in which Qataris distinguish themselves from foreigners.  Qatari citizens are given no-interest loans and are able to build any type of elaborate housing they would like for themselves and their families on private land plots.  The government also pays for Qatari’s water and electricity usage whereas foreigners must pay full rates.  Foreigners and foreign business owners are only allowed to build commercial type properties for themselves and their employees to live in thereby separating housing conditions of citizens and foreigners.  Land use policies, higher rental rates, and resistance from citizens also limit foreigners from renting outside of their walled-in rental compounds and living in most Qatari residential communities.  An old Qatari proverb states that a neighbor is more important than the house.  In interviews with Qatari citizens, many prefer to live in Qatari neighborhoods only where there are no foreigners and, due to their Muslim faith, women can freely move between homes without a male escort.  The Muslim faith also does not allow drinking of alcohol and has many other strict practices.  Qataris openly complain and stereotype neighbors according to their nationalities such as “uncleanliness of Asians, sexual promiscuity of Filipinas and loud parties of Americans and Europeans (Nagy, 2006).”  There are also various religious sects, family backgrounds and cultures within Qatar and specifically Sunni and Shi’ite Muslims from different backgrounds do have prejudice within the Qatari culture.  It is important to point out that although there is an apparent distinction between Qatari’s and foreigners, Qataris do not prefer to talk about their religious sects or specific Qatari heritage with foreigners. (Nagy, 2006)

Business Practices

            Business laws require Qatari citizens to own 51 percent of a foreign invested business.  There are no taxes levied on companies wholly owned by Qatari nationals to include payroll, property, municipal, sales, withholding or value-added taxes.  Foreigners can apply for tax exemptions and tax holidays for periods of five to ten years.  Imported goods are not taxed if purchased from Gulf Cooperation Council (GCC) countries but importing goods that can be made in Qatar can run up to 70 percent in duty rates.  Some major national projects and contractors working on them are however granted duty exemptions.  Import or sale of pornographic material, alcohol and pork are forbidden by local law and there are no export taxes issued in Qatar (Al-Khatib & Al-Abdulla, 2001).

Labor laws require that employment contracts be written in Arabic first above other languages.  A work week in Qatar lasts six days per week and eight hours per day.  Overtime is required over eight hours and employees receive two weeks of leave per year.  Unions are not permitted (Al-Khatib & Al-Abdulla, 2001).

Important things for foreign employees to know

Conclusion

References:

(2008). CIA – The World Factbook — Qatar. CIA World Fact Book, 1. Retrieved from Military & Government Collection database.

(2002). QATAR. Retrieved from Funk & Wagnalls New World Encyclopedia database.

Al-Khatib, F., & Al-Abdulla, S. (2001). The state of Qatar: a financial and legal overview. Middle East Policy, 8(3), 110. Retrieved from SocINDEX with Full Text database.

Berrebi, C., Martorell, F., & Tanner, J. (2009). Qatar’s Labor Markets at a Crucial Crossroad. Middle East Journal, 63(3), 421-442. Retrieved from Historical Abstracts database.

Ford, N. (2007). Qatar: the sky’s the limit. Middle East, (377), 25-28. Retrieved from Military & Government Collection database.

Lay, A. (n.d). Interpretations of Islamic Practices Among Non-Qatari Students Living in The University of Qatar’s Ladies Hostel. Springer Science & Business Media B.V. doi:10.1007/s10624-005-0826-1.

Nagy, S. (2006). Making room for migrants, making sense of difference: Spatial and ideological expressions of social diversity in urban Qatar. Urban Studies (Routledge), 43(1), 119-137. doi:10.1080/00420980500409300.

Qatar. (2010). Political handbook of the world 2010. Washington: CQ Press. Retrieved August 5, 2010, from CQ Press Electronic Library, Political Handbook of the World Online Edition, http://library.cqpress.com.ezproxy.umuc.edu/phw/phw2010_Qatar. Document ID: phw2010_Qatar.

U.S. Department of State. (2010). Background Note: Qatar. Retrieved from http://www.state.gov/r/pa/ei/bgn/5437.htm

U.S. Department of State. Bureau of Consular Affairs. (2010). Qatar country specific information. Retrieved from http://travel.state.gov/travel/cis_pa_tw/cis/cis_1003.html

Is current international policy enough to control the use of nuclear weapons to prevent a future catastrophe?

Prologue

This course has helped me to understand more about international policy and also has brought me to the realization that although there are international laws in place, there are many unstable nations who do not follow them or are not party to them.  With the recent news of North Korea and the threat of nuclear weapons, I have to wonder what our own specific policy is about deterrence and retaliation.

In my career as a U.S. military war planner; I work with an array of different career fields within the military.  One of which is the Air Force missileer.  Upon considering the topic of Nuclear Weapons for this research paper, I questioned one of our missileers, about the U.S. policy toward the use of nuclear weapons.  The missileer deals with a pretty ugly reality every day.  They sit in a guarded missile silo next to a nuclear weapon with their finger on the trigger (so to speak), and they wait for a phone call on a direct line from somewhere very high in our chain of command.  Because of their ability to use a specific checklist and fire this weapon, they must understand very well the circumstances for which that weapon might be fired and what the exact target is.  I asked the officer I was interviewing if he was nervous sitting in this position everyday or if he expected nothing to come of it.  He explained that he wasn’t exactly nervous but there was always a reason, sitting in such a position, to remain vigilant and understand the importance of your duty.  My next burning question was “in what situation would you actually have to fire the weapon?”  Of course there are many reasons he could not share because of classification but the short answer was that the weapon would only be used if we were fired upon first or if we had confirmation that we were in imminent danger of being destroyed.

It is upsetting to think that our nation would ever have to use a nuclear weapon, but it is even more devastating to think we would use it in retaliation even though we already knew our own destroyed fate.  Can you imagine being in this man’s position should this ever happen?  You are firing a weapon you know will have catastrophic consequences for its target and yet you also know you will most likely meet your own fate somewhere in the near future.

Stated best in a quote by Author Hans Bethe “If we fight a war and win it with H-bombs, what history will remember is not the ideals we were fighting for but the methods we used to accomplish them. These methods will be compared to the warfare of Genghis Khan who ruthlessly killed every last inhabitant of Persia (Bethe, 1991).”  A weapon of this sort does not discriminate; there is no strategic military target involved.  There will be dire consequences for many innocent people that are definitely non-combatants.  This goes against every international law in place to protect humanity.  I’m sure there must be a plan in place somewhere within International Policy, to prevent this from happening.  Have we not learned anything from history?  This is what I intend to find out through research and hopefully reach a better conclusion and understanding of nuclear weapons, deterrence and international law.

Introduction

History has shown that the use of nuclear weapons can cause catastrophic harm to an entire nation and therefore the subject of nuclear weapons policy is important in terms of International Law as well as the control of these weapons and the questions of morality associated with their use.  Is current international policy enough to control the use of nuclear weapons to prevent a future catastrophe?

Background

It is first important to define some of the terminology behind nuclear weapons and warfare such as the definition of a nuclear weapon versus a conventional weapon and also nuclear war versus conventional war.

            -The Nuclear Weapon

Simply put, nuclear weapons are weapons that release energy through atomic reactions rather than chemical reactions. There are many different names for nuclear weapons such as atomic bombs (A-bombs), hydrogen bombs (H-bombs), nuclear weapons, fission bombs, fusion bombs, and thermonuclear weapons but what they all have in common is that they require nuclear fission to initiate the explosive release of energy.  Nuclear weapons are either fission fueled, such as the atomic bomb, or fusion fueled, such as the hydrogen bomb.  Each of these weapons generates an explosive reaction from the interaction between atoms however hydrogen bombs are distinguishable by the isotopes of hydrogen involved in that atomic reaction.  Fusion weapons such as the H-bomb are also called “thermonuclear weapons” because high temperatures are required for the fusion reactions to occur (Sublette, 2001).

Nuclear weapons come in all shapes and sizes.  They can be delivered by artillery, plane, ship, or ballistic missile (ICBM); some can also fit inside a suitcase. “Tactical nuclear weapons can have the explosive power of a fraction of a kiloton (one kiloton equals 1,000 tons of TNT); while strategic nuclear weapons can produce thousands of kilotons of explosive force (“Nuclear Weapons”, 2008)”.

Nuclear technology is the most destructive ever developed and therefore controlling the technology is of utmost importance to the human race.  As explained by author Carey Sublette in his introduction to the frequently asked questions about nuclear weapons: “The topic is complex and technical: steeped in physics, mathematics, and esoteric engineering. Born in war, the subject has been highly classified from the beginning making it even more inaccessible. Yet this complexity and secrecy has not prevented their acquisition by any nation with an industrial infrastructure advanced enough to build them, and a matching desire. The obstacle to would-be members to the nuclear club has not been discovering how they work, but simply obtaining the tools and materials to make them.

During the Cold War immense empires devoted to the development, manufacture, and potential use of these weapons developed in the United States and Soviet Union. Although motivated by the natural desire for self-protection, much that occurred within these secret enclaves was less than noble. Political posturing, personal ambition, profiteering, and plain carelessness all had their role in deciding the expenditure of staggering amounts of public funds, the exposure of millions of people to risk and injury, and the creation of products and by-products that will burden future generations. Secrecy has been used as a screen from accountability, a tool for personal advancement, and an insider’s weapon against challenges as often as a genuine means for protecting national security (Sublette, 2001).”

-Nuclear Warfare vs. Conventional Warfare

            The primary differences between nuclear and conventional warfare are the weapons utilized and the objectives involved.  Conventional weapons are those weapons that are not chemical, biological or nuclear in nature.  These types of weapons can be aimed and fired at the opposing enemy or a legal military target.  Conventional warfare is defined as “armed conflicts openly waged by one state against another by means of their regular armies (Creveld, 2004).”  During conventional warfare, the objective is to weaken or destroy the opposing military allowing surrender and victory.

Nuclear warfare uses highly destructive nuclear weapons.  There cannot be an objective of conventional means to destroy a specific opposing force or target because a nuclear weapon cannot be employed in a proportional manner.  The long term effects of the use of a nuclear weapon can last years versus the immediate effects of a conventional weapon.  Nuclear warfare can be called unconventional because it does not follow the “rules” of conventional warfare and the tactics used will destroy illegal targets such as innocent civilians as well as legal ones.  There can be no justification for using nuclear force that is within the boundaries of just warfare.

History

The nuclear era began with the Manhattan Project, the secret American effort during World War II to construct an atomic bomb (Rezelman, 2003). After the discovery of fission many physicists realized the potential danger of the technology associated with atomic energy.  One physicist in particular, Leo Szilard, is considered the inventor of the atomic bomb.  Szilard led a team under President Roosevelt to test the capabilities of this new technology and the possibility of creating a bomb.  As German armies advanced through Europe during the war, many scientists thought it only a matter of time before the United States would be involved and this brought on the acceleration of the project.  On December 7^th, 1941 Japan launched a surprise attack on Pearl Harbor forcing U.S. involvement on the Pacific and European fronts.  President Roosevelt gave the approval for the project to construct the atomic bomb.  During this time, there was also the fear that other countries, such as Nazi Germany, held similar technologies and were also attempting to create nuclear weapons and this essentially created a race to see who might use it first to affect the war.  For construction and security purposes, the project was turned over to the Army Corps of Engineers under the leadership of Colonel Richard Groves.  “With the successful Allied landings in France on “D-Day,” June 6, 1944, the war in Europe appeared to be entering its final phase.  Germany ceased to be the primary intended target.  General Groves and his advisers turned their sights on Japan, and the rush was on to complete the atomic bomb in time to end the war in the Pacific (US Dept of Energy, 2003)”.

The first test of the atomic bomb was in New Mexico in 1945.  The explosion and effects were much larger than anyone had anticipated.  “Los Alamos scientists agreed that the blast had been the equivalent of between 15,000 and 20,000 tons of TNT, higher than generally had been predicted.  Groves reported that glass shattered 125 miles away, that the fireball was brighter than several suns at midday, and that the steel tower had been vaporized (US Dept of Energy, 2003).”  Reports of the tests were handed over to President Truman who was currently at Potsdam in talks with the Soviet Union who had similar technology and were at the head of the pack in the nuclear arms race.  After it was clear that the Japanese would not surrender and that the Soviet Union under Stalin was not yet ready to declare war, Truman approved the use of the non-tested bomb on Hiroshima and to use additional bombs on Nagasaki as soon as they became available.

