As a vanguard firstly entered India for international operation in 1990, Enron International experienced rise and fall through years and had been built into a global operation with remarkable achievements by 1997. Simultaneously, the growing presence in India became the major potential treasure in Enron International's business kingdom. As the CEO appointed by Enron's chairman, Rebecca Mark has been fastly gaining reputation for her splendid diplomatic skills and political intelligence.
However, influenced by different factors, this critical international company had a tough way to its latter success. Although it was chosen by the India's former prime minister, Narasimha Rao, it successively experienced unexpected problems and complex conflict in the country. By 1997, Enron International had been built into a global operation with sales of $1.1 billion, annual profits of $220 million, and a backlog of international energy projects worth over $20 billion. While it showed a good learning example in success, enlightenment also could be found in this case, which calls for further perception of finely manipulating a business under a circumstance, which related to culture studies and major ethics.
Problems Enron International had been through several problems from the initiation: Inappropriate Anticipation
At very beginning after Enron International jumped on the offer and initiated its business in India, Rebecca Mark quickly discovered that India's energy problems involved more than a simple lack of generating capacity. The country had been found lacked adequate supplies of fuel as well. That led the leader of the company made a bold but risky decision which called for further investment up to $20 billion to turn Enron into the largest distributor and consumer of liquefied natural gas (LNG) in India by 2010. One thing lead to another, Enron would have to set two terminals at Dabhol and Ennore respectively and also two gas-based power generating plants near the terminals.
Additionally, Enron International had to import LNG from a facility building in the Gulf, promised its investors a 15 percent annual growth in shareholders' income, which took big responsibility and put high stakes on success of Enron International's India strategy. A plenty of actions would be asked to follow the leader's newly extra decision. It either influenced the former budget or tested the company's capability. If the project experienced failure, wide range of people and organizations would be involved.
This issue should be identified as an operational symptom which could be avoid if the company better viewed the various factors, mainly the external environment and took good care of that before entering an international market. Good prior preparations in some extent enable a company to easily react and deal with problems would be confront in the operating process.
Unexpected Deferment And Its Chain Reaction
The process of approving the Dabhol project took time and much complex than it thought to be. As reported by Mark: "People (foreigners) don't understand how to get things done in India. Politicians lay out a plan, but that's different from working through the system." She realized that the federal government might in principle approve the project but it still had to win approval from state government and cultivate the approval of key players in India's extensive civil service. The government had been repotted reluctant to intervene and force a bureaucrat to make a decision when an issue of process is at stake. Due to that complex, the company would have to get 170 different state and federal permits, and deal with attached problems.
Unexpected deferment caused the company not able to move forward until early 1995 when full approval for the project received. Unfortunately, just as the construction was initiated, a new administration government took power in the state and seized on the Dabhol project, which continued with other setbacks of Enron International.
The symptom could be behavioral that the company had underestimated the time taken for the approval procedures of the project and therefore led to the deferment. It was a problem that related to external environment what in this case were the different regulations and complex procedures of Enron's kind of situation in India. The aspect of how political and legal environment influenced the approval of the project should be considered the root problem for this issue.
Political And Cultural Risk
'Culture' has not got a simple definition. The values and norms of a culture do not emerge fully formed. Many things such like prevailing political and economic philosophy, social structure of a society and dominant religion, language, and education, constitute them.
According to one observer, "The popular belief is that any dealing with foreigners are bound to be either crooked or disadvantageous. Maybe 9 times out of 10 this is correct." Many people in India held this sort of notion by that time. Because of that, the claim that the local leader had been bribed by the company played well in public. Enron's investment in India had been regarded as a corrupt machination associated with the local leader and the Congress Party. The company began experiencing a conflict with the state government of which the new leader had been elected. The campaign constituted the trials and tribulations of both the company and the Indian government. It also took time and efforts that were unexpected to Enron international.
In this case, a major change of the control power in the state government had been through by Enron International. The issue that had trouble with the newly changed local government could be considered as an external environmental influence. The root problem in my view was irregularities in India the company met when the new government called for exorbitant costs and put political pressures on the project. However, on the other hand, it could be also regarded as a behavioral issue, which could be actually avoided by signing a more concrete contract before started the project plan. Considering more about the stability of a country's political society at the very first, Enron International might solve the problem more easily and much better.