Enron Case study

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