The bombs were delivered by aircraft on 6 and 9 August to Hiroshima and Nagasaki and on 10 August, Japan surrendered.  The U.S. celebrated the end of the war but was also in shock of the “terrifying power of this new class of weaponry”.  The reactions to the bomb varied greatly and many feared that the next world war could mean the “literal extinction of humankind, and to witnesses of two world wars in the space of three decades, a third world war seemed a virtual inevitability”.  Some thought that the “atomic world” might force creation of a world government, end war altogether, or that the new technology might be able to end disease and provide unlimited electricity.  Although the first two dreams of the atomic world were never realized, nuclear energy eventually did help to fight cancer and generate electricity. The bomb did have long lasting effects on American culture. “By the early 1950s even schoolchildren were instructed by a cartoon turtle that they “must be ready every day, all the time, to do the right thing if the atomic bomb explodes: duck and cover (Rezelman, 2003)!”

Even the devastating effects of the bombing of Japan did not end the nuclear arms race. There was hope by military leaders that an American monopoly on these weapons would deter any possible enemies in the near future but with the spread of technology and the Soviet Union also soon able to create weapons, any monopoly would be short lived.   Nuclear theorists developed deterrence theories and it seemed preventing war was more important than winning one.  When the Soviet Union started atomic testing in 1949, the United States felt it even more necessary to stay ahead and President Truman approved the development of a hydrogen bomb.  The h-bomb had even worse possible consequences than the atomic bomb.  In 1957, the Soviet Union came out ahead with the release of the intercontinental ballistic missile (ICBM).  The ICBM allowed an attack to be initiated in minutes versus the hours it had previously taken to load a weapon on an airplane.  The U.S. soon developed their own ICBMs and it was soon clear by leaders on both sides that neither superpower could “hope to escape unacceptable damage to its homeland (Rezelman, 2003)”.

The arms race continued into the 1970’s as each side realized that the slightest bit of new technology could remove the chance of retaliation by the other side causing the need for a “second strike” capability, thus ensuring the deterrent of “Mutual Assured Destruction” or MAD. The US created a “strategic nuclear triad” using intercontinental bombers, land-based ICBMs, and submarines equipped with nuclear-tipped ballistic missiles.  Soon after ICBMs with multiple warheads that had the ability to destroy the enemy’s weapons while still in their hardened silo’s were created. There was also the threat of antiballistic missile (ABM) systems, these weapons were to be used to fire at other weapons, but because of the “possibly destabilizing nature of a partially effective defense” both sides signed the ABM Treaty to prevent the other from moving further with the systems. The biggest concern was that the weapons had become so commonly available during the 60’s and 70’s that they were being deployed with military troops with the intention of using them in tactical roles.  The reality was that any combatant could now be the victim of a nuclear attack.  A ground assault by the Soviet Union against Western Europe was a particular concern because this type of attack could potentially wipe out civilization in the area and could not be called a “successful” defense (Rezelman, 2003).

It seemed many in the US and Europe in the 1980’s thought that a nuclear freeze might be the answer to this never ending saga.  President Ronald Reagan challenged the logic of “MAD” in 1981 and renewed the ABM debate through his “Strategic Defense Initiative.”  The arms race finally ended with the collapse of the Soviet Union in 1991.

As Martin Van Creveld explains in his discussion paper about modern conventional warfare, nuclear weapons capabilities are now quite commonplace in the international community.  “Since 1945, when the first two atomic bombs were dropped, the number of countries with nuclear weapons in their arsenals has increased from just one to ten; namely, the US; Russia; Britain; France; Russia; China; India; Pakistan; Israel, and North Korea.  At least as many countries are capable of producing them quickly should they want to do so, and will presumably do so if they feel that their security is seriously threatened. Out of those, several are working in this direction even now and are expected to go nuclear in the near future. In fact, by the early twenty first century any country sufficiently developed to build and maintain considerable conventional armed forces should also be capable of begging, stealing, or manufacturing nukes (Creveld, 2004)”.  Governments are now more concerned less with the idea of nuclear war and more with the acquisition of nuclear weapons by “rogue states” such as Iraq and North Korea (Rezelman, 2003).  It is for this reason that international policy on nuclear weapons and warfare is necessary.

International Law

            The threat of the possible consequences of an increasing number of states developing or acquiring nuclear weapons over the years has caused policymakers and diplomats alike to pursue international law as a means of controlling that threat (Graham, 2000).  As a result there have been many treaties and agreements between nations over the years, some an attempt to control testing and use and others to create nuclear weapons free zones and limits on the use of nuclear energy.  There have also been defense and missile treaties as well as international agreements to promote human rights and peace.

-Nuclear Non-Proliferation Treaty

“International law, as it relates to the control and spread of nuclear weapons, consists of a collection of largely Cold War-era treaties predicated on the belief that both the spread and existence of large arsenals of nuclear weapons represent a threat to international peace and security. More importantly, these agreements, particularly those in the 1970s that placed limits on U.S. and Soviet nuclear arsenals, were based on the idea that nuclear arms limitations and arms reductions could not be undertaken unless done verifiably and in parallel (Graham, 2000)”.

            One of the most significant treaties is the United Nations nuclear non-proliferation treaty.  This treaty was signed in 1970 and all five nuclear weapon states as well as 187 parties have joined the treaty.  The objective of the treaty is “is to prevent the spread of nuclear weapons and weapons technology, to promote co-operation in the peaceful uses of nuclear energy and to further the goal of achieving nuclear disarmament and general and complete disarmament (UN Department for Disarmament Affairs, 2002)”.  To further the efforts of non-proliferation and build confidence of treaty members, a system of checks and balances was put in place in the form of inspections conducted by the International Atomic Energy Agency (IAEA).  The IAEA inspects for compliance with the treaty and also ensures the security of fissile materials that could be used to create weapons.  In 1991 it was decided upon review that the treaty should remain in force indefinitely.  Although there has not been another nuclear attack equal to that of the atomic bomb on Japan, the treaty seems to have failed in its attempt to prevent the spread of nuclear weapons and nuclear weapons technology.

-Nuclear Weapon Free Zones

“Nuclear Weapon Free Zones (NWFZs) at a minimum prohibit the stationing, testing, use, and development of nuclear weapons inside a particular geographical region, whether that is a single state, a region, or area governed solely by international agreements. They have been identified in many fora, including the Non-Proliferation Treaty and the UN General Assembly, as being positive steps towards nuclear disarmament (Nuclear Age Peace Foundation, 2009).”

Single state zones can be declared through legislation, declarations or constitutions.  Mongolia and Austria have declared themselves as weapons free zones using legislation without the use of treaties while New Zealand and the Philippines have signed a treaty but have also used domestic legislation to go above and beyond the requirements of the treaties they are party to.  The local legislation in Mongolia and Austria prohibits the storage, manufacture or testing of nuclear weapons within their territories but unfortunately it does not serve as a formal agreement from non-weapon states to respect their weapons free status.  Mongolia is hoping to achieve some international recognition of its weapons free status through a formal agreement.  Other single state zones located on or surrounded by water, such as New Zealand, have set domestic legislation to prohibit any ships which are carrying nuclear materials from entering their waters and also aircraft carrying nuclear weapons from landing in their territory which goes beyond New Zealand’s regional requirements under the South Pacific Nuclear Free Zone Treaty (Nuclear Age Peace Foundation, 2009).

Regional zones are weapons free zones formed by agreements from more than one state.  There are currently five regional NWFZs established by treaty.  “The provisions of each zone vary with the language of each respective treaty; however each treaty prohibits the manufacture, production, possession, testing, acquisition, and receipt of nuclear weapons (Nuclear Age Peace Foundation, 2009).”  Each of the treaties also requires each non-weapon state to sign a protocol that lays out specific negative security assurances and respect for the NWFZ.

The five regional zone treaties cover the areas of Latin America and the Caribbean through the Treaty of Tlatelolco, the South Pacific through the Treaty of Rarotonga, Southeast Asia through the Treaty of Bangkok, Africa through the Treaty of Pelindaba, and the Sea Bed, Outer Space and the Antarctic through their respective treaties.  Each of the regions has its own drawbacks because although most of the states in the region have signed and ratified the treaties, there are still some states left to sign or ratify in certain areas.  For example, Cuba has not yet ratified the Treaty of Tlatelolco, The United States has yet to ratify the Treaty of Rarotonga, and none of the states have signed the additional protocols that require negative security assurances of the Treaty of Bangkok (Nuclear Age Peace Foundation, 2009).  The most significant of the regions in current affairs is the Joint Declaration on the Denuclearization of the Korean Peninsula between Korea and North Korea, signed in January of 1992.  “Under this declaration the two countries agree not to test, manufacture, produce, receive, possess, store, deploy or use nuclear weapons, not to possess nuclear reprocessing or uranium enrichment facilities, and to use nuclear energy solely for peaceful purposes.”  However, the treaty has not been enforced because North Korea has threatened to withdraw from the Non-proliferation Treaty.

It is clear that although the Nuclear Weapons Free Zones are a step in the right direction, the issues that face them such as the single state zones not receiving negative security assurances from non-weapon states and the regional zones obtaining the full ratification of their treaties and the transit of material through international waters in these zones remain a problem.  It seems in the case of the non-proliferation treaty as well as the weapons free zones, that the current laws in place are not enough to prevent further actions in regards to nuclear weapons and materials and that it was necessary for the United Nations to turn to the International Court of Justice for an opinion on the matter.

-Legality of Nuclear Weapons

The piece of the puzzle that seems to be missing thus far is the issue of the overall legality of the use of nuclear weapons in terms of international law.  It is excellent that the international community had the idea thus far of attempting to prevent the further use of nuclear weapons through avenues such as the non-proliferation treaty, but is the use of nuclear weapons legal?

On December 20^th of 1994, the UN Secretary General requested that the International Court of Justice (ICJ) answer the question “Is the threat or use of nuclear weapons in any circumstance permitted under international law?”  The court first determined that they held the necessary jurisdiction to reply to the request, which was granted because the charter required the requestor to have authorization from the United Nations.  Next the court questioned the “compatibility of the threat or use of nuclear weapons with international law” and decided that any political motives behind the request were “irrelevant to the establishment of its jurisdiction to give an opinion (Bello & Bekker, 1997).”  After it was decided that the court would make a judgment, the results were delivered.

“The court held: (A) that neither customary nor conventional international law specifically authorizes the threat or use of nuclear weapons; (B) that international law comprehensivley and universally prohibits the threat or use of nuclear weapons; (C) a threat or force by means of nuclear weapons that is contrary to Article 2, paragraph 4 of the UN Charter and that fails to meet all the requirements of Article 51 is unlawful; (D) that a threat or use of nuclear weapons should be compatible with the requirements of the international law applicable in armed conflict (including international humanitarian law) and specific obligations under treaties and other undertakings expressly dealing with nuclear weapons; (E)that the threat or use of nuclear weapons would generally be contrary to the rules of international law applicable in armed conflict, and in particular the principles and rules of humanitarian law, but that in view of the current state of international law and the facts before the Court, it could not conclude definitively whether the threat or use of nuclear weapons would be lawful or unlawful in an extreme circumstance of self-defense, in which the very survival of a state would be at stake; and (F) that there exists an obligation to pursue in good faith and bring to a conclusion negotiations leading to nuclear disarmament in all its aspects under international control (Bello & Bekker, 1997).”

The court concluded that after all the recent world summits to talk of environmental and human security concerns, that is was important that a new level of cooperation was reached and that the UN should declare the first ten years of the twenty first century in creation of a “culture of peace.”  It was quoted by Attorney Jonathan Granoff:  “The moral experience of shame has been placed in us along with the moral sensibility of revulsion. What right do we have to organize ourselves such that we might give human beings the Sophie’s choice of ending all life on the planet in order to save a human creation, the state. As General Omar Bradley stated, “We live in an age of nuclear giants and ethical infants, in a world that has achieved brilliance without wisdom, power without conscience. We have solved the mystery of the atom and forgotten the lessons of the Sermon on the Mount. We know more about war than we know about peace, more about dying than we know about living (Nuclear Age Peace Foundation, 2009).”

