Effect of Internal and External Factors on Worldcom

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The effects of Internal/External Factors on WorldCom
Learning Team A
November 9, 2010

The Effects of Internal/External Factors on WorldCom
Over the years the world has seen many corporate disasters pertaining to management. One of these disasters has been the rise and fall of WorldCom. From the beginning of WorldCom in 1983 as an obscure long distance company, the world watched as the company executed an aggressive acquisition strategy to become the second largest communication company in the United States and one of the largest companies to handle worldwide Internet data traffic. Until the company’s bankruptcy filing in 2002, the globalization, technology, innovation, diversity, and ethics were factors and causes for the rise and fall of WorldCom, this paper will briefly discuss each.

The first factor is how WorldCom used globalization to grow the company. In 1983, Bernie Ebbers created a business plan that would eventually become WorldCom; this planning event was the first step to establishing a structure. The goal was to determine how many employees and how much capital the company would need, and how to rival the competition. The second step was to organize personnel and resources to gain control of the untapped Internet communication market for companies overseas. The third step was to lead his people to the goal of worldwide communication domination of Internet data resources for businesses. The fourth step was to control the amount of globalization through performance levels of overseas assets.

If Bernie Ebbers had adhered to the four functions of management his company may have succeeded in the globalization efforts for WorldCom. However, he failed his people internally by not managing a strong organized work environment, as stated by Cynthia Cooper a WorldCom internal investigator. “WorldCom created an environment that pitted the workers against each other to make financial goals therefore they did not respect their employees” (Eichenwald, 2002 p.A-1). He also failed to lead by not providing meaningful direction to employees or managers and was unsuccessful in controlling finances leaving his company in a $9 Billion dollar accounting deficit after selling his own stock.

In today’s society technology affects how individuals communicate, learn, and think; it helps to identify with society and determines how people interact each day. Technology and innovation has both a positive and negative effect on society; it is nearly impossible to go an entire day without technology affecting one’s life some way or another. “WorldCom, through the execution of an aggressive acquisition strategy, evolved into the second-largest long distance telephone company in the United States and one of the largest companies handling worldwide Internet data traffic” (Moberg & Romar, 2003, p. 1). WorldCom’s steady growth in revenues was through external acquisitions, resulting in the successful completion of 65, which did not leave any attractive companies left to consider purchasing. This led to the decline of WorldCom because they did not create means internal to bring in revenue; they also did not consider that large mergers and acquisitions would cause significant managerial challenges. It is management’s responsibility to work through the challenges of combining the new and old organizations into one efficient business; this can be a very time-consuming process. If the acquisition process is to increase the value of the company, thorough planning, and considerable senior managerial attention is necessary. “With WorldCom completing 65 acquisitions in six years management at every level had a great deal on their plate” (Moberg & Romar, 2003, p. 1); their demise resulted in part from WorldCom not providing their managers adequate time to integrate, structure, and fix the companies they acquired....
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