Key Elements Of Enron's Strategic Model

By acquiring the physical capacity in every market and influencing that investment by creating a flexible pricing structure, were one of the key elements of Enron’s strategic model. The company used financial derivatives to manage risks and therefore, Enron's success was deeply rooted in its ability to manage risks. Coincidently, these were the very risks that resulted in the company failing and filing for bankruptcy, so are the risk managers also at fault here? The simple answer is, yes but the blame also lies with other entities involved in the company.

In 2001, systematic and planned accounting fraud was reported in the financial condition of Enron, which was known as “the Enron scandal.” A series of irregular accounting procedures were

When Enron built an asset like a power plant, they claimed the profit which was projected on their books, even when there was no profit. When the profit was less than the projected one, they didn’t take it as a loss but transferred the asset to an off-shore corporation, where there was no record of that asset and its loss. In addition to that, Arthur Anderson played a major role in the company’s downfall as they oversaw their accounts, they gave Enron a stamp of approval even at times of poor accounting practices and fraud taking place, this then gave a positive outlook to regulators and investors but this was in hindsight short-sighted, without taking into account the long-term impacts. The analysts started questioning the transparency of the earnings of Enron and both the company and the auditing firm were then persecuted for their irresponsible and illegal behaviour. To the financial world, this was the biggest bankruptcy of any organisation that was worth billions at that time. Many factors contributed to the downfall of Enron, highlighted among those were the false accounting practices and their investment in risky projects. In almost four years, its shareholders and employees lost billions, in terms of pension benefits and other investments.

The company has a well-defined low-cost leadership strategy, at every level either functional or HR, the managers are continuously trying to cut costs to achieve the corporate strategy. Training sessions are held for employees to ensure they understand the purpose and vision of the company. Thus, leading Walmart to sustain and generate income in this globalised world and remain as the leaders when it comes to retail businesses. Enron on the other hand, was a leader in electricity and gas supplies and was considered to be innovative in their methods. Enron failed because of its poor accounting practices and this was due to the lack of effective short-term strategic planning. Although, the company had well-defined strategies and were implementing them and a strong organisational based culture was valued, but due to its poorly managed diversification, greed by leadership and false accounting practices led to its downfall, one of the biggest of all