The rulings of the court give us the understanding that although the use of nuclear weapons is clearly inhumane and not within the confines of customary or conventional international law, that it cannot make a decision on complete disarmament because use might be legal under extreme circumstances.  Therefore, with this final judgment, the court has given us permission to keep producing, storing and distributing nuclear weapons just incase we might need them in an extreme circumstance.  Each states obligations under any treaty or international law are left to their own understanding and intentions.

Conclusion

            Attempts to control the use and spread of nuclear weapons have failed under any treaty or law.  It is clear that the international community understands the seriousness of the use and threat of these weapons but that they refuse to take necessary steps toward disarmament.  The steps that have been taken thus far have been successful on some fronts but in the long run we are in the same position we were in after the bombs were dropped on Hiroshima and Nagasaki.  Each state that is party to a treaty has agreed to disagree because treaties have not been fully enforced.

The answer to the issue is definitely not clear cut.  Further actions may need to be taken by the weapons states to agree on disarmament and ultimately the destruction of weapons; however with rogue states holding weapons it may be hard for weapons states to disarm themselves first.  It is then fair to disarm a rogue state with the “promise” of destroying any existing weapons held by declared weapons states afterwards?  The reality is that because the technology exists there is always an ability to create a weapon, no matter how many are destroyed.  Therefore, it is clear we cannot prevent the repeat of a nuclear attack or a nuclear war and although it is important to have international law and treaties to police our current affairs and situation, international law is not enough to prevent further actions from taking place only to warn us of possible threats.

References

“Nuclear Weapons”. (2008). Retrieved August 11, 2009, from The Columbia Encyclopedia, Sixth Edition: http://www.encyclopedia.com/topic/nuclear_weapons.aspx

Bello, J. H., & Bekker, P. (1997). Legality of the Threat or Use of Nuclear Weapons. The American Journal of International Law. Vol. 91, No. 1 , 126-133.

Bethe, H. (1991). The Road from Los Alamos. New York: The American Institute of Physics.

Creveld, M. (2004, May 25). Modern Conventional Warfare: An Overview. Retrieved August 11, 2009, from National Intelligence Council: http://www.dni.gov/nic/NIC_2020_2004_05_25_intro.html

Graham, T. J. (2000). International law and the proliferation of nuclear weapons. The George Washington Journal of International Law and Economics .

Nuclear Age Peace Foundation. (2009). Treaties. Retrieved August 11, 2009, from Nuclear Files.org: http://www.nuclearfiles.org/menu/library/treaties/

Rezelman, D. (2003). “Nuclear Weapons.” . Retrieved August 11, 2009, from Dictionary of American History: http://www.encyclopedia.com/doc/1G2-3401803030.html

Sublette, C. (2001, August 9). A guide to Nuclear Weapons. Retrieved August 11, 2009, from The Nuclear Weapon Archive: http://nuclearweaponarchive.org/

UN Department for Disarmament Affairs. (2002). Treaty on the Non-proliferation of Nuclear Weapons. Retrieved august 11, 2009, from UN.org: http://www.un.org/Depts/dda/WMD/treaty/

US Dept of Energy. (2003). The Manhattan Project. Retrieved August 11, 2009, from USDOE Office of History and Heritage Resources: http://www.cfo.doe.gov/me70/manhattan/

Apple Incorporated SEC 10-K Analysis

Amy Wees

Apple Incorporated SEC 10-K Analysis

This project will cover my financial analysis of Apple Corporation after review and presentation of the firm’s financial documents and records.  I will present factual information to the reader and also my analysis and interpretation of the data for use by managers and investors in making more informed decisions about Apple.  I chose Apple because they have several marketable products right now to include the iPod and the iPhone.  It seems they are constantly moving in the right direction financially and technically and also remain ahead of their competitors in the marketplace.

Who is Apple? (MD&A Review)

Apple designs, manufactures and markets personal computing devices such as laptops and personal computers, digital music players to include digital content and cellular telephones.  The company also sells its own line of software and peripherals as well as the Apple operating system.  Apple is focused on providing its customers with “enhanced digital lifestyles (Security and Exchange Commission [SEC] 10-K, 2008)” and their consumer base ranges from individual consumers, small businesses, and enterprises to educational and governmental agencies.  Apple’s product distribution channels are both direct through its own Apple Stores and web-based stores and indirect through major retailers such as Wal-mart and Best Buy, cellular service carriers, private membership warehouses, and online retailers.   The main focus on selling the company’s products is put into its sales force.  Apple invests heavily in the training and careful placement of its sales force in all direct and indirect sales locations so that consumers can be educated on the benefits that only Apple products can offer over its competitors being sold at the same location.  The company believes that the more consumers are educated about the benefits of their product, the more they will remain ahead of the competition (SEC 10-K, 2008).

Products & Inventory records

Apple Inc. sells a wide variety of technological products to include its line of Mac desktop computers such as the Mac Pro for business professionals, the Mac for the home user, and the Mac Mini to appeal to the consumer wanting the latest technology in a small package.  The company also sells a similar line of laptop computers such as the MacBook Pro for advanced users, the MacBook for everyday users, and MacBook Air – the patented ultra slim, ultra light laptop.  Accompanying the desktop and laptop computers is the Mac OS X Operating System, a wide variety of proprietary software and also the Xserve, a server equipped with all of the latest capabilities and materials to appeal to large and small business.  The popular iPod portable digital music players come in a variety of shapes, sizes and colors also to appeal to every consumer.  Along with the iPod is the iTunes online digital music store where consumers can purchase digital music, games, movies, television shows and other content for use with the iPod.  The company also recently launched the popular iPhone, a hand held device capable of providing iPod music and applications, internet and e-mail access as well as mobile phone capabilities (SEC 10-K, 2008).

Apple makes inventory purchase decisions through demand forecasts, product lifecycle status, product development plans, current sales levels and component cost trends.  The company keeps enough inventory on hand to cover shipments and orders based on these forecasts.  These inventory purchases are recorded on the income statement as part of the cost of sales and this cost is recognized in the quarter in which other costs of sales are recorded.  Apple’s net income is reduced by write-downs on products in inventory that have become obsolete or in reduced demand.  Although the forecast of product sales in the future is favorable, additional write-downs could negatively impact Apple’s income if inventory continues to be recorded in this way and sales do not go as planned (SEC 10-K, 2008).

Apple’s competitors

According to the annual report, Apple faces fierce competition in the computer, digital music and overall technology market because of competitors’ abilities to offer very low prices and their own versions of software, hardware and digital music content that may be less proprietary than Apple’s products.  Companies similar to Apple who also sell computer products based on their operating systems have significantly cut prices and lowered their product margins to gain a greater market share.  Similarly, the consumer market is changing its focus from software capabilities more to internet access capabilities.  For Apple to stay ahead of this market, it must offer low cost alternatives to the small, inexpensive internet access devices being introduced to the market (SEC 10-K, 2008).  Yahoo! Finance offers a competitors feature that charts a company’s biggest competitors and their market shares.  Apple’s direct competitor comparison according to Yahoo! Finance is below:

As you can see, the company’s direct competitors are mainly sellers of personal computers although Apple also competes in other markets such as digital music and cellular telephone manufacturer markets.  According to the above comparison, Apple does not make as much revenue or income as other direct competitors but their higher gross margin says they will have more money left over to spend on marketing, operations and research and development to keep them afloat among tough competition.  Their quarterly revenue growth is also the highest, and Price to Earnings Growth (PEG) is very promising over that of competitors.  Based off of these numbers, I would say Apple has a better handle on future sales and revenue then that of its competitors.

Popular Media Views and Reports

Recently in the news, Apple reports that it is dealing with direct competitors by significantly cutting prices on their MacBook laptops in reaction to the growing popularity of netbooks – compact notebook computers that mainly offer internet access for a fraction of the cost of today’s computing notebooks with all of the additional software and hardware offered.  Although, netbooks were once thought by industry research professionals to fail in sales, these little machines have been best sellers this year.  Rumors are circulating in the media that Apple may cut MacBook sales up to $150.00 per unit to counter falling sales last quarter and with such a promising gross margin, the company can definitely afford to take a step in that direction (Elmer-Dewitt, 2009).

In other news from Forbes.com, Apple is reportedly expanding its market in the gaming industry – the last area of the technology market left for Apple to conquer.  The company has hired industry professional leaders such as Richard Teversham from Microsoft’s XBOX team and Bob Drevin, the creator of the Nintendo Game cube’s processor chip.  Plans appear to be in the works to corner the handheld gaming market for Apple’s new generation of iPods and iPhones.  There was also a large amount of money invested in semi-conductor technology through acquirement of Imaginations Power VR graphics technology and purchase of a processor designer called PA Semi.  This new technology is reportedly being used to improve the iPods and iPhones with newly produced silicon as well as faster processors and better cameras and technology (Caulfield, B. 2009).  So far, the future is looking bright!

Revenue Recognition

Like most other companies, Apple uses accrual accounting for revenue recognition in accordance with the American Institute of Certified Public Accountants.  For this purpose, revenue is recorded when the product is in the buyers possession after shipment has occurred, if shipment requires the company to be liable for the product until it is delivered, or it is recognized when it is purchased online (such as software purchases) or by the retailer.  According to the SEC 10-K, revenue is recognized when an arrangement exists, the product is delivered, the sales price is determined and payment is probable.  This is where many financial analysts draw the line between cash flows and accrual accounting.  Because payment is only probable and has not yet been received, sometimes it is more useful to use the operating cash flow amounts in conjunction with the net income amounts reported in financial documents when determining if investments in a company are sound decisions (Marshall, McManus, & Viele, 2008).

Ratio relationship and analysis of:

• Income Statement (SEC 10-K, 2008)

Income Statement Analysis

Apple uses a multiple-step formatted income statement which shows gross profit as well as operating income.  Net income has increased significantly due to market expansion of the iPod and iPhone and increased brand recognition over the past few years.  The company has a very efficient gross profit margin in 2008 of 34.3 percent ($11,145,000 Gross Profit / $32,479,000 Total Revenue) and 34 percent in 2007.  Investors use this percentage to determine the amount of money a company has left over after subtracting the cost of goods sold.  At a steady gross profit margin of 34 percent, investors can be sure that Apple has plenty of money left for profitability as long as overhead costs remain low.  Another positive sign is that the gross profit margin is not fluctuating by a large amount over time, which can be a sign of fraud or accounting irregularities (Kennon, 2001).

Another consideration of the income statement is the Cost of Good Sold (COGS) or Cost of revenue percentage.  In 2008, Apple’s COGS percentage was 66 percent, relatively high compared to major competitor Microsoft’s COGS percentage of only 19 percent for the same year.  It is clear that the cost of Apple’s inventory is high and this could be an area where costs could be cut to increase profitability.

Overall, I would say the income statement for the company shows promise for the future. Overall income has increased over time; gross profit margin has also remained consistent and shows profitability.   I do not consider the COGS percentage to be negative as the company prides itself on its higher priced goods and all other percentages prove strong sales volume.

Balance Sheet Analysis

Below is the Balance Sheet captured from the SEC 10-K.  The balance sheet shows the liquidity of Apple and the ability of the company to pay debt in the short term or the current ratio.  In 2008, Apple’s current ratio was (2.46:1).  Another words, for every $1.00 of current liability due in the next year, the company has $2.46 in current assets that will convert to cash during the year to pay the debts.  A current ratio of 2.0 or higher is considered healthy for a business.

Another consideration from the balance sheet and income statement is the Return on Assets (ROA) ratio, or the company’s ability to generate profit.  In 2008, Apple’s ROA ratio was 12.22 percent ($4,834,000 net income / $39,572,000 total assets).  For every $1.00 of assets Apple has, a profit of $.12215 is returned.  This is the equivalent of a 12 percent return on investment and is very favorable from an investors or managers perspective (Marshall, McManus, & Viele, 2008).

