Corporate Fiascos and Their Implications - Essay Example

Running Head: Marketing in contemporary context Writer inserts the name of the paper Writer inserts the name of college Writer inserts the name of professor\ Date of submission A business can only show well is doing or how bad is doing by use of it financial record but lately business have resulted to financial misrepresentation so as to hide their real financial status which if fully exposed will affect them in many ways but the most important one is the share price . So how can a company or an organization avoid misreporting in their financial report? And what lead to the misreporting of financial records? And how they are capable of missing the report on their report that is financial reports? A company called Enron which is based at Houston, Texas is one of the corporations that deal with energy. The company was thus incorporated when natural Gas and Inter North. After that merger Jeffrey Skilling was hired , he developed a staff that he knew very well that will be able and willing to manipulate the financial and accounting systems so as to be report good results in the financial records, CEO and his management team used legal means to report losses as revenue thus giving a wrong picture . This led Enron’s stock price to hit high of US 90 per share this made the securities and Exchange Commission (SEC) began an Investigation (Banerjee, 2001). In the early 1990s, Kenneth Lay was able to restructure the company enabling the company to be able to diversify their core business by his initiative the company 3was able to sell electricity at market price which enabled Enron to take advantage of legislation passed by the congress at that time deregulating the sale of natural gases. This enable Enron to sell their product at higher margin thus reporting higher revenue which translated to a superior profits enabling the company to be able to expand it market share to a point that in 1992 the company was the market leader in the natural gas market in America. And in the same year its gas contracts trading the second largest contributor to the company’s net income by earning the company huge amount of money in figures $ 122 million. The November 1999 creation of the Enron Online especially trading website proved to be essential tool to manage the company trading contracts and helping in quick access to the investors. In an attempt to achieve further growth, management decided that they strategy that is best fit to do so was the diversification thus acquiring and operating various assets in terms of broad band, electricity plants , gas pipelines, water, pulp , paper plants all these bringing more revenue to the company. Good result led it share price to soar because the company was reporting good results in terms of billions in dollars and over 70% in term of percentage and it was showing why they were leader in their industry especially in the energy sector. But the expert says that even business do have their own life spans meaning they have stages namely introduction, growth, maturity and decline but what determine how long the company or what can prolong their life span is if they are true to their business ethics but also they are in touch with their business meaning the CEO or the owner of the company have to vision, passion, integrity courage perseverance for that company to thus show the capability of achieving their intended goals and thus to see to it that their mission and vision come to bee reality. Enron I think forgot those keys to success that why Enron life span ended in by their assets being sold at lower price and being bought by their competitors and also their management team being indicted and their stakeholder like shareholder suffering losses thus a company which had a good name finished or ended being a curse to USA economy affecting the investor confidence not only in the US but also globally. This was despite the company show casing good result all the up the fateful year , which lead to this question what led to it collapse , was it something from internal environment or external environment? Many company success breeds failure meaning the company enjoy greater success in few first years then they become complacent and even to extreme they become arrogant. For example general motors and |AT&T both enjoyed such dominance in their industries that they failed to recognize their own vulnerabilities. This is evidence by the way these company practice status quo management and become highly bureaucratized; there existing policies, procedures and culture create inertia for change meaning change will take time before it is accepted in the organization (De Genus, 1997). Due to lack of change or structures that welcome and push for change in these companies, make things to do with cost to be very hard to implementer because if the company have accumulate costs during their growth phase to a point they are unable to reduce in tough time also there are often internal conflicts : infighting among functional department and business units creating a negative impact on customers and employees ( De Genus, 1997). The other reason that can come from internal environment and cause the decline of company or of their product is the lack of company to understand that each and every stake holder have his merit or important or may I say essential part to play for that company to achieve success , so they should not concentrate on certain stakeholder and ignore the other this will be a formula of failing , the company should consider emotional need as well as psychological needs of all its primary and secondary stakeholders’ overtime. This is seen when the company is seen to have lost it connection with its stakeholders meaning they