Nortel Case Study

Nortel: Arrogance Leading to Demise and Downfall

Nortel Networks Corporation, also known as Nortel, was an international telecommunications company in Ontario, Canada. It was founded in Montreal, Quebec in 1895. During the height of its success, Nortel made up more than one third of the total worth of all similar companies in Toronto and they employed 94,500 team members worldwide. (Gillies, 2009). On January 14, 2009, Nortel filed for protection from all its debts and creditors in the United States, United Kingdom, and Canada in attempts to remedy its debt and financial obligations (Gillies, 2009). Late in 2009, the Nortel disclosed that it would end all business transactions and sell off all of its parts. The period of bankruptcy protection

It has been concluded that Nortel’s growing dominance in its markets in the 1990s “led to a culture of arrogance and even hubris combined with lax financial discipline. Nortel’s rigid culture played a defining role in the company’s inability to react to industry changes.” (McFarland, 2014). While Nortel was increasing its revenue between 1997 and 2000 through a spree of acquiring other partners and tripling its share price in the same period, the company lost focus on profitability and was in a very tough position (McFarland, 2014). Nortel misread the market and was not prepared to respond to increased competition from Japan and other competitors. The accelerating rate of technological change and the power shift to customers was just too much for them. The bad taste they left in key customer’s mouths made them feel that Nortel would not be around for the long term to fulfill their promises. Their lack of resilience, strategy, structure, poor financial management, business processes, people and culture decreased the company’s ability to adapt to keep up with competitive advantage. (Nisen, 2014). Nortel, made textbook errors like failing to communicate, meet commitments, and possess a firm technology knowledge (Nisen,