E-Commerce in Enron

Abstract

Enron was formed in 1985 when a Houston natural gas company merged with InterNorth, a gas provider in Nebraska to operate an interstate natural gas pipeline that linked the Great Lakes with Texas. Kenneth Lay, a former Exxon executive, became chief executive officer (CEO) of Enron in 1986. Enron began trading gas commodities in 1989 and soon became the largest supplier in the USA. The business activities of Enron spread all around the world and included activities in countries like Argentina, Bolivia, Brazil, China India, Indonesia, Mozambique, and the Philippines (Chatterjee, 2000). Enron also diversified its product range and expanded on to the Internet trading in a wide range of products from pulp and paper to petrochemicals and plastics. It also traded in esoteric products such as airport landing rights, railroad hauling capacity, and clean air credits. In less than two decades, Enron grew from a small gas pipe line company into the world’s leading energy trading company with $100 billion in revenue, $60 billion market value and 21,000 employees in 40 countries. In 2000 the Fortune magazine named Enron as the most innovative company in the USA for the fifth year in succession. In the same year Energy Financial Group ranked Enron as the sixth largest energy company worldwide. Enron’s mergers brought the company much success, but Enron wanted more. Enron wanted growth which eventually led to its demise. This phenomenal growth was made possible by the use of new market strategies that tilted towards knowledge and innovation in place of traditional ownership of physical assets. The central strategy at Enron was to totally use the financial derivatives in the market to acquire commodities that anybody wanted to sell and dispose it at a profit to anyone who required it. This started with oil and natural gas and then just expanded into electric power generation and pipeline capacity, broadband communication, and freight capacity of modular containers. All these were the factors that were responsible for Enron’s growth and corporate greed led to its downfall (Ekbia, 2004).