ENRONCase study
Rebecca Gamboa
Carole Gutierrez
Maria Fernandez
Joanne Gutierrez
Company Motto
“RespectIntegrity
CommunicationAnd Excellence”
Early Beginnings
Formed in Omaha, Nebraska 1932.
Known as Northern Natural Gas Company.
Reorganization led to a holding subsidiary of InterNorth 1985.
Merged with Houston Natural Gas.
CEO Kenneth Lay changes the name to Enron.
Headquarters is relocated to Houston, Texas.
• The fifth largestcompany in the United States.
• One of the world’s leading energy distributors.
• Stated revenues of 111 billion dollars.
Labor Force Approximately
22,000
employees.
Power PlantsPulp and
Paper
PipelinesElectric
utilities and distribution
Broadband assets and bandwidth
trading
Principle Assets of Enron
Promising Future Ahead!
Built a strong corporation based on its reputation of being a risk
taking corporation that
resulted in a large growth of
clients
Praised for having a great compensation package for its employees including a large
long- term pension fund.
Among the
100 best
companies to
work for in
America in
2000.
Fortune magazine 1996 -2001
“America’s Most Innovative Company”
STRENGTHS
Scandal of 2001.
Financial Scandal
Destroyed
Reputation
Unemployment
Jobs in jeopardy
CompanyPlummets
Important documents destroyed
Falsified financial documents
WEAKNESSES
Chance of Redemption?
Opportunities Merger of two natural gas pipeline company’s – Houston Natural Gas & InterNorth.
Bandwidth trading was $36 million, more than gas & electricity combined in 2000.
Energy trading gave great profits in 2001.
Unsuccessful Attempt.
Threats
Tried to monopolize the broadband trading.
Regarded competitors as uncompromising and did not want to work with them to create profit.
Did not engage in collaborative markets that competitors worked with.
Should have collaborated with stakeholders, to protect the market share, and to create new products
More threads:
Failed due to financers did not know about bandwidth or telecommunications.
Accounting irregularities.
No company trust.
Operated with great overconfidence and increased expectations with investors.
Enron’s long-term debtdeclared : $13 billion
Real Debt: $38 billion
Hidden debt: $25 billion
Communication Problem
Present Solution &
Recommendations
Solution/Recommendation 1
Enron could have structured their communication with their competitors instead of refusing to involve any communication whatsoever. Having brief communication would allow for the corporation to partake in healthy competition in such a way that allows them to expand and broaden their value of creating propositions for diverse industry players and competitors.
Solution/Recommendation 2
The accounting representatives should have followed the guidelines of the Generally Accepted Accounting Principles (GAAP ) rather than violating them. As a result, financial documents contained incorrect financial information regarding the corporation’s financial status. By complying with the guidelines the appropriate assistance could have been provided to help.
Solution/Recommendation 3
Each department within the corporation could have tried to maintain better communication with one another and its human resources department, to ensure that the proper courses of action were taken to ensure the best interest of the shareholders and employees whose pensions were invested in the corporations stock.
Conclusion
Enron Corporation’s main area of concern stemmed from the accounting representatives overlooking some crucial strategies involving falsified financial documentation that could have prevented the falling out of this booming trading corporation and its practices.
ReferencesCunningham, Gary E. and Jean E. Harris. (2006). Enron and Arthur Andersen: The case of the crooked E and fallen A. Global Perspectives on Accounting Education Volume 3. http://gpae.bryant.edu/~gpae/Vol3/Enron%20and%20Aurhur%20Andersen.pdf
"Enron Scandal," Encarta Online Encyclopedia 2009. Retrieved on October 29, 2009 from http://encarta.msn.com
Enron scandal. (2009, October 28). In Wikipedia, The Free Encyclopedia. Retrieved 19:14, October 30, 2009, from http://en.wikipedia.org/w/index.php?title=Enronscandal&oldid=322529264
McLean, Bethany. (2006). Is Enron Overpriced? http://money.cnn.com/2006/01/13/news/companies/enronoriginal_fortune/index.htm?postversion=2006011818
Schwartz, Andrew. (2003). Enron's Missed Opportunity: Enron's Refusal to Build a Collaborative Market Turned Bandwidth Trading into a Disaster. UC Berkeley: Berkeley Roundtable on the International Economy. Retrieved from: http://escholarship.org/uc/item/0k61f1nb
Ferguson Niall, The Ascent of Money, Video http://www.pbs.org/wnet/ascentofmoney/featured/watch-the-two-hour-the-ascent-of-money/24/
Wikipedia: Enron http://en.wikipedia.org/wiki/Enron