• Balance Sheet  and Stockholders Equity (SEC 10-K, 2008)

Lastly, we can look at how much Apple Inc. invested in the company.  Apple has no long term investments which is favorable as they are not paying accrued interest on these investments and $12,615,000 in short term investments.  Another favorable ratio is the Return on Equity (ROE), which reveals how much profit a company has generated from the money shareholders have invested (Investopedia, 2009).  In 2008, Apple had a ROE ratio of 23 percent ($4,834,000 net income / $21,030,000 shareholder’s equity).  This is a very favorable profit returned on monies invested by stockholders.  In comparison that same year, competitor Microsoft had a ROE of 49 percent ($17,681,000 net income / 36,286,000 shareholder equity).  Again, although Microsoft has a higher ROE, Apple remains a sound investment decision based on other factors in competitor data such as market share and gross margin.  It is however important for investors and management to compare the profitability of a company of interest to other companies in the same industry for sound decision making purposes (Investopedia, 2009).

• Cash flows (SEC 10-K, 2008).

The cash flow statement shows how much actual cash a company has generated, whereas the income statement shows accrual accounting of revenues and expenses.  It is important for investors and managers to pay attention to the cash flow statement because it shows the ability of a company to actually pay for its operations and growth.  The ability to produce cash shows how well a company will fare if the business gets into financial trouble (McClure, 2009).  Cash flows from financing activities have significantly increased over the past few years while overall change in cash and cash equivalents decreased by $437,000 in 2008.  The balance of the two numbers shows that although the change in cash flow has decreased, the company has increased its financing activities and is improving revenue from that aspect.  As an investor, this would be promising and should not cause alarm because of other totals on the cash flow statement such as the cash flow from operating activities increasing significantly over the past few years.  The cash flow statement proves that Apple Inc. is more than capable of paying down debt should the future present challenges.  The statement also shows that Apple is moving its cash flow from operating activities to investment activities for further cash flow in the future.

Based on the analysis of Apple Inc.’s financial statements, and SEC 10-K I would say that the company has a firm handle on the market and is ahead of its competitors in forward thinking about future operations and investments.  The financial analysis shows a strong financial standing as well as a definite ability to handle adverse financial situations should they occur.  Management would be smart in looking to Apple to stay ahead of competition in the technological market as well as to offer Apple’s products and sales force in their retail facilities.  Investors can be fairly certain that Apple is a sound investment option as a company with a plan for maintaining its stronghold in the current market as well as in possible future markets.  Apple is expanding its operations and product line at a safe rate while also anticipating changes for current products as they become obsolete or do not meet today’s consumer requirements in technology.  Finally, from an accounting perspective, the numbers on the financial statements show sound accounting practices over time and the statements and company objectives on the SEC form 10-K seem to line up with the company’s overall financial reporting.

References:

Caulfield, B. (2009). Apple’s Interest in Gaming isn’t Casual. Forbes.com. Retrieved April 20, 2009 from http://www.forbes.com/2009/05/01/apple-gaming-iphone-technology-enteprise-tech-apple.html?partner=yahootix

Direct Competitors Comparison. (2009). Direct Competitors data from Hoovers Inc. Retrieved from http://finance.yahoo.com/q/co?s=AAPL

Elmer-Dewitt, P. (2009). Would you pay $849 for a new MacBook? Fortune. Retrieved April 20, 2009, from http://apple20.blogs.fortune.cnn.com/2009/05/03/would-you-pay-849-for-a-new-macbook/?source=yahoo_quote

Investopedia. (2009). Return on Equity. Forbes Digital. Retrieved April 24, 2009 from http://www.investopedia.com/terms/r/returnonequity.asp

Kennon, J. (2001).  Calculating Gross Profit Margin. About.com. Retrieved April 28, 2009 from http://beginnersinvest.about.com/cs/investinglessons/l/blgrossmargin.htm

Marshall, D. H., McManus, W. W., & Viele D. F. (2008). Accounting: What the Numbers Mean, 8e. New York: McGraw-Hill/Irwin.

McClure, B. (2009). Fundamental Analysis: The Cash Flows Statement.  Investopedia. Retrieved April 24, 2009 from http://www.investopedia.com/university/fundamentalanalysis/fundanalysis8.asp

Security and Exchange Commission. (2008). Annual Report for Apple Inc (SEC Form 10-K). Washington, DC. Retrieved April 24, 2009 from http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001193125-08-224958

The Importance of Corporate Information Security

Amy Wees

Introduction

Operational Security (OPSEC) was a term first coined by the military meaning to keep information about operations in any format a secret.  During World War II, the ad campaign “Loose lips sink ships” was used to train both American’s and military troops to keep any information about troop movements and military plans quiet as to protect troops from enemy danger.  According to eyewitness to history.com, newly enlisted troops were given a pamphlet which read as follows:

“WRITING HOME – THINK! Where does the enemy get his information — information that can put you, and has put your comrades, adrift on an open sea: information that has lost battles and can lose more, unless you personally, vigilantly, perform your duty in SAFEGUARDING MILITARY INFORMATION (Eyewitness, 1997)?”

“TALK – SILENCE MEANS SECURITY — If violation of protective measures is serious within written communications it is disastrous in conversations. Protect your conversation as you do your letters, and be even more careful. A harmful letter can be nullified by censorship; loose talk is direct delivery to the enemy.

If you come home during war your lips must remain sealed and your written hand must be guided by self-imposed censorship. This takes guts. Have you got them or do you want your buddies and your country to pay the price for your showing off. You’ve faced the battle front; it’s little enough to ask you face this home front (Eyewitness, 1997).”

“CAPTURE – Most enemy intelligence comes from prisoners. If captured, you are required to give only three facts: YOUR NAME, YOUR GRADE, YOUR ARMY SERIAL NUMBER. Don’t talk, don’t try to fake stories and use every effort to destroy all papers. When you are going into an area where capture is possible, carry only essential papers and plan to destroy them prior to capture if possible. Do not carry personal letters on your person; they tell much about you, and the envelope has on it your unit and organization (Eyewitness, 1997). “

In today’s technologically innovative and globally competitive market, OPSEC is not just a military term or concept anymore.  The “enemy” is everywhere and the fight to win the war on the market (whatever that market may be) is a serious feat in private and government sectors.  OPSEC has expanded into other areas such as information security and computer security and businesses are learning very quickly that protecting company information and the information of their customers is perhaps the most important thing they do day to day.  Why is information security management of utmost importance to today’s organizations; specifically in regards to employee training and participation?

Look back at the pamphlet given to the troops.  The first category is written communication.  Every business writes down significant information about their company, its vision and mission, daily operations, new ventures, and potential flaws in its product lines.  How much of this information ends up on the internet or could be hacked by a company server connected to the internet?  What about the printed information that ends up in the garbage, in e-mail boxes, or on fax machines?  If even one competitor were to gain access to your facility, what might they find?  More importantly, what is out there in cyberspace in plain view for competitors to piece together?  How much information do employees share on social networking sites where their personal profiles contain their workplace information?  What about resumes and job openings posted on job sites that give information about new openings for new projects?

The next category on the pamphlet is “talk – silence means security”.  So much information is leaked through telephone and casual conversations.  Employees are excited about that new project they are working on and they want to talk about it!  Really, who is listening?  Unfortunately, people generally have a high level of trust for other people.  They want to believe people are good intentioned, even when they aren’t.  Just how easy is it for a competitor to get information over the phone?  They simply need to sound like they are a trusted party.  For example, if I am a competitor working for Company A, and I want to find out if Company B is working on a new technology, I can simply look up a few contacts on the corporate website, make a few phone calls introducing myself under an alias (such as a contractor for the “special project”) and find out by piecing the information together whether Company A is working on the new technology, who the point of contact is and what other sources are party to the information.

Who is vulnerable?

Every single business large or small is vulnerable to security breaches. “Today information can be seen as a basic commodity, similar to electricity, without which many businesses simply cannot operate (Niekerk & Solms, 2010).”  Few if any businesses operate within themselves without their information or their customer’s information traveling to some outside source.  The internet, telephone and network lines are the mainframe for travel of information and data today.  Unfortunately, none of this data can be completely protected from interception.

One primary example of data vulnerability is the Payment Card Industry (PCI) compliance standards in the hotel and retail industries.  An article by Jason Freed (2010) in Hotel & Motel Management notes that the hotel industry is highly targeted by identity theft hackers, accounting for a whopping thirty-eight percent of security breach investigations noted in a 2009 Trustwave Global Security Report.  The report showed that most of the security breaches came from human error and employees failing to follow basic security measures such as closing databases, securing servers, and creating user IDs and passwords that aren’t easy to guess.  Many of the hotels also do not have security training for employees and outsource information technology, leaving no one on staff oversight of customer credit card data.  (Freed, 2010)

What about other private company and customer data?  A search through the media archives reveals laptops containing social security numbers and customer data were stolen from the Veterans Administration, social networking sites Facebook and Twitter administrator user accounts were hacked and high profile user accounts and private company data were accessed, criminals in Massachusetts figured out how to withdraw money from multiple personal credit union accounts, a stolen file server at AIG contained over a million account user’s personal data, and the most recent story of researcher Barnaby Jack demonstrating at the Black Hat security conference in Las Vegas how he hacked several different Automatic Teller Machines overwriting their code with a simple USB device causing them to spew out all contained money.

Despite the security breaches broadcasted daily in the media and in countless studies, businesses and Chief Information Officers (CIOs) remain confident that their security is adequate and are naïve to realities.  A 2006 CIO Insight article by Allan Alter reports that one in three companies reported a security breach in the past year and one in four says it has been targeted by organized criminals.  There were eight key findings noted in this article from a survey conducted by CIO Insight of 277 IT executive respondents from various companies.  The first finding was that only 1 of 10 respondents thought that their company was at high risk for an information security risk, financial institutions reporting the most risk.  The second finding was that IT executives are extremely satisfied and confident with anti-virus and anti-spy software.  The third finding reported that improved enterprise-wide security strategies were in place at 78% of respondent’s companies.  The fourth showed employee negligence and vulnerabilities to Microsoft programs bring the highest security risks with no change in top employee security concerns.  The next finding showed a surprising 48% of the large companies surveyed had been targeted by online criminals including disgruntled ex-employees. Finding six was that companies are not doing enough to keep customer and employee data private and only half actually notified customers when their data had been compromised.  Many companies are also not doing much more than password protecting their data, which isn’t enough in most cases.  In the next finding a disturbing one in six companies had lost equipment containing company data in the past year and one in three respondents admits a security breach in the past year.  The last finding reports most security policies are not firmly practiced in 75 % of the surveyed companies. (Alter, 2006)  The results of the survey are contradictory.  How can so many IT executives have faith in the system when clearly the system is failing in so many instances?

What are the costs?

“Many CEOs and CIOs are slow to invest in computer security because they do not know how to measure their Return on Investment (ROI) (D’Amico, 2000).”  Security systems and software do not generate income, so it is hard for a business to rationalize what solutions are adequate.  Businesses also want systems and hardware that are easy to use and security generally makes systems less usable.  Van Nikerk and Von Solms (2010, p. 476) make the argument that “the goal of securing information is, to a certain extent, in conflict with the normal business goals of maximizing productivity and minimizing cost.”  Perhaps if management were to invest in security programs after financing a breach, they might see the return on investment.

What happens to the company when the system fails?  What are the costs of a security breach? D’Amico (2000, p. 1) points out the following tangible and intangible aspects of a breach:

Tangible (D’Amico 2000 p.1)

• Lost business, due to unavailability of the breached information resources
• Lost business, that can be traced directly to accounts fleeing to a “safer” environment
• Lost productivity of the non-IT staff, who have to work in a degraded mode, or not work at all, while the IT staff tries to contain and repair the breach
• Labor and material costs associated with the IT staff’s detection, containment, repair and reconstitution of the breached resources
• Labor costs of the IT staff and legal costs associated with the collection of forensic evidence and the prosecution of an attacker
• Public relations consulting costs, to prepare statements for the press, and answer customer questions
• Increases in insurance premiums
• Costs of defending the company in any liability suits resulting from the breached company’s failure to deliver assured information and services.