are no longer emotionally bonded with them. Stakeholder may continue doing business with the company, but they do it without heart indicating that the relationship is heading for trouble (De Genus, 1997). In order for the organization to thus survive in the embers of the rising global environ, it has to satisfy both the emotional and the functional requirements of all the entire stakeholders to thus perform its functions in a more strategic and in a more proper financial way on the run of the companies needs. The company have also to build a sustainable value creation engine that does not force them to squeeze certain stakeholder for benefit of others. They can do this by for example by providing excellent pay benefits to employees, excellent value to customers, treat their suppliers fairly and being positive force in the community (De Genus, 1997). In external contexts, the external environment of a company can change any time it all depends if, entity have the ability to change and if the entity have no ability, then failure is often the results. Some of thee factors can have a very rapid impact on a company and its industry, while the effects of other manifest themselves more slowly. Most of the company are focusing too much on technology and globalization as primary drivers of change but are they? Research has shown the fastest moving externalities are regulation, capital markets and competition while the slowest moving ones are technology, globalization and customers (Rivlin, 1999). Regulation, these are policies and rules that are there that govern the industry these rules can get restructured with stroke of pen , and many companies are s imply unable to adapt . In the US telecommunications industry, AT&T’s decline can be traced to its inability to change with time within the non-regulated internet. In some industries, existing regulations present barriers to much-needed change. They may prevent the company from adapting rapidly enough to fast-changing environments. Companies in the telecommunications, defense and healthcare industries often face this issue. The deregulation of a regulated industry sometimes occurs too rapidly, leaving a company’s processes and people unprepared. For example, the “Big Bang” deregulation of the US airline industry overwhelmed the ability of many companies to adjust, leading to a rash of failures. Rapid economic liberalization in countries such as India led to the collapse of many domestic companies, as they were unable to cope with foreign competitors (Rivlin, 1999). Regulatory changes do not always mean deregulation; in many industries, the opposite may be the case. As a result of widespread abusive practices in the past , a good example being the United State financial services industry is going through right now .since regulation is such a potent effect the company should be proactive rather than them be reactive what that mean is that company should anticipate what will happen before e even it happens , instead of wait the impossible to happen and have to respond or react to it , because for one that will show that the company leadership is weak because it is supposed to be having a vision and also plan on how to achieve that vision and the leadership should foster a good relationship with their competitors so as they can be able to formulate those regulation that will encourage not only growth in their industries but also fair competition in the industry because bring metocracy rather that mediocrity (Rivlin, 1999). Investors: at certain times, some industry and companies fall out with investors. Despite its high margins and huge cash flow, for example Microsoft is currently being shunned by investors; this can be attributed to the rise of Google. Another company that is out of favor is Wal-Mart whose stock-market decline can partly be attributed to investor sentiment in favor of target and partly to its declining reputation as an employer and business partner. Wall-mart is now targeting Target, by trying to move somewhat upscale itself a strategy that will put it even into a weaker position (Rivlin 1999). When investors sentiment towards a company changes, what it means is that the company have no access to equity market, and cannot hence leverage its debt to equity ratio thus the companies should be very careful of what they do because investor are their audience a and they should offer them the best they can by the company determining what are their needs and if the company can be able to satisfy them and if not what changes they can make to see to it that the Investors are attracted to invest in the company (Rivlin, 1999). Competition is best for any business because it help it to grow bout the issue here is not on competition but on the competition intensity, which is an incremental change of the kind that companies can often adjust to, but the entry of non –traditional competitor has the potential to rapidly alter the rules of the game for example, National cellular telephony companies in the Us started treating all phones calls , local or long distance as equivalent. This had a devasting impact on traditional land based long distance companies but those with internet protocol has the potential to up end the local telephony business. The outsourcing of many business processes and back office functions in recent years to locations such as India has brought a new type of competition into those industries. In the photography business, traditional film companies such as Kodak and Fuji face a rash of new competitors from the computing and consumer electronics industries, in software, (Rivlin, 1999). Microsoft’s near monopoly in many of its businesses is now being seriously challenged by the rise of Linux and other open source co-operative