Case Study on Enron Corporation

Case Study on Enron Corporation

Enron Corporation was formed in 1985 from the merger of Houston Natural Gas and InterNorth a Nebraska pipeline company. The Corporation rose to become one of the largest global energy, services and commodities company. It sold natural gas and electricity, delivered energy and other commodities such as bandwidth internet connection, coal, steel, paper and pulp, and provided risk management and financial services to the clients around the world and by the year 2000 Enron has become the seventh largest company in America and was paving way to become the largest (Moncarz et al, 2006). To attain this level of growth and success, Enron adopted innovation, internal entrepreneurship and asset-light as the corner-piece of their corporate strategy.

Enron's innovative strategy forever change the way coal and energy were traded because they functioned at both the supply side and dealer side of the industry. On the supply side they had information from energy producers about production cost and distribution problems while on the dealer side they had critical knowledge about the market as market players came to them either to buy or to sell thus providing a major competitive advantage (Moncarz et al, 2006).

But did this strategy fit into their situation? During Enron formative years, YES; because as at the mid 1990s Enron had become the biggest trader of natural gas in the US but their gas trading business didn't dominate their operations as they simultaneously concerned themselves with expending their hard-assets (Fox, 2003, p43). At the time, these were not contradictory goals. Enron was trying to become an integrated gas company, with operations in producing, delivering, selling and trading gas (Fox, 2003, p43) but as Enron was making large profit from the trading activities (Moncarz et al, 2006) management began to lose focus and direction thereby making this strategy incompatible with their situation as they were now aiming to become the best company and as such they went into trading business that was different from their core and traditional business of energy, so in the larger context of Enron overall business activities, this strategy failed.

But was Enron able to sustain the competitive advantage their strategy made them to achieve initially in their core business? No, Enron strategy did not help in achieving a competitive advantage because their new strategy of going into trading business undermined the asset-owning business on which the company was built (Fidler, 2002) and on the long run Enron strategy did not result in better company performance, hence their demise.

One of the major strategic management failures that led to demise of Enron was their non-adherence to their corporate values. There was a wide gap between Enron's state values of respect, integrity, communication and excellence, and their actual business practices (Thompson, Strickland III and Gamble 2008, p. 29). Enron managers often display arrogance and ruthlessness that went against their values despite the fact that they talk about it (Fox, 2003, p79).

Secondly, Enron had a fabulous innovation program which made them ...