On April 9, 2001, Enron issued a political force majeure notice to the Maharashtra State Electricity Board (MSEB), a standard contractual clause that aggrieved parties use as a first step towards possible quitting. Companies issue the notice if they believe circumstances on the ground have undermined a contract.
It took three years. to February 1999, for Rebecca Mark and her team at Enron's International Unit to bring its Dabhol
power plant in India back into operation. In 1996, the Indian government had canceled the partially built plant because of pressure from environmentalists and a derailed economic
reform plan that had placed the Dabhol plant as the first
foreign-owned power project. But both sides learned from
their mistakes, and Ms. Mark's patient and skillful negotiations eventually brought about consensus to reignite economic
reform and to get the Dabhol plant going again. Enron submitted a proposal in 1997 to build five-to-seven additional power plants in India. The first phase, the Dabhol plant, was completed in December 1998
Ms. Mark had worked on the relationship between Enron International and India, with an on-again, off-again relationship, since the early 1990s, when the Indian government
began to be more open toward foreign investment. Prior to that Gandhi's philosophy of swadeshi, meaning self-reliance, had peretuated protectionism for its domestic industries.
Ms. Mark had an ambitious plan to construct a $3 billion
power plant in Dabhol. in Maharashtra state. She negotiated extensively with the Maharashtra state government and members of India's civil service. She needed 170 different state
and federal permits, along with layers of legal and tax paperwork. She commented on this process:
I've had tea with every bureaucrat in India People don't understand how to get things done in India. Politicians lay out a plan, but that's different from working through the system.
Today, (as of April 2001., Enron's 2.364-megawatt plant at Dabhol is the biggest foreign investment in India. However, officials at Enron, the Houston-based company, announced on April 9, 2001, that it had lost confidence in the state company that is contractually obliged to buy the output of its Maharashtra plant. The problem was that the energy Enron sold to local utilities cost four times the going rate. While there had been an agreement for the Maharashtra officials to pay partly in U.S. dollars, no one foresaw the decline of the rupee or the surge in oil prices. The bill ran up to Rs.2.25 billion (Pounds 33 million), and a Maharashtra government plea to the federal government to bail out the state fell on deaf ears. Enron Dabhol noted that it had been subjected to the politically motivated agenda of both the Maharashtra government and the government of India. resulting in an adverse effect on the company's ability to perform obligations under the Purchase Power Agreement. This situation resulted in Enron Dabhol issuing a political force majeure notice to the Maharashtra State Electricity Board. This is a standard contractual clause in which a company can give warning of withdrawing when their contract has been undermined-in this case where it is locked in a payment dispute. While India's federal power minister. Suresh Prabhu states that the bill will be paid, there are broader ramifications of this situation for foreign investors and for India itself. Although it has been over ten years since India started dismantling its socialist economy and encouraging foreign investors, only a few of the two dozen foreign power players who invested there remain.
It seems that Ms. Mark's tireless negotiations may not have been enough to contend with India's political volatility and bureaucracy. Enron has decided not to build more plants in India, and instead, as part of its worldwide strategy, move out of the ownership of assets into the trading of power as a commodity.
Global managers negotiate with parties in other countries to make specific plans for strategies (exporting, joint ventures, and so forth), and for continuing operations. While the complexities of cross-cultural negotiations among firms around the world is challenge enough, managers also sometimes are faced with negotiating with various governmental agencies; this kind of situation is illustrated in the opening profile of Enron's Dabhol plant, where negotiators were faced with shifting political agendas over time, internal political conflicts between state and national governments, and multiple layers of bureaucratic hurdles. The high-level political negotiations between the United States and China to gain the return of the U.S. military crew from the plane that was forced to land there in April 2001 is another example of complex situations fraught with both political agenda and cultural nuances, such as the need for the Chinese to save face by demanding an apology.
Managers must prepare for strategic negotiations; next the operational details must be negotiated-the staffing of key positions, the sourcing of raw materials or component parts, the repatriating of profits, to name a few. As globalism burgeons, the ability to conduct successful cross-cultural negotiations cannot be overemphasized. Failure to negotiate productively will result in lost potential alliances and lost business at worst; confusion and delays at best.
During the process of negotiation-whether before, during, or after negotiating sessions-all kinds of decisions are made, both explicitly or implicitly. A consideration of cross-cultural negotiations must therefore include the various decision-making processes that occur around the world. Negotiations cannot be conducted without decisions being made.
This chapter will examine the processes of negotiation and decision making as they apply to international and domestic cross-cultural contexts. Our objective is a better understanding of successful management.
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