Intangible (D’Amico 2000, p.2)

• Customers’ loss of trust in the organization
• Failure to win new accounts due to bad press associated with the breach
• Competitor’s access to confidential or proprietary information

There are other possible losses not mentioned here including stock prices falling due to lack of trust in the organization, employee morale and trust in management degraded, and most importantly the effects on the personal and financial livelihoods of the people whose private information has been revealed.

Financial losses can be the most unanticipated because nearly all of the costs, intangible or tangible, have a significant associated financial consequence for the organization. Dependent on the type of breach and the amount of data compromised, security breaches can cost anywhere from $90.00 to $350.00 per record according to Forrester research not including the intangible losses. (D’Amico 2000) If the breach is significant, it can force a business into bankruptcy so it is important for executives to estimate the cost of a possible breach based on various research studies and the amount of data protected and factor this into the company’s financial plan.

Why does this happen?

            After decades of research, data, and improvement in security technology one would think that it is possible for a business to have a good chance of avoiding a security breach.  Unfortunately, along with technological advancement come increased vulnerabilities in computer systems.  Hackers and coders are updating their technology and innovations faster than most companies update their own.  Anti-virus and anti-malware software can only work as well as the technicians that install and update them.  If a business outsources their information technology, there is no guarantee that the employees working on local computers are ensuring security software is up to date.

Research shows the biggest threat to an organization’s security is not the security software, but the employees who work there.  “Employee’s, whether intentionally or through negligence, often due to lack of knowledge, are the greatest threat to information security (VanNiekerk & VonSolms, 2010, p. 477).”   Simply put in most cases employees do not have the knowledge to apply the correct security techniques every time.  This threat increases if the company fails to train employees on proper security procedures and develop security policies which relay the importance of protecting corporate and customer data.

Prevention (training, stakeholders, accountability, IT upgraded/budgeted)

In an effort to protect themselves and also arm themselves with competitor information, corporations are hiring a slew of security professionals.  This includes A fairly newer concept beyond that of the CIO is business intelligence.  Daft (2010 p. 573) defines business intelligence as “high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant in helping managers to make better strategic decisions.

References:

Albrechtsen, E., & Hovden, J. (2010). Improving information security awareness and behaviour through dialogue, participation and collective reflection. An intervention study. Computers & Security, 29(4), 432-445. doi:10.1016/j.cose.2009.12.005

Allen, M. (2005). A day in the life of mobile data. Management Services, 49(4), 14-15. Retrieved from Business Source Complete database.

Alter, A. (2006). IT CAN’T HAPPEN HERE–BUT IT DOES. CIO Insight, (72), 41-53. Retrieved from Business Source Complete database.

Caelli, W. (2002). Trusted …or… trustworthy: the search for a new paradigm for computer and network security. Computers & Security, 21(5), 413-421. Retrieved from Business Source Complete database.

Da Veiga, A., & Eloff, J. (2010). A framework and assessment instrument for information security culture. Computers & Security, 29(2), 196-207. doi:10.1016/j.cose.2009.09.002

Davis, D. (1992). OPSEC: Not for government use only. Security Management. Retrieved from http://www.thefreelibrary.com/_/print/PrintArticle.aspx?id=11871376

D’Amico, A. (2000). What does a computer security breach really cost? Secure Decisions. Retrieved from http://www.avatier.com/files/pdfs/CostsOfBreaches-SANSInstitute.pdf

Daft, R. (2010).

Eyewitness to History.  (1997). Loose lips sink ships.  Retrieved from http://www.eyewitnesstohistory.com/lslips.htm

Freed, J. (2010). Create a security culture of data protection, compliance. Hotel & Motel Management, 225(5), 1-28. Retrieved from Business Source Complete database.

Straub, D.W., & Welke, R.J. (1998). Coping with systems risk: Security planning models for management decision making. MIS Quarterly, 22(4), 441-469. Retrieved from http://www.jstor.org/stable/249551

Van Niekerk, J., & Von Solms, R. (2010). Information security culture: A management perspective. Computers & Security, 29(4), 476-486. doi:10.1016/j.cose.2009.10.005

1. I.                   Choose a Business Model
   1. a.       What type of business will you establish?  Online, brick and mortar, part or full time, home based, franchise, licensed product or marketing.
   2. b.      Ensure you are committed to working the number of hours required to start your business and that you are financially ready or research what financial options are available to you.
2. II.                Write a Business Plan
   1. a.       Decide what kind of business you would like to establish, how small or large it will be, whether you will have employees, how much it will cost to run, and how you will fund your business.
   2. b.      Ensure you have some experience in the business you are starting, if not ensure you either work for a similar business or do extensive research on the workings of such a business.
   3. c.       Do some market research to find out what other businesses like yours are in the area; find out if the market share is large enough for your business to fit in the area.
   4. d.      What are your goals, who are your customers, how will you make a profit, how will you measure success?
3. III.             Choose a business structure; evaluate the advantages and disadvantages of each one.
   1. a.       Sole proprietorship
   2. b.      Partnership
   3. c.       Corporation
   4. d.      Limited Liability Corporation
4. IV.            Get your taxes lined up
   1. a.       Get a tax ID number
   2. b.      Get a federal tax ID number
5. V.               Register and/or Certify your business
   1. a.       Register or certify your business depending on state requirements (state.gov website)
6. VI.            Create Key Business Assets
   1. a.       Website Address
   2. b.      Trademarks
   3. c.       Copyrights
   4. d.      Patents
   5. e.       Provisional Applications for Patents
   6. f.       Inventors Logs
   7. g.      Confidentiality Agreements
7. VII.         Get Funding
   1. a.       Bootstrapping – pulling money from your own credit/assets
   2. b.      Debt Financing
   3. c.       Grants (such as those sometimes offered for Women owned businesses)
   4. d.      Friends and Family
   5. e.       Investors
   6. f.       Factoring
   7. g.      Venture Capitalists
8. VIII.      Organize Logistics – you must get everything in order before starting your business such as
   1. a.       Have your books in order
   2. b.      Your contracts made up or lined up
   3. c.       Money safely placed and ready
   4. d.      Cover your downside
   5. e.       Accountants, Lawyers, Insurance agents, and Bankers can help
9. IX.            Hire good people
   1. a.       Have a good mentor
   2. b.      Hire great employees with experience
   3. c.       Have good incentives to keep your great employees on your team!
10. X.                Establish your brand
    1. a.       Your brand should sell YOUR product
    2. b.      Be strong
    3. c.       Send a message about your business
11. XI.            Market and Sell
    1. a.       Do market research
    2. b.      Get the word out about your business
    3. c.       Establish customer target audience
    4. d.      Ensure that you have the right resources for your customer to pay for and receive your product such as credit card acceptance and shipping policies.

Below are some South Carolina state specifics and resources I found for Women Owned businesses.

Every state or jurisdiction has a process that you need to follow in order to start a business.  In the state that you are starting your business, where do you go to register the business?  What information is required?  How do you obtain your tax id or determine the regulations for your state?

Obtained from http://www.sctax.org/Publications/startbusns.html

A General Tax Guide for Starting a Small Business in SC 

If you are starting a new business or just thinking about it, you will want to know more about your tax obligations. This publication is intended to give you some basic information about South Carolina’s tax laws and how you, as a business owner, are affected. The South Carolina Department of Revenue wants to help your business succeed. We have offices in nine cities throughout the state and we invite you to drop in to discuss your business tax requirements.

Forms of Business Organization

There are several forms of business organization from which you may choose for your new business. Before deciding which form is best for your business, you may want to consult a tax adviser. The most common forms for business organizations are:

Sole proprietorship

A sole proprietorship is a business that is owned by an individual who is responsible for all aspects of the business. The owner is personally responsible for all debts of the business, even in excess of the amount invested in the business.

Partnership

A partnership is a legal entity that is jointly owned by two or more people. As in the sole proprietorship, the partners or owners may be personally responsible for all debts of the business, even those in excess of the amount invested in the business.

Corporation

A corporation is a business that is formed and authorized by law to act as a single person and is legally endowed with rights and responsibilities.

Limited liability company

A limited liability company (LLC) is an unincorporated business association that provides its owners (members) limited liability and flexible management and financial alternatives. An LLC usually provides the favorable pass-through tax treatment of partnerships and the limited personal liability of corporations.

Registering Your Business

The first thing you’ll need to do before opening your business is to register the business. If your business is a corporation, limited partnership, limited liability company or limited liability partnership you need to register with the Secretary of State.

Most businesses also must register with the South Carolina Department of Revenue. Some small, sole proprietorship businesses that are service-related and not selling goods and products to customers, may not have to be registered with the Department of Revenue. However, if you have any employees, you will be required to register to withhold income tax from employee wages.

You may be required to register with the South Carolina Employment Security Commission to report and pay unemployment insurance for your employees. You also may be required to register with the Workers’ Compensation Commission.

The city or county where you locate your business may require you to obtain a local business license. Certain types of businesses may be required to be registered with other state agencies. A lawyer or small business adviser can be especially helpful in ensuring that you register with all the proper government agencies.
Registering with the Department of Revenue

You can register for the most common state business taxes by completing Form SCTC-111, Business Tax Application, which can be obtained from our website at www.sctax.org or by calling our Forms Office at (803) 898-5599. You can use this form to register for a retail license, a purchaser’s certificate of registration, solid waste tax, business personal property tax and income tax withholding. Depending on the type of business you have, you may need to make application for the following licenses or permits:

Admissions Tax License
Alcoholic Beverage License
Bingo License
Tobacco Manufacturers’, Distributors’ and Wholesalers’ Licenses
Coin-Operated Device License
International Fuel Tax Agreement Permit
Gasoline Dealers, Special Fuel Suppliers and Seller Users Licenses
Soft Drinks License

Purchasing the Assets of a Business

If you buy the assets of a retail business, sales tax which may be owed by the previous owner transfers to you. The sales tax owed is a lien against the business inventory and equipment. You cannot obtain a retail license until the tax is paid. Unpaid business personal property tax owed on the assets remains with the assets, therefore the tax debt also transfers to the new owner.

The Retail License

Before you start a retail business in South Carolina, you will need a retail license. Apply for the license on Form SCTC-111. The retail license must be obtained by all retailers, including those making infrequent sales in this state. If you have more than one business outlet, you must obtain a separate retail license for each location. The fee for each permanent retail license is $50. This license is good for as long as you own your business at that location. You do not have to renew the retail license.

If you sell arts and crafts which you make yourself, you can buy a special retail license for $20 to use for sales at arts and crafts shows and festivals. If you have no permanent retail location, you can purchase a transient retail license for $50 which will allow you to make sales throughout the state, but in only one location at a time.

Purchaser’s Certificate of Registration

A purchaser’s certificate of registration is required for someone who does not make retail sales but who purchases goods from outside this state to store, use or consume in South Carolina. Generally, the certificates are issued to construction contractors but is needed by any business which purchases goods from outside South Carolina. If you are licensed as a retailer, you do not need a purchaser’s certificate of registration.

Sales and Use Tax

Sales tax is an excise tax imposed on the sale of goods and certain services in South Carolina. Use tax is imposed on goods purchased out of state and brought into South Carolina for your own use or consumption or on those sales for which no sales or use tax has been paid.

The statewide sales and use tax rate is 5%. The following counties also impose an additional 1% local sales and use tax: Abbeville, Allendale, Bamberg, Barnwell, Berkeley, Charleston,, Chester, Chesterfield, Clarendon, Colleton, Darlington, Dillon, Edgefield, Florence, Hampton, Jasper, Kershaw, Lancaster, Laurens, Lee, Marion, Marlboro, McCormick, Pickens, Saluda, Sumter and Williamsburg.

Cherokee County imposes a 1% special local sales tax for schools. While not the local option sales and use tax, it is collected, reported and paid the same way.

Chester, Jasper, Newberry, Orangeburg and York counties imposes a 1% special local sales tax for capital projects. While not the local option sales and use tax, it is collected, reported and paid the same way.

Beaufort County imposes a 1% special local sales tax for transportation (effective 6/1/99).

Counties and municipalities also may pass local sales taxes on food, beverages and accommodations. Check with the governing body where your business is located.

Unless specifically exempt or excluded, all sales are subject to the sales or use tax. There are numerous exemptions and exclusions from the sales and use tax. Call the Department of Revenue at (803) 898-5788 to determine if any apply to your business.

