Procter & Gamble·s Corporate Espionage

Presented by: by: Gaurav Thakur

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P&G    

Established in 1837 by William Procter & James Gamble. One of the Largest FMCG Companies in the world. Number One maker & Marketer of Household Products in U.S. Five Business Segments includes Fabric & Home Care, Baby, Feminine and family care, Beauty care, Health care, Food and Beverages

P&G   

Ranked 31st among the Fortune 500 Companies in 2003. Operations in more than 80 countries world wide Employee strength of more than 110,000 worldwide.

Unilever    

Formed in 1930 By the merger of Margarine Unie (Dutch Company) & Lever Brothers (British Soap Company) Main Focus on it·s Foods, Personal care & Home Care Business. Second largest Consumer goods Company (After P&G) Third largest Food Firm after Nestle & Kraft Foods in the world.

Unilever  

The Group operates through seven segments: a) Soaps and Detergents b) Personal Products c) Exports d) Beverages e) Foods f) Ice Creams and Other Significant Business in US, Europe, Asia & Latin America.

P&G and Unilever    

Unilever entered the u.s market in late 19th cent. & Competed with the market leader P&G. P&G dominated the U.S household & personal care market while Unilever dominated the European market. Equal Dominance of P&G & Unilever in Asia. Both Competed in every aspect of their operations.   

Fiercest Competition in Soaps (Body care & Fabric Care) & Shampoo (Hair care) segments. Both among the Heaviest users of CI. Many instances since 1940 proving their involvements in Corporate espionage.

All·s Fair in Love, War - and Hair  

P&G and Unilever are fierce competitors in the shampoo industry. P&G, the world·s largest producer of hair care products & trying to increase its position in the industry by introducing new brands, like Physique, and buying others, like Clairol.

Competitive Intelligence vs. Corporate Espionage
Competitive Intelligence (CI)  

CI is Information acquired by a market competitor about the companies with which it competes. CI may be acquired from, the competitor's customers (current and former), suppliers, former employees, stockholder meetings, industry associations and trade shows, trade journals, newspaper articles, research studies, or advertising copy

CI Practices
Companies need to be aware of their competitor·s strategies and make efforts to effectively counter those strategies in order to sustain themselves in the market
Major companies using CI are;
‡ ‡ ‡ ‡ ‡ ‡ ‡

Microsoft Motorola P&G HP IBM CocaCoca-Cola Xerox

Corporate Espionage (CE)
Acquisition of trade secrets from business competitors, a reaction to the efforts of many businesses to keep secret their designs, formulas, manufacturing processes, research, and future plans. Practices that fall under CE are;
‡ ‡ ‡ ‡

Dumpster Diving Social Engineering Interviews Bugging offices and Hacking systems

Difference between CI & CE
A dumpster diver would say ¶I want it all· & a ¶I all· savvy CI analyst would say ¶I have to act quickly, so what is the minimum information I need to draw a conclusion?·

Evolution of Corporate Espionage     

History dates back to sixth century. China had monopoly in silk production. Justinian hired monks to gain understanding about silk production. Monks succeeded in smuggling silkworm eggs and mulberry seeds out of China. Byzantine empire replaced China as the largest silk producer.    

18th century France sent spies to steal Great Britain·s Industrial secrets. Power loom plans were stolen by Americans from England in 1811. Technological advancements in 1990·s made companies invest heavily in R&D activities. The late 20th century corporate world had to have the right information at right time to make decisions 

21st century, CE had found wide acceptance and usage in many nations. Almost every Fortune 500 company was engaged in some form of CI activity. Companies engaged in Illegal or Unethical activities were not negligible.  

Economic Espionage Act, 1996 

To prevent the theft of American Intellectual Property by Foreign companies and Governments. The act made CE (buy or possess trade secrets obtained without owners authorization) a criminal offense. 10 years imprisonment or a fine of $250,000 on any person or $ 5 million on any company violating the Act.  

Leading Brands

A Shocking Revelation
´Procter & Gamble found engaged in illegal Corporate Espionage against archrival, Unileverµ ² Fortune magazine August 2001 John Pepper, then chairman of Procter and Gamble, discovered this operation which did not violate U.S. law but, violated strict guidelines regarding P&G business policies.

P&G·s Secret Operation 

Begun in late 2000 to spy on hair care business of Unilever Planned by the Competitive Analysis team by hiring outsiders ´Dumpster Divingµ also called as Rubbish archeology Misrepresentations as market analysts & journalists $3 million was spent on the operation.    

Shampoo Giants Tell Spies to Wash and Go
Advertising budgets launch plans market strategies Spying Operation prices

margins Product Development plans

P&G·s Top Management Shocked !!    

P& G·s Top Management found about CE in early 2001. Unilever & P&G were competing to acquire ´Clairolµ. Decision on offer price was to be made after considering CI on Unilever·s hair care business which was far too detailed & sensitive. P&G sacked the 3 executives involved in the covert operation.

P&G Makes Admission on Violation   

P&G wrote letter to Unilever. Company·s chairman John Pepper called Unilever·s co-chairman Niall Fitzgerald to settle cothe issue. Invitation to Unilever to interview P&G staff as well as the agents to identify the extent of transgression.

Unilever Dissatisfied 

Unilever was not satisfied by the level of cocooperation. P&G did not sack any of their employees. P&G won the auction for Clairol for $4.95 billion in May 2001  

Settlement Terms & Conditions    

Reassignment of key personnel to other business divisions of the company Restriction on launch of certain new products until the end of 2003 Appointment of a 3rd party investigator to review P&G·s Business & Marketing strategies Cash payment of more than $10 million in settlement.

Lessons to be Learnt 

90% of the information on any company is available in the public domain if the investigators know what and where to look for. Unilever should have at least taken routine precautionary measures to destroy its documents Laws related to espionage practices should be more stringent by clearly defining every activity that falls under CE. Companies should formulate an internal code of Ethics & ensure that employees abide by that code and the concept of CI should not be maligned by CE. CE.   

THANK YOU

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