The Unethical Behavior of Enron

Enron and Unethical Behavior
Student's Name
Institutional Affiliation
Course Number
Professor's Name
Date
Enron and Unethical Behavior
Enron was created through a merger of two companies, which were small regional companies, in 1985. In 1986, Kenneth Lay became CEO and chairman of the newly merged company. The purpose of the newly formed company was to take advantage of the energy industry. Enron wanted to come up with the most extensive pipeline in the country. The company quickly became the major petrochemical and energy commodities trader and is moved its operations online, giving a boost to the most extensive online trading exchange. In 1999, it was one of the key market makers in electricity, crude oil, natural gas, plastics, and petrochemicals. The company got into various businesses such as shipping, paper, steel and metals, pulp and coal, and even commodities such as weather and credit derivatives. At its peak, Enron was reporting profits of $1 billion and revenues of $80 billion. Fortune selected the company as America's top and most growing company for six consecutive years.
Enron Unethical Behavior
Enron's scandal was a result of lies and unethical accounting on business operations. The company's leadership fooled the regulation authority with off-the-books accounting practices and fake holdings. The executive staff led by Jeffrey Skilling used an existing void in accounting, production of precise financial statements, and unique purpose entities, proving that the company was doing well by hiding billions of debt consequential from the projects. To the customers and other competitors, Enron appeared like an innovative, well-run company. However, in a real sense, it was hugely a product of self-created ventures or businesses that were made "off the balance sheet." The side businesses would report profits but never report losses after selling stock.
Not including the businesses in its balance sheets was an indication that the company assumed that these businesses were separate, independent firms. Despite this, when the separate business made a profit, Enron would include it as its income. If the new business borrowed money or lost money, the debt and losses could not be reported by Enron. These unethical tricks were designed to make the company look like a more profitable company and to raise its stock price (Kulik et al., 2008). Enron worked to "cook the books" to make their income look much higher than it was and make their losses look more diminutive than they were. The officials forged information to favor their interests and to lie to the general public. Both executives and other officials claimed that they were not aware of the level of the company's off-the-books partnerships.
Enron stock declined after their tricks were known, and an investigation began. Enron was planning to keep its local pipeline companies and some of its abroad holdings. Before it emerged from bankruptcy, it sold its local companies, and days after, it sold the other overseas holdings. In 2006, Enron sold its last business, Prisma Energy, leaving it with no assets (Craig & Amernic, 2004). In 2007, the company changed its name officially to Enron Creditors Recovery Corporation, and its mission was to pay back all the old company's unpaid creditors and end every single affair that was facing the previous Enron. The ethics investigation resulted in the jailing of many Enron executives, and Arthur Anderson, their accounting firm, lost their clients and was eventually dissolved (Premeaux, 2008). Enron ended up filing for bankruptcy, and since then, new laws were made based on this issue to prevent such things from occurring again.
Industry Analysis Using Porter's Five Forces
Understanding the characteristic of an industry is essential in an organization's efforts to come up with competitive strategies and implement them. One of the frameworks that are good in determining the threat of entry, degree of rivalry, buyer and supplier bargaining power, and most importantly, the intensity of competition of a particular industry is the porter's model (Blair, 2014).
In the case of Enron Company, the industry was facing an increase in the threat of entry because it was a potential and profitable one. Most of the firms producing similar products were considering entering the industry to take advantage of the vast presented profitability. Most consumers at that period were considering the use of renewable forms of energy. The threat of entry was significant, given that there were few legal barriers. The introduction of renewable forms of energy played a significant role in increasing the threat of substitutes.
The considerable competition led to an increase in the degree of industry rivalry. The various options concerning forms of energy significantly increased the buyers' power. The aspect came from the fact that they could opt to go for the minimal cost. On the other hand, due to the significant number of suppliers, the bargaining power of suppliers was low.
Key Capabilities
Reaching the physical capacity of each available market and making a considerable investment by creating a flexible pricing structure was one of the critical elements of the company's strategic capabilities. Enron used financial references to manage risks, and therefore, its success was deeply connected to its ability to manage risks. Although these were the high risks that failed the company, the company was good at managing risks.
In terms of value, the company influenced every investment by creating flexible pricing structures in the newly acquired territories, which helped create some of the most popular consumer bonds (Srivastava et al., 2021). No other company was able to influence the market so extensively as Enron, and this increased the rarity of the company. Influencing an investment in a new market is both costly and difficult to imitate, especially when combined with creating a flexible pricing structure. Companies had to build their name first and invest in their marketing strategies to imitate and compete with Enron. Although the non-substitutable aspect of its ability to influence investm...