programming movements. This was due to them in this case Microsoft leadership concentrating in only one side of their market this side being market share forgetting the other side of innovation which is also a good thing for a company to think of for them to be competitive in their industry (Benston, 2003). Technology: Every industry is experiencing advances in the technology because new technology with superior performance cost ratios provides better customer value. As discussed above, non traditional competition often enter an industry with new technology likewise a firm traditional rival can have a leverage over the company only because of having been the first to embrace the technology this was seen in the telecommunications industry Northern Telecoms gained a significant foothold in the market by being the first to embrace digital technology for switching and transmission , moving much faster than industry leader Lucent (Swartz & Watkins, 2004). Globalization industries inevitably go through a shakeout when they become globalised. The process is gradual one, and companies must develop effective offensive as well as defensive strategies to survive. When the car industry started to globalize in the seventies, for example Frances Michelin made the first foray into the US which led to Goodyear to move to Europe market but full meaning can be seen by the opening up of vast new markets in developing countries like China and India , as well as the entry of companies from those countries into the global arena for example Chinese companies are moving aggressively into the computer and home appliance industries by seeking to acquire major brands (Bryce, 2008). Customers are constantly changing and evolving, but usually at a slow rate. Some shifts in customer tastes and preference can be traced to m demographic changes like age, changing role of women, greater polarization of income , others are due to n cultural changes that may, in turn, be triggered by technology . The explosion of the internet and wireless technology for example has impacted how many consumers, especially the younger ones, Clearly must realize the impact the technology is having in the way customer relate to the company products and services because the current time customer are not only looking somewhere they can get full value of their money but also how it take to be served , how they are served and the pace in which they can get access to the given product or services and technology enable a company to be able to do that and customer can experience total satisfaction thus a company need to adopt to their changing circumstances. What happens when these changes occurs?. Why are company managers and executives not able to adapt? Unfortunately, recent research has found that most companies are either unwilling or unable to change (Fox, 2003). Change is need for growth to take place but implementing change determine if the growth will take place because for a example it is in a company which is used to a certain reality or culture of doing things to change that need high leadership skills and if that is lacking then .who come in as saviors or crusaders are rarely successful. So the key question is how change has to be brought about, not necessarily who is responsible for it (Tichy, 1992). What is needed is? Consider the performance of General Electric under Jack Welch .When Welch become CEO in the early eighties , analysts regarded GE as a solid but staid performer, growing at rate above the other company in that industry. But The GE CEO at that time disagreed, and went on to restructure GE through a strategy called No1. No 2.The strategy called for GE to “ fix , close or sell” that were not doing well in terms of worldwide market share, and which did not offer major global growth opportunities which resulted in GE eventually selling 400 businesses and product lines leaving GE with 14 major high tech or service businesses that Welch had core competencies to compete globally. GE are know as the talent master meaning that they look or see potential in their staffs , find the way to grow that potential and turn it to result meaning they form an army to war and war being the ever changing market but having solders who can change accordingly and see to it that the desired results are acquired and even more, What also make the GE some how have advantage over their competitor is that they use anticiparatory management meaning they are always ready for any eventuality and have a plan ready for that eventuality even before it happens thus why they are always one step ahead of their competitors and thanks to their competitor and their leader like jack by shaking of status quo (Sheth, Sisodia, and Wolfe, 2006). They must pay attention to regulation, structure, systems, and processes and culture because failure to do so will lead them to result to the unethical practices that Enron practiced and then they should expect to face the same music Enron faced (Dharan& Bufkins, 2004). The question I have for you as company is, are you in the same group with Enron or GE? References Bethany, B and Elkind, P. (2003). The Smartest Guys in the Room: New York: Portfolio Trade..  Bryce, Robert (2008). Pipe Dreams: Greed, Ego, and the Death of Enron: Public Affairs  Charles R. S. (2002). The Real Enron Scandal: Harvard University Press Collins, Denis (2006). Behaving Badly: Ethical Lessons from Enron: Dog Ear Publishing, LLC.  Cruver, Brian (2003). Telling the Unshredded Truth from Inside Enron: .  De Genus, A. (1997). The Living Company: Boston, Harvard Business School Press. Dharan, G & Bufkins,W. (2004). Enron: Corporate Fiascos and Their Implications: Foundation Press. Eichenwald, Kurt (2005). 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