The rental of transient accommodations, such as in hotels, motels, campgrounds and vacation homes, is subject to a 7% accommodations tax. The local option sales and use tax applies, along with any local accommodations tax imposed by counties and municipalities.

If you operate a retail business, you must report and pay sales tax to the Department of Revenue on all your sales. You may pass the sales tax along to your customers, but reporting and remitting the tax is your responsibility. If you’re buying merchandise for resale later, you do not need to pay the sales tax at the time you make the purchase, but the tax becomes due when the merchandise is sold at retail or withdrawn from inventory for your own use. You must present a resale certificate, Form ST-8A, to the seller in order to make the purchase tax-free. If you’re buying merchandise out of state for use in your business and not for resale, you must pay the use tax.

Report and pay sales and use tax on Form ST-3, Sales, Use and Local Option Return. If you rent accommodations, report the tax on Form ST-388. Depending on the amount of your sales, the Department of Revenue may authorize you to file returns and pay tax monthly, quarterly or annually. You must file monthly returns until you are authorized to do otherwise. You must file a sales tax return even if you had no sales during the reporting period.

A voluntary program to remit sales tax through electronic funds transfer is available. To participate, call the Department of Revenue at (803) 898-5828.

Income Tax

South Carolina’s top individual income tax rate is 7% and the corporate income tax rate is 5%, one of the lowest in the nation.

The way you report income from your business will depend on your business organization. If you create a corporation, you will register your business with both the Secretary of State and the Department of Revenue. As a corporation, in addition to the income tax, you must pay an annual corporate license tax which is based on capital stock and paid-in surplus of the corporation. The minimum annual license tax is $25. This is paid in advance along with the corporate income tax return each year.

You may decide to form a partnership with other individuals. If so, you must file a partnership return (SC1065) and report your share of the business income or loss on your personal income tax return.

If you form an LLC, you file the same type of return (corporate or partnership) with South Carolina as you file with the IRS. Forming a corporation, an LLC or a partnership usually requires the assistance of a lawyer.

If you are a sole proprietor, you report all income from your business on federal Schedule C of your personal income tax return. South Carolina does not have a separate Schedule C. For a South Carolina resident, federal taxable income is your starting point in determining how much state income tax you may owe.

Generally, South Carolina follows federal tax laws regarding your business income. If the Internal Revenue Service allows you to take deductions for business expenses or other costs, those deductions will be allowed for the purpose of determining your South Carolina taxable income. Federal taxable income is your starting point in determining how much state income tax you may owe.

Income Tax Withholding

If you have at least one employee working for you, you will need to register as a withholding agent for state income tax. If you form a corporation, you are considered an employee and must withhold income tax from your income.

You will withhold the state income tax from each employee’s salary and remit it to the Department of Revenue on a regular basis. The size of your payroll will determine the frequency and method of payment that is required of you. You may be required to pay the withholding taxes by depositing the money directly into a local bank or you may be required to mail your withheld income taxes to the Department of Revenue.

If you withhold $20,000 or more in any calendar quarter, you must pay withholding through electronic funds transfer. Your dates for paying the withholding tax to the Department of Revenue are the same dates required for you to pay the Internal Revenue Service. Complete details for withholding income taxes from your employees along with forms and withholding tables will be given to you when you register with the Department of Revenue.

Estimated Income Tax Payments

If you are a sole proprietor, partner, shareholder of an S corporation or a member of a limited liability company, you will be responsible for reporting and paying estimated tax on your income. These payments are made quarterly. Estimated tax payments for individuals are due on April 15, June 15, September 15 and January 15. Estimated tax payments for C corporations are due on the 15th day of the third, sixth, ninth and 12th months of the tax year.

Property Tax

Property tax is administered and collected by local governments with assistance from the Department of Revenue. Real and personal property are subject to the tax. The tax is paid by individuals, corporations, partnerships, etc. owning property within the state.

Each class of property is assessed at a ratio unique to that type of property. The assessment ratio is applied to the market or use value of the property to determine the assessed value of the property. Each county, municipality, school district and other tax district then applies its millage rate to the assessed value to determine the tax due. The following ratios are applied to each class of property to determine the assessed value: (fmv=fair market value)

Manufacturing – 10.5% of fmv
Utility – 10.5% of fmv
Railroads, Private Carlines, Airlines and Pipelines – 9.5% of fmv
Legal residences – 4% of fmv
Agricultural (owned by individuals, partnerships and LLCs) – 4% of use value
Agricultural (owned by most corporations) – 6% of use value
Other real estate – 6% of fmv
Personal property – 10.5% of income tax depreciated value
Motor vehicles – 10.5% of fmv
Motor carrier vehicles – 9.5% of fmv

When you register your business for a retail license, you will automatically be registered for business personal property tax. Form PT-100 will be mailed annually to you to complete. You are required to report and pay property tax on any furniture, equipment and fixtures you maintain in your business. The tax is levied and collected by your local government.

Business Tax Incentives

You may qualify for tax incentives for your new business. Location of the business, total capital investment and number of employees hired are all factors which determine your eligibility for tax incentives. For more information, see the Department of Revenue’s publication Tax Incentives for Economic Development, on our website at www.sctax.org.

What certifications are necessary or available for women owned businesses?

Derived from http://www.govoepp.state.sc.us/osmba/apps.html

Certification as a Minority Business Enterprise (MBE)

1. A South Carolina business seeking certification as a Minority Business Enterprise must submit to OSMBA an application and any supporting documentation as may be required. It is the responsibility of an applicant business and its owner(s) to provide information to OSMBA about its economic situation when it seeks certification.
2. OSMBA will conduct an interview of the owner(s) at their place of business and a site visit of the business as part of the certification approval process.
3. The Certification Board within OSMBA will determine if the business is controlled and operated by socially and economically disadvantaged individuals. Upon recommendation of the Certification Board, OSMBA will certify the business as a socially and economically disadvantaged small business and issue a Certification as authorized by Section 11-35-5270 of the Procurement Code.

Certification Board/Procedures:
The certification board, as defined below, is responsible for reviewing files and applications in order to determine whether a business should be recommended for approval or disapproval by the Director of the OSMBA (hereinafter referred to as the Director) as a certified business in compliance with Article 21 of the South Carolina Consolidated Procurement Code.

Applications for certification must be addressed to the Director. Upon receipt, OSMBA shall conduct an investigation of the applicant and provide the results to the Certification Board. Failure to furnish requested information will be grounds for denial or revocation of certification.

Eligibility:
Eligibility requirements for certification as a Minority Business Enterprise (MBE) are per 19-445-2160 of the South Carolina Procurement Code Regulations and Title 49, Part 26, of the Code of Federal Regulations (CFR). In order for a firm to be certified, it must be found to be a small independent business owned and controlled by a person or persons who are socially and economically disadvantaged. The following factors will be considered in determining whether the applicant is eligible for certification:

1. Small Business

The applicant firm must be an existing “for profit” business. It must also meet the federal definition of a small business based on its primary SIC/NAICS code, as described by the US Small Business Administration (SBA), and must not exceed the small business size standard established for it’s particular line of work.

2. Independent Business

• Recognition of the business as a separate entity for tax or corporate purposesis not necessarily sufficient for certification under Article 21. In determining whether an applicant for certification is an independent business, OSMBA shall consider all relevant factors, including the date the business was established, the adequacy of its resources, and relationships with other businesses.
• A joint venture is eligible if one of the certified business partners of the joint venture meets the standards of a socially and economically disadvantaged small business and this partner’s share in the ownership, control and management responsibilities, risks and profits of the joint venture is at least 51 percent, and this partner is also responsible for a clearly defined portion ofthe work to be performed

3. Ownership and Control

• The business must be 51 percent owned by socially and economically disadvantaged persons. The OSMBA will examine closely any recent transfers of ownership interests to insure that such transfers are not to be made for the sole purpose of obtaining certification.
• Ownership shall be real, substantial and continuing and shall go beyond the pro forma structure of the firm as reflected in its ownership documents. The minority owners shall enjoy the customary incidents of ownership and shall share in the risks and profits commensurate with their ownership interests, as demonstrated by an examination of the substance rather than form of ownership arrangements.
• The contribution of capital or expertise by the minority or women owners to acquire their interest in the business shall be real and substantial. Examples of insufficient contributions include gifts, inheritance, a promise to contribute capital, a note payable to the business or its owners who are not socially disadvantaged and economically disadvantaged, or the participation as an employee, rather than as a manager.

Disadvantaged owners must be US citizens and meet the federal definition of socially and economically disadvantaged as defined by 49 CFR 26.67. Presumptive groups include “women, Black Americans, Hispanic Americans, Native Americans (including American Indians, Eskimos, Aleuts and Native Hawaiians), and Asian Pacific Americans. Personal networth of a disadvantaged owner cannot exceed $750,000.

Definition of terms:
A “Minority Person” means a United States citizen who is economically and socially disadvantaged.

“Socially disadvantaged individuals” means those individuals who are members of the following groups: Black Americans; Hispanic Americans; Native Americans (including individuals recognized as American Indians, Eskimos, Aleuts and Native Hawaiians), Asian Pacific Americans and Women.

“A socially and economically disadvantaged small business” means any small business concern which:

(a) At a minimum is fifty-one (51) percent owned by one or more citizens of the United States who are determined to be socially and economically disadvantaged and who also exercise control over the business.

(b) In the case of a corporation, at a minimum, fifty-one (51) percent of all classes of voting stock of such corporation must be owned by an individual or individuals determined to be socially and economically who also exercise control over the business.

(c) In the case of a partnership, at a minimum, fifty-one (51) percent of the partnership interest must be owned by an individual or individuals determined to be socially and economically disadvantaged who also exercise control over the business.

“Small Business” means a concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on government contracts, and qualified as a small business under the criteria and size standards in 13 C.F.R. Section 121 (1989).

Minority Business Enterprise is a business which has been certified as a socially and economically disadvantaged small business.

Decertification:
OSMBA reserves the right to cancel a certification at any time if a business becomes ineligible after certification. OSMBA will take action to ensure that only firms meeting the eligibility requirements stated herein qualify for certification. OSMBA will also review the eligibility of businesses with existing certifications to ensure that they remain eligible. A business organization’s, ownership or control can change over time resulting in a once eligible business becoming ineligible. Certified businesses must notify OSMBA, in writing within 30 days, of changes in organization, ownership or control. When OSMBA determines that an existing business may no longer be eligible, it will file a Complaint with the Certification Board, and send a copy of the Complaint by certified mail to the business. Upon receipt of such a complaint, the Certification Board shall conduct a hearing in accordance with the procedures set forth in the Administrative Procedures Act (Section 1-23-310, et seq., Code of Laws of South Carolina, 1976, as amended).

OSMBA may revoke the certification of any firm which has been found to have engaged in any of the following:

1. fraud or deceit in obtaining the certification;
2. furnishing of substantially inaccurate or incomplete information concerning ownership or financial status;
3. failure to report changes which affect the requirements for certification;
4. gross negligence, incompetence, financial irresponsibility, or misconduct in the practice of his/her business; or
5. willful violation of any provision of Article 21.

Applications

Certification Forms for New Applicants [PDF]

Forms for Re-Certification as MBE – part I [PDF]
Forms for Re-Certification as MBE – part II [PDF]
Certifications expire 5 years after issuance. MBE’s must re-submit evidence of qualification for certification

What are the steps in certifying your business with the State, Federal Government, and for the private sector?

Obtained from https://www.key.com/html/certifying-your-business.html

Certifying Your Business

For many minority- and women-owned companies, acquiring state or national certification opens doors to business opportunities and can mean the difference between winning and losing a contract. Learn how MurTech Consulting has used certification to open doors to new business opportunities.

Key accepts certifications from city, state, local, and federal agencies as well as from certifying organizations such as the Women’s Business Enterprise National Council (WBENC) and the National Minority Supplier Development Council (NMSDC).

What is certification?

