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Examining a Business Failure - Essay Example

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Examining a Business Failure Name of Institution Date Examining a Business Failure It is agreeable that running a business, whether large or small, is very risky and the possibility of failure is relatively high…
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Download file to see previous pages In simple terms, business failure can be defined as a situation whereby a company or an organization ceases operations due to inability to make profit or because it can no longer be able to bring in sufficient revenue that can cover the expenses it incurs. Studies have shown that business failure can be caused by the following factors: increased competition; poor implementation of strategies; outdated technology; poor management; poor leadership; financial problems; and economic challenges (Hatch, 2006). In order to have a better understanding of business failure, this paper will discuss the failure of Enron Corporation. Enron Corporation was one of the leading players in the energy market; actually, in the year 2001, it was the United States ’ seventh Largest Corporation in terms of revenues (Mclean and Elkind, 2003). However, it suffered a catastrophic collapse as a result of financial scandal (famously known as Enron Scandal) which involved its accounting firm (Arthur Andersen), Enron’s management and leadership. The scandal involved fraudulent accounting procedures and practices which occurred during the 1990s and the beginning of 21st century. These fraudulent activities included manipulation of the Enron’s stock price. This scandal eventually led the Corporation to file for bankruptcy in December 2001 (Fox, 2003). Robbins (2004) argues that whereas events leading to business failure of an organization often take different dimensions, the contribution of the organization’s management, leadership, and organizational structures towards the failure cannot be ruled out. As a matter of facts, he notes that this contribution is usually central to business failure in any given organization. So, how did Enron’s leadership, management, and organizational structures contribute to the failure of the organization? Fox (2003) observes that the trials relating to Enron scandal showed that, indeed, the Corporation’s leadership contributed to its failure. Enron executives were charged with criminal acts that include insider trading, money laundering, and fraud. What became clear was that the Corporation’s leadership only focused on influence, greed, power, and profits and paid little attention to the Corporation’s Code of Ethics (Mclean and Elkind, 2003). Their focus made them to make wrong and deceiving decisions, as well as conspiring with Arthur Andersen auditors to engage in illegal accounting activities and methods. Jeff Skilling, Ken Lay and Andrew Fastow are the most notable top-level leaders of Enron whose behaviours greatly contributed to the collapse of the Corporation (Fox, 2003). For example, Andrew Fastow who was the Corporation’s chief financial officer engaged in improper partnerships, fraud, and money laundering activities. Jeff Skilling engaged in conspiracy, insider trading, made false financial reports, and in fraud. Ken Lay made misleading statement and got involved in fraudulent activities (Mclean and Elkind, 2003). As leaders of the Corporation, Fastow, Skilling, and Lay were expected to adhere to and uphold Enron Code of Ethics that called for integrity, excellence, communication, and respect. However, they engaged in activities that challenged the Corporations ethics code’s foundational values. The top leadership as well as the Corporation’s senior management contributed to the failure by attempting to create a conglomerate in the energy industry that was aimed at increasing the ...Download file to see next pagesRead More
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