Purchase Solution

The Rise and Fall of Nortel

Not what you're looking for?

Ask Custom Question

1. Keeping in mind ethical concerns, describe the factors that contributed to Nortel's failure.

2. What mechanisms should be enforced to better align managers with the interests of shareholders?

3. Would you describe the meltdown of Nortel more as a failure of "people" or of "capital market processes"?

4. Nortel's fate is similar to what happened to WorldCom and Enron in the early 2000s, and to Lehman Brothers, Citigroup, and other banks during the 2008 financial crisis. Why and how does the banking industry commit the same mistake over and over again?

5. Discuss methods to prioritize the following remedies to stop such recurrences: business education, regulation of accounting/financial markets, regulation of incentives, or regulation of punishment. How did you prioritize these remedies?

Purchase this Solution
Solution Summary

This library response looks at the meltdown of Nortel.

Solution Preview

1. From an ethical perspective, the primary factor that was responsible for the rise and fall of Nortel was overvaluation, which happens when a company overstates share prices to lure potential investors to the company. The overvaluation engaged in by Nortel was the catalyst for a series of irreversible events leading to the doom of Nortel. The company attempted to deceive investors by utilizing the discrepancy between actual value of the share and the market value of the share to raise market value of their company and by raising potential investors' expectations. Therefore, Nortel's market value increased because of the inaccurate and deceitful strong future prospects and profit potential for the company created by the use of overvaluation. As a result of the deception used by Nortel, investors began to buy into the company greatly increasing the market value of the shares.

But when Nortel failed to deliver on its expectations, it started to create suspicion among its investors with share price declining. As a result of this, managers started to take drastic measures thinking it might stable the ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Annual Reports Comparison: ACE Aviation and Nortel Networks

    However, Nortel was the winner as it produced US $7.15 and US $7.46 in 2007 and 2006, respectively for every dollar of fixed assets while ACE produced Canadian $1.37 and Canadian $1.76 for every dollar of fixed assets in 2007 and 2006, respectively.

  • Company stakeholders and reputation of a company

    I am giving the example of Nortel taken from the wikipedia: Nortel shares soared in the late 1990s and collapsed in 2002 along with the technology bubble.

  • Management style of Nortel CEO Frank Dunn

    See the attached file. Nortel Employee Communications Memo Date xx-xx-xxxx Subject - Dismissal of Mr. Frank Dunn There is much media and news about the recent Nortel management changes and most notably, the change in Nortel's CEO.

  • Why was inventory written down for Nortel Networks?

    Have a great day This solution is comprised of a detailed explanation of whether or not the Securities and Exchange Commission should do anything about the written off of the inventory for Nortel Networks in 2 paragraphs of more than 100 words of text

  • inventory

    For example, Nortel Networks revalued some of its inventory parts at $0, though the inventory initially cost Nortel $650 million.

  • Potential Organizational Effectiveness Dissertation Topics

    The researchers in the Nortel study highlighted how staff within the company had become incompetent as a result of hubris and an inability to adapt within the changing marketplace and organizational environment, but the researchers had gaps in regard

  • Many high-technology companies, like Nortel Networks....

    For example, Nortel Networks revalued some of its inventory parts at $0, though the inventory initially cost Nortel $650 million.

  • Writing off inventory

    For example, Nortel Networks revalued some of its inventory parts at $0, though the inventory initially cost Nortel $650 million.

  • Why do businesspeople keep making the same mistake?

    (STANFORD GRADUATE SCHOOL OF BUSINESS, 2003). All of the other companies mentioned, Lehman Brothers, Citigroup and others fall into the similar patterns.

View More Related Solutions