• Minority-owned enterprise (MBE) or woman-owned enterprise (WBE) certifications are granted by public and private agencies to companies that can prove they are at least 51% owned and operated by minorities or women
• The certifications offer a “seal of approval,” showing that a company’s claim of being a minority or woman-owned enterprise (M/WBE) has been investigated thoroughly by an outside group and found to be true

What are the criteria for certification?

Basic criteria for certification include:

• 51% ownership by a woman or women
• Proof of effective management of the business (operating position, by-laws, hire-fire and other decision-making role)
• Control of the business as evidenced by signature role on loans, leases, and contracts
• U.S. citizenship

The business owner will be asked for general information about the business, its history, legal and financial structure. Other documents may include, but are not limited to, customer and bank references, loan activity, financial statements, articles of incorporation, tax returns, stock certificates, resumes, drivers’ licenses, and proof of citizenship.

How long does certification take and how much paperwork is involved?

Some certification fees may range as high as $350 and the certification process tends to be stringent, involving significant paperwork and even a site visit. When an organization certifies your business as a women-owned and women-controlled business, it must strictly adhere to national standards to protect the integrity of the certification designation.

Help decrease the time it takes for an organization to certify the business by submitting complete and accurate packages, double-checking every line item, following the checklists provided, and most importantly, by reading the instructions in the certification packet. Certifying agencies generally won’t process an incomplete application.

Who certifies women-owned businesses?

There is not one certificate accepted across-the-board — rather than apply to several different groups and go through a costly process for each, investigate which certification is likely to be accepted by the majority of your potential customers. Certifying agencies and resources:

• Women’s Business Enterprise National Council
• National Women Business Owners Corporation
• U.S. Small Business Administration Small Disadvantaged Business
• HUBZone Program – U.S. Small Business Administration
• MWBE.com list of certifying agencies by state

Connect with Key4Women

• By Phone
  866-KEY4WOM (866-539-4966)
• Find a Key4Women Specialist
• I bank with Key and would like to enroll in Key4Women.
  Enroll Now

Helpful Resources

• Frequently Asked Questions
• SBA – My Biz for Women
• Calendar of Events

Why do you need a federal tax id?  How do you obtain one?

Obtained from http://usgovinfo.about.com/od/moneymatters/a/taxidhowtoget.htm

To set up a federal tax ID number (also called an Employer Identification Number, or EIN), contact you’re nearest Local IRS Field Office, or call the IRS Business and Specialty Tax Hotline at 800-829-4933.

You can also apply online for an EIN via the IRS web site. The online application asks the questions, you provide the answers and, just like that, you get your EIN immediately. You can then download, save, and print your EIN confirmation notice.

If you want to apply the old-fashioned way, the form you’ll need to fill out is IRS From SS-4 (.pdf).

If your business does not have employees, the IRS recommends you label the top of the form SS-4 “For Identification Purposes Only.”

Does your business even need a federal tax ID?
See: Do I Need a Federal Tax ID (EIN) Number?

Q. Does my business need a federal tax ID number?

A. Any business offering products or services that are taxed in any way must get a federal tax ID number. If your state taxes personal services, or if you are required to collect sales taxes on your sales, you need a federal tax ID number. All the government forms you will be required to file for your business will require either a Social Security number or a tax ID number.

It’s safe to say that any business that has employees and/or pays any kind of taxes will need a federal tax ID.

Best advice is, when in doubt, get one. It’s easy to do.

Where can you find resources and information for doing business with and in your state?  

Derived from http://www.sc.gov/business/Pages/default.aspx

The sc.gov website has a place just for business owners to go to learn about anything and everything necessary to do business with and in SC, here is a screen shot of the site:

What if you wanted to bid on a state contract?

The SC.gov website has links to State Government Business Opportunities which walk you through the process of bidding on state contracts and even contracts from other solicitors.  Here is a screen shot of their page:

Is there a support or advocacy organization for women in your state. As an example, in the State of Maryland, there is an office that supports women and minority owned businesses.   Does a similar organization exist in your state? What is it?   There are also non-profit organizations that advocate and provide resources for women entrepreneurs.  Identify a few.

Yes, Greenville, SC has a Women owned business website here is a screen shot:

     There is also a state office of small and minority owned business here is a sample of their website:

OTHER RESOURCES FOR WOMEN OWNED BUSINESSES:

·         Small Business Resources for Women in Business

Since 1998, Woman Owned has provided information, tools, networking opportunities and advice to hundreds of thousands of women business owners. Today, we offer even more. www.womanowned.com

·         WomenBiz.Gov – Welcome

You’ll find useful information and links specifically focused on the woman business owner interested in doing business with the federal government.

www.womenbiz.gov

·         Women Owned Businesses | Business.gov

Federal resources and assistance for women entrepreneurs and business owners

www.business.gov/start/woman-owned  ·

·         Home [www.wbenc.org]

Looking for a way to promote your company to major corporations that are actively seeking to conduct business with women-owned businesses? WBENC-certified Women‘s Business …

www.wbenc.org

·         Home [www.nwboc.org]

The Nation’s First WBE Certifier: NWBOC provides a national certification program for women-owned businesses. The certification, called Woman Business Enterprise (WBE …

www.nwboc.org

·         MINORITY AND WOMAN-OWNED BUSINESS ENTERPRISE AND SMALL BUSINESS …

Minority- and Woman-Owned Business Enterprise and Small Business Enterprise Certification Programs What is the Minority- and Woman-Owned Business Enterprise Certification Program?

phoenix.gov/BUSINESS/mwbecert.html

·         SBA 8(a) Minority-Owned and Woman-Owned Business Directory

Search by Location

sba8a.com

·         WomenBiz.Gov – FAQs

Here are answers to the questions women business owners ask most often. How do I certify my business as woman-owned? What are the criteria for classification as a small business?

www.womenbiz.gov/faq.html

·         Women Owned Business Network – Home

PO Box 1684 301 W. High Street, Suite 680 Harry S. Truman Office Bldg. Jefferson City, MO 65101 Toll Free: (877) 426-9284 Phone: (573) 751-0810 Fax: (573) 522-5005

www.wobnetwork.mo.gov

·         Small Business Grants and Loans for Women Business Owners

Be aware of the opportunities that exist for women business owners. Grant opportunities can provide you with money to grow and come in the way of loans, scholarships, microloan …

www.womanowned.com/Growing/Funding/Opportunities.aspx

What are some of the resources available to start or grow your business in your state?

• SC.GOV – Starting a Business

Buildings and Site Locator South Carolina has an extensive database of industrial properties for sale or lease. Search by size, infrastructure and surrounding community resources …

www.sc.gov/Portal/Category/STARTINGABUSINESS

• Starting a Business in South Carolina| Business.gov

Learn the steps to take when starting a business in South Carolina.

www.business.gov/states/south-carolina/start.html

• SC.GOV – Business

Starting a Business; Taxes & Insurance; Workforce; State Employees. Documentation & Forms … Relocate your business to South Carolina, grow an existing business, or improve your community

www.sc.gov/Portal/Category/BUSINESS_TOP

• Starting a Small Business in SC

A General Tax Guide for Starting a Small Business in SC . If you are starting a new business or just thinking about it, you will want to know more about your tax obligations.

www.sctax.org/Publications/startbusns.html

• How to Start a Business in South Carolina

Learn the process, legal and regulatory requirements for starting a business in South Carolina. Also get tips on where you can get help as you jump start your small business.

www.powerhomebiz.com/resources/starting-business-south-carolina.htm

• South Carolina State Library – Starting a Business

South Carolina State Library website … The Grants Research Collection covers private foundations that give only to nonprofit organizations.

www.statelibrary.sc.gov/starting-a-business

• Starting a Small Business

Links to Other Helpful Sites. Small Business Administration (SBA) Offers great tips on starting, expanding and financing your business from the U.S. Government.

www.midnet.sc.edu/smbiz/smallbus.htm

• sccommerce.com

sccommerce.com/businessservices/businessservices.aspx

• How to Get a Business License in South Carolina | eHow.com

Starting a business in South Carolina, as in most other U.S. states, requires that you obtain and annually renew a business license. This ensures that your company is legally …

www.ehow.com/how_4829199_business-license-south-carolina.html

• South Carolina Small Business Guide | Business.gov

Explore South Carolina‘s small business resources and get information about paying … Legal steps to starting a business in South Carolina. Operating a Business

www.business.gov/states/south-carolina

By: Amy Wees

Development of a training program is important in the success of a business and its employees.  Certainly the most important justification for a business to invest in a good employee training program is profitability.  Simply put, the more training employees receive about the business and industry, the more profit they will earn.  Training helps employees stay motivated about new information and empowers them to be more productive and profitable.  There are other motives for having a training program.  According to the Small Business Knowledge Base, reasons for emphasizing the growth and development of personnel include:

• Creating a pool of readily available and adequate replacements for personnel who may leave or move up in the organization.
• Enhancing the company’s ability to adopt and use advances in technology because of a sufficiently knowledgeable staff.

• Building a more efficient, effective and highly motivated team, which enhances the company’s competitive position and improves employee morale.
• Ensuring adequate human resources for expansion into new programs (Liraz, 2008, para. 2).

A training session can be conducted for a number of reasons, from bringing in a new hire, introducing new concepts to working groups or even learning a new computer software program.  No matter the reason, training should be comprehensive, ongoing and consistent (Monahan, 2009, para. 2).  A successful program must include many complex elements in order to train new employees, and also refresh or retrain current employees.  When considering all of these elements the real question is: Where does one begin in development of a successful training program that meets the needs of the firm?

There are many different methods of developing a training program.  When performing an online search it seems there are endless journals, articles, and templates to assist human resources professionals in doing just that.  There are, however, some things to consider during the development process to avoid common pitfalls and get the process off the ground. One popular model to use in this process is the ADDIE model (I-tech, 2006).  ADDIE stands for Analysis, Design, Design, Implementation and Evaluation.  The ADDIE model covers all of the broad steps involved in creating any program and will be the basis of what this paper covers.

The first phase in the ADDIE process is the analysis phase.  During the analysis phase it is important to determine the basic needs for a training program in that particular company.  A needs assessment can be used to determine what type of training will be needed and offered by the firm.  Needs assessments can be accomplished by using questionnaires, asking employees about training shortfalls, requiring management to define needs of employees, or via working groups or consultants.  It is important to determine what the trainee’s job related needs are, what they need to know, and if there is a significant gap between the two (I-tech, 2006).

Next are the design and development phases which are possibly the most critical and involved because they define who, what, when, where and why.  The U.S. Small Business Association (2007) has identified twelve important questions to answer during the design and development phases:

1. 1.      What is the goal of training? 

• Do you want to improve the performance of your employees?
• Will you improve your employees by training them to perform their present tasks better?
• Do you need to prepare employees for newly developed or modified jobs?
• Is training needed to prepare employees for promotion?
• Is the goal to reduce accidents and increase safety practices?
• Is the goal to orient new employees to their jobs or about overall operations?
• Do you need to train employees to train others?

1. 2.      What Does the Employee Need to Learn?

Once the objective or goal of the program is set, you will need to determine the subject matter. The following questions are designed to help you decide what the employee needs in terms of duties, responsibilities, and attitudes.

• Can the job be broken down into steps for training purposes?
• Are there standards of quality, skills or techniques which trainees can be taught?
• Are there material handling techniques that must be taught?
• Have you determined the best way for the trainees to operate the equipment?
• Are there performance standards that employees must meet?
• Are there attitudes that need improvement or modifications?
• Will information on your products help employees to do a better job?
• Will the employee need instruction about departments other than his or her own?

1. 3.      What Type of Training?

The type of training to be offered has an important bearing on the balance of the program. Some types lend themselves to achieving all of the objectives or goals, while others are limited. Therefore, you should review the advantages of each type in relation to your objective or goal.

• Can you train on-the-job so that employees can produce while they learn?
• Should you have classroom training conducted by a paid instructor?
• Will a combination of scheduled on-the-job training and vocational classroom instruction work best for you?
• Can your goal be achieved with a combination of on-the-job training and correspondence courses?

1. 4.      What Method of Instruction?

One or more methods of instruction may be used. Some are better for one type of training than another. For example, lectures are good for imparting knowledge, and demonstrations are good for teaching skills.

