Enron Doing Business In India

1291 words - 5 pages

Enron in IndiaIn moving into India, Enron faced a variety of problems which hindered its ability to conduct business. Some of these factors were environmental or cultural factors that any foreign investor in India would face, and other factors existed that were particular to the Dubhol project.When considering doing business in India, Enron should consider that at the time India was emerging from a command economy and only recently realizing the huge benefits of FDI. This change would not happen overnight so opposition from those people who previously were supportive of a government planned economy should have been expected. The political ideology of India at the time was emerging from a radical perspective - a movement away from the idea that multinational enterprises were an instrument of imperialist domination may still have been felt in many areas. The support of Gandhi's doctrine of swadeshi would be still felt by the older people in power those who remember India's fight for independence. This cultural backdrop therefore presented a difficult task for Enron, before contracts had even been drawn.Logistical issues were also prevalent here - India did not have the capacity to support the demand for energy and did not have the fuel supplies. The interdependence of Enron's Qatar project ensured that success in India was important as well as far-reaching.When making moves into Maharashtra, Enron noted that the political and economic environments were favorable. Contingency plans should have been made for a possible change in political climate or a downturn in the economy. When the Congress Party lost power to Shiv Pawar in Maharashtra, there was a shift in political climate and power over the project now lay at the hands of a non-supportive, ethnically-intolerant party. The Shiv Pawar Party's accusations of bribery and cost padding helped to exacerbate an already existing distrust of foreign presence which may have existed and became a source of bad publicity for Enron as well as a very real threat to the Dubhol project. The public were not impressed by the apparent lack of competitive bidding for the project and there was also opposition from environmentalists who were concerned about the environmental impact of the project, and local farmers who felt their land had been unfairly taken away from them to build the plant.Given these project-specific difficulties against a backdrop of potentially unfavorable environmental issues, Enron has a tough decision to make. It could have backed out of the project - jeopardizing the whole India and Qatar project, as well as incurring sunk costs and possible litigation fees for breaching of a contract. They could also have considered moving some or all components of the project out of the state where the political climate was friendlier, or even to a neighboring country for power generation before being distributed to India. A final option, perhaps the most challenging, would be to proceed with the project...

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