Enron was a perfect storm of under regulation and corrupt consumerism. In many ways Enron was only the beginning in the way american business are to be proceeded today. In addition this case study will be focused on the business model, the specific action that caused its downfall, the consequences of this major event and lastly what all this means in today’s world.
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With that being stated Enron was at the time seen to be the very best and a shooting star that can go far. The company was seen to be geared towards success in many ways. It was an meritocratic venture that throw out the lowest twenty percent of the employees and heavily gifted the best and hardest working employees. In addition Enron did not stop thier because Enron was over ambitions. They came up with may of gray area business tactics that in many of the companies today use to get a leg over their competitors. Enron in some cases an example of just how bad things can get when men’s ambitions are bigger than their capabilities. With the introduction settled the next section will focus on Enron’s business model.
Enron began as a humble interstate pipeline company in the hart of american business Texus. The foundation was struck when the company’s Houston Natural Gas and Omaha-based InterNorth merged in 1985. The company at the time was going throw a same phase as in the soviet union. The market sector was deregulated and a new and more lucrative business model had to be generated or else the company would go bust. The company hired Jeffrey Skilling as a consultant and the end result the concept of brokering energy or buying the natural gas from a supplier and then selling that gas to a private entity was born. After this was settled the next step for Enron was to establish its own financial branch of the company and then to attract the best and brightest. In 1990 This new business culture was being formed and its the outcome was astounding. The program was to rate all the employees on a number biases and to show the door the ones that did not fit the mold. The next major step for the company was to get into the electric business and start applying the lessons from providing gas to now start providing electricity. So in 1997 Enron bought out an electric utility company that was named Portland General Electric Corp. At this point Enron eclipsed itself in more ways than one. It’s focus at this point was to grow rapidly and to expand in to any trading community that it can. In addition one major change happened around this point of time mark to market. The concept of marked to market was very subjective and that they would buy something and then post what they thought the price should be of such a deal. This was truly the first mistake in which Enron the company made. Then around the start of the new century in the 2000’s Enron started to feel the burn of competition and it started becoming less profitable. In the next section the passage will continue with the specific actions that caused an end to Enron.
Enron at this point was in dire starties and had a true bleak outcome. If enron marked the truth about their shady business deals they have done it would have caused a severe but livable crash. Instead Enron chose to go out with a bang and they did in the end. Enron at this point started employing shady accountant methods like mark to market. This specific method stated that the company can in some sense post whatever prophets they wanted. This could manifest itself as if i bought a commodity for 50$ and they reported that it had risen to 1100$ regardless if that was true or not. The next thing is that Enron started trying to use it connections to flip the credit rating agencies. If Enron would have pulled this off it would have done more damage to the american system and its institutions than the strike of Pearl Harbor. Instead Enron settled with only bribing an accounting company called Arthur Andersen. Then the company started using shell companies that traded itself and in a complex way made it like if the company had no debt. The use of these shell companies is legal and they are able to such thing. But the company did not properly disclose this information. Lastly the company used its financial retirement that its employees used and leveraged that as a strength in the company further inflating its stock prices.
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