Case Enron

Case Study: Enron

Question 2: Cons for Enron in the negotiation process

Enron Company took a big risk trying to penetrate Indian market with the knowledge that Indian culture is a lot corrupted and has a small respect of contracts and agreements.

Enron made a first mistake, “This was after a preliminary termination notice given by Enron a week before which stated that it would quit the project in six months.” By saying that, Enron sent a strong signal to MSEB that the project was not for the long-term.

→ MSEB decided to cancel the contract

This is justified because Enron didn’t respect certain technical functions of the plant, which were certainly noticed in the agreement between both companies. More over there is no future opportunity of both companies.

To this point, regards that Indian culture is a culture where corruption is strongly, and so, where the opportunity of cancel a contract is very important, Enron made a mistake not honouring that part of the contract. Indeed, it gave to MSEB the choice to cancel the agreement, and MSEB have to think in its own interest.

→ Because of the cancelled of the contract MSEB isn’t constraint in paying its electricity bill.

Even if this operation is morally debatable, this is not illegal.

MSEB don’t have to operate in Enron’s advantage and this could have been predictable by Enron because the company should have known that the Indian industrials were not as trustful as it though.

To sum up, MSEB and the Indian government played in this case an unfair and immoral war but legal.

→ Conclusion

In conclusion, as the previous case, we realize here that the knowledge of the culture you want to work with is simply crucial to do a fair, long-term and constructive business. And this includes the knowledge of the rules, the way to do business, the different codes, and so on.

More over the company have to remember to work in it’s own interest and remember that everybody do not act necessarily with loyalty, and so, protect itself from potential threats.

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