Why Did Enron Collapse?
Enron was one of the world’s largest electricity, natural gas, and broadband trading companies, with revenues of over $100 billion until its crash in the fall of 2001. Enron’s strategic intent was to become the blue-chip energy and communication company of the 21st century through its business efforts in four core areas: Enron Wholesale Services, Enron Broadband Services, Enron Energy Services, and Enron Transportation Services. Enron management claimed that each of these business units supported the company’s vision of “offering a wide range of physical, transportation, financial and technical solutions to thousands of customers around the world.” But Enron’s aspirations of becoming the leader in the energy and communications came to a screeching halt because of a strategy that was flawed by unethical behavior mainly GREED. But how does a corporation that becomes so successful become so greedy? I am of the opinion that the main reason was due to the corporate strategy that was implemented that was more concerned with the continuing growth of stock prices instead of looking at the long run. In the following paragraphs it is shown what constitutes a good strategy and examples of what went wrong.
by saying that a good corporate strategy is one that is shaped by management having an ethical view of external and internal considerations. External considerations include societal, political, regulatory, and community factors along with competitive conditions and overall industry attractiveness; a company’s market opportunities and threats. External considerations on the other hand are of great importance in today’s business world due to the global market that exists. Thanks to the stories from former employees of Enron we have examples of how management failed in this area. According to one former employee of Enron; “The upper management of Enron was filled with very young, mostly early 30s and 40s men and women who were promoted faster than they could move to their new office. As their incomes grew, so did their heads and their selfishness. Once money, which meant Enron Stock Price, became the most important thing; ethics, morals and the financial safety of the company went out the window. Enron created new ways of accounting and finance, which boosted the Stock Price in the short run, but whittled away at the core foundation of the company. Eventually, it came down to a huge bet -- about $50 billion dollars or so, and the livelihoods of thousands of people. If the company kept on growing its earnings, then everything was fine. If not, the creative financial snowball would begin to roll downhill.” As we can see in this exert another portion of the corporate strategy was compromised. The upper levels of management were promoted to quickly and were more concerned with quick profits than sustainable growth. As you can see Enron had the right idea starting out but when upper management got a taste of large profits they became more concerned with making bigger profits no matter what the cost. So not only did it hurt the corporation’s imag
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Approximate Word count = 1262
Approximate Pages = 5 (250 words per page double spaced)
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