Conflict and Resolution: Avoiding political and legal pitfalls

The Case of ENRON in India

Presented By-• Pravin Narwade• Saurabh kalikar• Shrikant Gote• Rakesh Chaudhary• Aditya Khairnar

Introduction

ENRON – Texas, USA

ENRON In India

Ratnagiri, Maharashtra

Dabhol Power PlantLocation: Dabhol, Dist: Ratnagiri, Maharashtra.Fuel: Naphtha and Natural GasCurrently owned by Ratnagiri Gas and Power Pvt. Ltd.

A joint venture between Enron, General Electricals and Bechtel.Enron: Develop and Operate PlantGE: EquipmentsBechtel: Design and Construct

Problems Enron Faced

• Land and Water Acquisition by locals.• Critics: Will affect the environment, farms and the fisheries.• BJP and Shivsena opposition to Governments Economic

Liberalization policies.• BJP @ State and Center

NATURE OF THE MARKETING ENVIRONMENT REPRESENTED BY A DEVELOPING COUNTRY SUCH AS INDIA. Kotler: Marketing environment consists of the actors and the

forces that affect the company’s ability to develop and maintain successful transactions and relations with target customers.

a) Demographic Environment: Less Literacyb) Economic Environment: Liberal on paperc) Physical Environment: Plenty of resourcesd) Technological Environment: Slightly outdated, But Developing e) Political Environment: Provisions for developmentf) Legal Environment: End of License rajg) Social and Cultural Environment:

WHAT ARE THE KINDS OF MARKET RESEARCH AND ENVIRONMENTAL ASSESSMENT THAT WOULD HAVE PROVED USEFUL TO ENRON?The market research and environmental assessment that would be useful to ENRON includes product related factors, external factors and company factors as follows:

• Research on market opportunities and threats to identify danger signs. This can be achieved through social, economic, and political scanning. There is also a need to conduct regional and national research on the macro-level to get a wider perspective on opportunities and threats.

• ENRON needs to conduct demographical research to determine market influences.

• ENRON needs to identify hierarchies and social interactions in India especially the balance and sources of authority and power. To make better marketing decisions

• There is always a need to understand the regulation system to determine how it works and its deficiencies.

• ENRON also needs to investigate the political parties’ balance of powers and local government roles with respect to the central government political structure.

Identify and discuss the major errors that ENRON appears to have made in its Indian market entry.• Overlooking the political scenario in India.

• Considering Natural gas as Clean and Non-polluting fuel and yet Cheap

• Outsourcing the LNG to Gulf Countries without considering the available resources in India.

• Starting the Phase II even when the Phase I was not so productive.

• Investing with MSEB which was already running in losses.

• They let the budget exceed.

• MSEB bought only 1/3rd power produced by DPC.

Given the difficulties in marketing in Developing Countries, why should firms like ENRON engage with countries like India?

Enron’s Global Strategy• Vision - “to become world’s leading

energy company-creating innovative and efficient energy solutions for growing economies and a better environment worldwide”

• Focus on every aspect of natural gas – exploration, production, transportation, processing, marketing• EDC offered complete energy

solutions – generating addition opportunities for other Enron business units

• Introduce concept of PPP in energy industry

• All undertakings are Project Financed with long term contracts and appropriate measures for Economic, Financial risks etc..

• Usage of Natural gas to take care of environmental concerns

• India, being a growing economy with huge energy needs fit well with Enron’s vision

• By contracting the middle east for fuel supply, EDC

(ENRON Development Corporation) ensured stake of EPP in Dabhol Project

• With reforms just coming in, India was welcoming private investment in Power sector

• Indian Govt. and MSEB providing for Currency risk, commercial feasibility etc.

• India’s coal considered environmentally unfriendly

India

Cont…

Potential benefits for Enron• Huge untapped market• Buying guarantee from MSEB• High tariff rates• Shielding from currency fluctuations (MSEB)• First mover advantage • Successful project completion would lead to future growth

opportunities

References

• http://www.altindia.net/enron/Home_files/WBreport.htm• http://www.hrw.org/reports/1999/enron3-0.htm• https://consortiumnews.com/2001/123001a.html

Thank You