• Does the subject matter call for a lecture or series of lectures?
• Should the instructor follow up with discussion sessions?
• Does the subject matter lend itself to demonstrations?
• Can operating problems be simulated in a classroom?
• Can the instructor direct trainees while they perform the job?

1. 5.      What Audio Visual Aids Will You Use?

Audiovisual aids help the instructor to make points and enable the trainees to grasp and retain the instructions.

• Will a manual of instruction — including job instruction sheets — be used?
• Will trainees be given an outline of the training program?
• Can outside textbooks and other printed materials be used?
• If the training lends itself to the use of motion pictures, film strips or slides, can you get ones that show the basic operations?
• Have you drawings or photographs of the machinery, equipment or products which could be enlarged and used?
• Do you have miniatures or models of machinery and equipment that can be used to demonstrate the operation?

1. 6.      What Physical Facilities Will You Need?

The type of training, the method of instruction, and the audiovisuals will determine the physical facilities and the locations needed for the training.

• If the training cannot be conducted on the production floor, do you have a conference room or lunch room in which it can be conducted?
• Should the training be conducted off the premises, as in a nearby school, restaurant, hotel or motel?
• Will the instructor have the necessary tools, such as blackboard, lectern, film projector, and a microphone (if needed)?
• Will there be sufficient seating and writing surfaces (if needed) for training?
• If equipment is to be used, will each trainee be provided with his or her own?

1. 7.      What about Timing?

The length of the training program will vary according to the needs of your company, the material to be learned, the ability of the instructor, and the ability of the trainees to learn.

• Should the training be conducted part-time and during working hours?
• Should the sessions be held after working hours?
• Will the instruction cover a predetermined period of time? (for example, 4 weeks, 6 weeks, 3 months.)
• Can the length of each session and the number of sessions per week be established?

1. 8.      Who Will Be Selected as Instructor?

The success of training depends to a great extent on the instructor. A qualified one could achieve good results even with limited resources. On the other hand, an untrained instructor may be unsuccessful even with the best program. You may want to use more than one person as instructor.

• Can you fill in as an instructor?
• Do you have a personnel manager who has the time and the ability to do the instructing?
• Can your supervisor or department heads handle the instructions?
• Should a skilled employee be used as the instructor?
• Will you have to train the instructor?
• Is there a qualified outside instructor available for employment on a part-time basis?

1. 9.      Who Should Be Selected for Training?

Employees should be selected for training on the basis of goal of the program as well as their aptitudes, physical capabilities, previous experiences, and attitudes.

• Should new employees be hired for training?
• Should the training of new employees be a condition of employment?
• Would you prefer trainees with previous experience in the work?
• Are there present employees who need training?
• Would you consider employees presently in lower rated jobs who have the aptitude to learn?
• Is the training to be a condition for promotion?
• Will the training be made available to handicapped employees whose injury occurred while employed by the company?
• Will employees be permitted to volunteer for the training?
• Should employees displaced by job changes, departmental shutdowns, automation, and so on be given the opportunity to be trained in other jobs?

1. 10.  What Will the Program Cost?

It may be desirable to compute the costs of your training before starting the program. Thus, you can budget sufficient funds for the program and use the budget as a tool for keeping training costs in line.

• Should you change the program for the space, the machines, and materials used?
• Will the wages of trainees be included?
• If the instructor is an employee, will his or her pay be included in the costs?
• Will the time you and others spend in preparing and administrating the program be part of the costs?
• If usable production results from the sessions, should the results of it be deducted from costs of the program?

1. 11.  What Checks or Controls Will You Use?

• Can you check the results of the training against the goal or objective?
• Can standards of learning time be established against which to check the progress of the trainees?
• Can data on trainee performance be developed before, during, and after training?
• Will records be kept on the progress of each trainee?
• Will trainees be tested on the knowledge and skills acquired?
• Will the instructor rate each trainee during and at the end of the course?
• Will the training be followed up periodically by a supervisor or department head to determine the long-range effects of the training?
• Should you personally check and control the program?

1. 12.  How Should the Program Be Publicized?

Publicizing the company’s training program in the community helps attract qualified job applicants. Publicity inside the company helps motivate employees to improve themselves.

• If the program is announced to employees, will the announcement be made before the program starts? During the program?
• Are pictures to be taken of the training sessions and used on bulletin boards and in local newspapers?
• Should employees who complete the training be awarded certificates?
• Should the certificates be presented at a special affair, such as a dinner?
• When the certificates are awarded, will you invite the family of the trainees?
• Should the local newspaper, radio, and TV people be invited to the “graduation” exercises?

After you have answered these twelve questions, you will need to decide how you will implement your program.  Prior to implementation it will be important to present your plan to top management for approval and budgeting purposes.  Your proposal to management should include at a minimum: costs of implementation and maintenance, staffing requirements, training methods and courses offered and benefits to the organization.  After managements approval it will be important to put together a team implement the program and create related resources.

Implementation requires documentation and record of the aspects of the program, training manuals, presentations, and a record keeping process.  During this phase it must be decided whether to maintain and present the program using a web based application or via internal electronic documents that can be updated and e-mailed on a regular basis or used by instructors during training sessions.  Many firms today are using web based applications that allow employees to complete training right from their desktop.  The initial expense of this option may be higher, but the long term benefit and self-maintenance of this type of program would require less in manning costs in the long term.  Also consider that even if the program is web based there will still need to be products and space allotted for other required face to face training or teleconferencing sessions.  Outsourcing can also be an option for printing the documents or maintaining an online program.

After all resources have been created it will be necessary to introduce the training program to managers so that they understand what is required and how they will participate in the program.  Promotion of the training program is the next step.  Employees must be aware of the program processes, what is required of them and most importantly how they will benefit from training.  “Supervisors should discuss the importance of individual and group training with the employees. Employees must be aware that training will be beneficial and is an attempt to help each individual be more efficient. Increased efficiency may lead to increases in pay, promotions, recognition and rewards, all leading to more individual self-esteem. Training awareness can be publicized using the bulletin boards, memos, newspapers and the grapevine (Harmon, 1998, p.2).”

The last phase in the process is evaluation.  Without evaluation, there are no traceable results of the program.  Evaluation can be accomplished by offering surveys to participants after training sessions are completed and also through performance reports from management.  It may also be beneficial to evaluate work processes against the training that was offered.  How closely are employees following the training during their work processes?  Are there significant safety or other important issues coming up during the process?  If so, it may be necessary to reevaluate the course and find out how it can be changed to help employees retain the most important information.  Employee surveys and process inspections offered during process inspections could also assist in making the necessary changes.  During evaluation, it can also be determined whether the current training program needs to be altered to meet the needs of employees or whether new or different training needs to be added to the program.  Evaluation closes the circle of the ADDIE model and allows the process to start again at the analysis phase.  By following the model and running all processes on a continual basis, the program will have the necessary alterations to meet the needs of the firm.

The business world is forever changing, upgrading and downgrading.  Positions are constantly added and removed.  Therefore it is necessary to have employees that are not stagnant who remain to be vital assets to the company (Harmon, 1998, p. 1).  Training programs also ensure employees remain to operate safely, confidently and consistently.  With a clear understanding of a firm’s objectives, human resources managers can develop, implement and maintain a successful training plan.

References:

Harmon, G. (1989). How to Create an Effective Training Program. All Business. Retrieved April 22, 2009, from http://www.allbusiness.com/human-resources/careers-career-development/111636-1.html

Liraz, M. (2008). Employee Training and Development. BizMove.com. Retrieved April 22, 2009, from http://www.bizmove.com/personnel/m4d.htm

Monahan, J. (2009). The Importance of Developing a Training Program for Your Company/Business. ContentDig.com. Retrieved April 22, 2009, from http://contentdig.com/business/the-importance-of-developing-a-training-program-for-your-company.html

I-tech. (2006). Creating a Training Program using the ADDIE Model. Go2itech.org. Retrieved April 22, 2009, from http://www.go2itech.org/HTML/TT06/toolkit/design/strategies.html

U.S. Small Business Administration. (2007). Checklist for Developing a Training Program. Canada-Ontario Business Service Center. Retrieved April 22, 2009, from http://www.canadabusiness.ca/servlet/ContentServer?cid=1081945276519&pagename=CBSC_ON%2Fdisplay&c=GuideFactSheet

By Amy Wees

June 9, 2008

            No one is unaware of the recent skyrocketing fuel costs and with the U.S military being the countries largest single consumer of oil it is no surprise that the department of defense is looking for ways to somehow fit this expensive fuel into its already expensive wartime budget.  The answer is in synthetic fuels.  If the Air Force can get its gas guzzling aircraft to run on synthetic alternative fuel our military might be able to meet budget requirements in the future.  So with help from some contracting experts in this arena we see the testing begin.

The exploration of using synthetic fuels began when the fight over oil caused fuel prices to skyrocket and cost the military billions to fly everyday aircraft needed for our current wartime situation.  Not to mention with our enemies having a handle on most of this oil and our military needing so much of it poses a severe and apparent disadvantage.  Something needed to be done to reduce our dependency on foreign oil.  Therefore, military officials decided to explore the use of alternative fuels by sending out a contract solicitation for just that.  Although these synthetic fuels would cost more to manufacture in the beginning because they are not mass produced, the military is hoping to be the lead in helping America to gain an interest in this new eventually lower cost fuel alternative.  To do this, in Spring of 2006 a contract was awarded to aircraft manufacturers such as Boeing Corp. and the Pratt & Whitney engine unit of United Technologies Corp. and North American synthetic-fuel processors including Rentech Inc., Baard Energy and Syntroleum Corp.  All of these corporations operate or hope to build synthetic-fuel refineries to feed the military’s growing thirst.   The Air Force in particular is hoping to purchase up to 400 million gallons of synthetic fuel by 2016.

In June 2006, Syntroleum Corp sold the Air Force 100,000 gallons of synthetic fuel to test the B-52 bomber for flight at a very high price of 20 dollars per gallon.  Although the price was outstanding, the results of the flight were unprecedented as a B-52 was the first ever aircraft to fly using the alternative fuel burning in 2 of its 8 engines.  After the success of this flight, military officials want to explore this idea further.  Synthetic fuels are now being prepared to test with the even faster fighter jets in the U.S Air Force inventory.  In March 2008, the first flight test began with a B-1 bomber jet flight breaking the sound barrier using synthetic fuels.  Commercial airliners are also now beginning testing and the Army is requesting alternative fuels for its heavier vehicles to include hybrid humvees.  This is all for very good reason, although the price of synthetic fuels is now 50 percent more than the price of oil, experts estimate that if produced in commercial scale, refineries would be able to sell the fuel for less than  half the cost of crude oil.

For the contractors, preparing this much fuel has not been easy.  Rentech is in the process of building a new facility in Colorado to support the production needs but this facility will only be able to produce small scale samples and Syntroleum, who was able to produce the fuel for the current testing has since shut down their production facility.  Baard energy of Vancouver is spending 6 million to produce the first commercial-scale production facility in the U.S. to support the militaries request.    It is expensive for these companies to produce the needed facilities and without a market for the product it is also hard to convince the corporations to make the investment.  Engines are also being built specifically to support the new fuels.   At Department of Defense direction, Pratt & Whitney, Rolls-Royce PLC, Honeywell International Inc. and General Electric Co. will work together to develop joint specifications for engine performances using artificial fuels.

This is the wave of the future, or is it?  The world will be waiting to see if America can lead the way in synthetic fuel usage.  We can only hope that the solicited contractors seek the benefit to their investments in commercial-scale production facilities.  Perhaps the expensive investment now will be a potential payoff for their corporations and for the American people at the gas pumps in the future.

Bibliography

Yochi J. Dreason, “U.S Military Launches Alternate Fuel Push,” Wall Street Journal, May 21, 2008.

Donna Miles, “Military Looks to Synthetics, Conservation to Cut Fuel Bills,” American Forces Press Service, Jun 6, 2008 (http://www.defenselink.mil/news/newsarticle.aspx?id=50131).

Gary Gamino, “ Syntroleum Signs Contract to Deliver Renewable Alternative Jet Fuel to U.S. Department of Defense,” Business Wire, July 9, 2007 (http://www.syntroleum.com/pr_individualpressrelease.aspx?NewsID=1023522).