Worldcom, Up Until Its Bankruptcy

WorldCom, up until its bankruptcy and financial scandal in 2003, was the world's second long distance telephone company. Its growth strategy during the 1990s was primarily to acquire other telecommunications companies such as MCI communications. However, the company free-fell after the discovery that it was involved in one of the biggest financial scandals of the American history, with the worst financial collapse of any American company in the wake of Enron. The bankruptcy of WorldCom in the wake of accounting scandals was symptomatic of internet excess during the era of the technology bubble. It was eventually sold to Verizon in 2006 for 7.6 billion dollars.

When WorldCom was one of the world's largest long distance telephone companies one of the primary problems was that it could not adequately incorporate acquisitions within the framework of its business practice. As a result, they lost more money through inefficiency and was not able to compete with other major players, especially with the emergence of cellular technology. The key legal problem within WorldCom is the conflict between corporate disclosure and maintenance of competitive advantages. WorldCom's strategy of acquisition for expansion was smart in that they were able to almost over night become the second biggest player within the telecommunications industry. However, in order to go through such acquisitions, it had to disclose all of its information to the SEC as well as other government agencies to conduct a conclusive test for monopoly interest. WorldCom's principle conflict and the reason for its accounting errors was due to its unwillingness to disclose all pertinent financial information to the SEC. WorldCom's reasoning for such nondisclosure was that a full report would have jeopardized its acquisition strategies for the future. In hindsight, this philosophy negatively impacted both WorldCom as well as its investors. WorldCom's strategy was to acquire companies and meet financial projections through careful integration of organizations; however, it acquired too many subsidiaries without having the ability to fully utilize them across platforms. When they failed to disclose these facts during filings, they effectively pursued a losing strategy without informing investors of their strategic decisions. Thus, the infrastructural collapse that occurred in the post-scandal era led to its eventual bankruptcy. The conflict present within the WorldCom case is the legality of public disclosure. WorldCom's actions resulted in the passage of the Sarbanes-Oxley act, which further enhances corporate transparency for publicly held companies.

WorldCom, as a subsidiary of Verizon now faces three strategic problems that impacts its long-term decision making process. First, the decreasing subscription of land-line telephone service due to the proliferation of cellular technology. Since 2001, there has been a steady decline in market share of land-line telephones as more and more users chose to use cell phones as their permanent phone provider. WorldCom, with its specific focus still on land-line services has created a multitiered strategy to promote land-line use. They emphasize new packages that are more affordable than older packages, with shorter time commitments, as well as more land-line services than previous offers. WorldCom believes that this strategy promotes greater diversification of land-line services across many different platforms that will increase the overall usage and service provision for American consumers. The second major issue that impacts WorldCom's future strategic vision is the emergence of VOIP services as a mode of land-line phone services. VOIP (Voice over IP) are internet-based telephone services that utilize the internet connections to create a virtual land-line platform. This service has become increasingly popular because it is low-maintenance and much cheaper than traditional landlines. In order to decrease the market share erosion for VOIP providers, WorldCom has created a long-term strategy that attempts to destroy the credibility of VOIP through attacking its inconsistency. WorldCom, at a corporate level, believes that it can maintain and even increase its current market share by reducing costs and increasing user friendliness through its platforms. The final strategic challenge to WorldCom is the proliferation of smaller and decentralized landline providers throughout the United States. When WorldCom dominated the marketplace of landline telephones, there were only four major competitors for overall market share. Today there are more than dozen popular services that all compete with WorldCom and at&T for overall market share. WorldCom has used a leaning approach with their current corporate strategy to cut costs. They believe that if they provide more efficient servicing platform they can maintain their current user base and expand into competitor strength regions that have less flexibility and more tenuous infrastructures.