1- Evaluate the planning function of management.
2- Analyze the impact that legal issues, ethics and corporate social responsibility have had on management planning, and give an example for each.
3- Analyze at least three factors that influence the company's strategic, tactical, operational, and contingency planning. Cite at least 2 sources.
WorldCom was found by Bernard Ebbers as a small long distance discount telecom company. It's headquarter was situated in Mississippi. WorldCom's growth was based on merger and acquisitions. It acquired many small telecommunication companies and became one of the largest long distance providers by 1995. In 1997, WorldCom took over MCI for thirty seven billion dollar. At that time, acquisition of MCI was the largest acquisition in the history of America and it made WorldCom the second largest telecom company in America after AT&T.
WorldCom thought that investing in handling internet backbone would be quite profitable but this resulted into a large amount of debt on WorldCom. In 1999, telecom and internet industry confronted a big slowdown. When most of the telecom companies (long distance carriers) were in loss WorldCom was fraudulently reported as a profit making firm to keep the faith of investors. Many of the top executives including founder & CEO, Bernard Ebbers and accounting in charge of the company got involved in violating accounting principles.
WorldCom's chief financial officer, Scott Sullivan highly manipulated the company's financial data and ordered other members of accounting department to follow his procedures. Ebbers borrowed $400 million from his company to pay the margin call. By June 2002, WorldCom found itself unable to hide its heavy manipulation in its financial statements and its stock trading stopped by the end of June. WorldCom claimed more than $41 billion in debt for bankruptcy protection in July 2002 (Moberg & Romar, 2008).
Investigation of this case showed that this fraud was bigger than Enron's and largest in the American history. In this manner, WorldCom's CEO and CFO both were involved in this fraud and the collapse of WorldCom resulted into a heavy loss of its investors. The major contributor of WorldCom's failure was the merger of MCI and WorldCom. This resulted into heavy and unmanageable debt on WorldCom and the company collapsed.
Management Planning is an essential part of any organization and is essential for the efficient working of an organization. If an organization works in a planned manner, it will earn profits and the efficiency and productivity of the Company will increase. Based on the shareholder prospects, the task of the management is to plan for the company with an aim to make high profits with the objective of paying out high dividends. Therefore, to maximize the revenues and control the costs, the management needs to strategize the planning process. The management may also consider its own intentions, so the leading executives may permit profit making to slither in their favor or taking out high remunerations and perks for themselves.
The management planning of WorldCom is not good as it is not able to function properly and allocate its resources in an effective manner. The Company lacked skills of planning and was not able to maintain its accounts properly. It had a bad debt expense of 400 million dollars which was not covered in the accounts represented to the audit committee. The internal audit committee was also fraud and it did not cover this debt of 400 million dollars. The stakeholders were also not informed and they were cheated (Enrick, 2007).
If the management planning would have been systematic and according to the time, such a situation would not be ...
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