UNETHICAL STRATEGIES

TEAM NO : 11

TEAM MEMBERS

SANGEETA A

SURAJ G

MAMATA M S
MARKETING STRATEGIES

Advertisement:

Airborne gets caught by its own fake science.

Back in the 1990s, the herbal supplement Airborne was all the rage.

Packed with vitamins and minerals, it was pushed by marketers as being

capable of preventing or mitigating common illnesses like the cold and

flu. Eventually, the Center for Science in the Public Interest (CSPI)

stepped in to test the claims of the manufacturers, discovering that there

was no real scientific evidence to back up the claims. Airborne agreed

to pay $23.3 million to settle a lawsuit.

Labeling

KFC:

KFC claimed in ads that one of its Original Recipe chicken breasts has only 11 grams of

carbohydrates and 40 grams of protein. It also claimed that two Original Recipe fried chicken

breasts were healthier than eating a Burger King Whopper.

These claims would be true if the consumer took the breading and skin off of the fried

chicken breasts before eating them. KFC, a subsidiary of Yum! Brands, failed to include this

nutritional information in its advertising.

The FTC charged the restaurant chain in 2004 with false claims about its relative nutritional

value, and for claiming its chicken was compatible with a low-carb/high-protein weight loss

program. The FTC found two fried chicken breasts have more calories and more than three

times the trans fat and cholesterol than a Whopper. It also contained more calories than the

popular burger.
Sales:

Gregor MacGregor, the super scammer who sold an imaginary country:

This debonair Scottish war veteran reinvented himself as the “Cazique” and owner of a place

called Poyais in Central America.

Times were auspicious for impostors after the Napoleonic War, when the lure of fortune

proved irresistible. MacGregor presented maps and statistics about Poyais in a splendid

leather-bound guidebook. A commentary by Dr Thomas Strangeways (MacGregor

himself) described friendly natives, chunks of gold lining riverbeds, trees overflowing

with fruit. No smart investor could pass the opportunity by.

Hundreds of people between 1822-38 invested the modern equivalent of €4bn in

MacGregor’s heaven on earth. Some 250 emigrated and were dumped in a stretch of

wilderness in Honduras. MacGregor got away with it, and many of his victims died of

malaria.
Social media marketing

Click farms:

Widespread in developing countries, click farms involve hiring workers to click on digital ads. These

kind of click farms are being used for generating high volumes of web traffic, likes & followers on social

media, app installs and generally boosting online presence.

This click farm from China is relatively low tech and consists of 1 individual who spends all day liking and

clicking things on the mobiles. Notice how its basically a wooden shelf built to hold the phones at an

angle so they are easily accessible. You might have pictured a more high-tech setup, but this is as

technical as it gets.
Financial strategies

Creative accounting

Not long after the collapse of Enron, the equities market was rocked by another billion-

dollar accounting scandal. Telecommunications giant WorldCom came under

intense scrutiny after yet another instance of some serious "book cooking."

WorldCom recorded operating expenses as investments. Apparently, the company

felt that office pens, pencils, and paper were an investment in the future of the

company and, therefore, expensed (or capitalized) the cost of these items over a

number of years.
• In total, $3.8 billion worth of normal operating expenses, which should all
be recorded as expenses for the fiscal year in which they were incurred,
were treated as investments and were recorded over a number of years.
This little accounting trick grossly exaggerated profits for the year the
expenses were incurred. In 2001, WorldCom reported profits of around
$1.3 billion. In fact, its business was becoming increasingly unprofitable.
Who suffered the most in this deal? The employees; tens of thousands of
them lost their jobs. The next ones to feel the betrayal were the investors
who had to watch the gut-wrenching downfall of WorldCom's stock price,
as it plummeted from more than $60 to less than 20 cents.
Fake company:

ZZZZ Best, 1986

Barry Minkow, the owner of this business, claimed that this carpet cleaning company of the

1980s would become the "General Motors of carpet cleaning." Minkow appeared to be

building a multi-million dollar corporation, but he did so through forgery and theft. He

created more than 10,000 phony documents and sales receipts without anybody suspecting

anything.

Although his business was a complete fraud designed to deceive auditors and investors, Minkow

shelled out more than $4 million to lease and renovate an office building in San Diego. ZZZZ

Best went public in December of 1986, eventually reaching a market capitalization of more

than $200 million. Amazingly, Barry Minkow was only a teenager at the time! He was

sentenced to 25 years in prison.

PONZI SCHEME

Saradha scam

The Saradha scam, where more than 1.74 million people lost their savings and investments

worth $3.7 billion, was exposed when Kolkata-based Saradha group went bankrupt in

January 2014. The crisis did not end just there. It led to some 35 people

committing suicide. Politicians from the ruling Trinamool Congress Party in West Bengal

were alleged to have been the beneficiaries of the scam.

Saradha group, promoted by Sudipto Sen, comprised over 200 small companies, and had been

running collective investment schemes across eastern India since 2006.

Since access to banks is limited in rural parts of the country, many Indians depend on such

schemes as an investment opportunity. ”We already have a total of about half-a-million

individuals or entities that have either been indicted or been declared non-compliant by

regulatory bodies,” Prithvi Haldea, founder of watchoutinvestors.com, a web-based

database of defaulters, told the BBC in 2014.

Under the Saradha scheme, investors were issued redeemable bonds
and secured debentures that promised extraordinary returns upon
completion of tenure—the maturity period ranging between 12
months and 60 months. On completion of the tenure, many investors
were also offered land or apartments. Much of the group’s success
came from hiring local agents and roping in famous celebrities as
brand ambassadors.
The government is yet to retrieve the losses made by the scheme. Last
year, it allotted Rs500 crore ($74 million) from the state exchequer
to repay investors.
Boiler room:

No1 Gems
In 2013, four UK gem dealers made £1m by duping investors into buying diamonds at
inflated prices. Adam Simmons set up No1 Gems in 2011 and handed out brochures
boasting that employees at No1 Gems had more than 100 years’ experience in the jewel
business. They also lied about the closure of diamond mines and a potential £15m deal to
sell jewels to HSBC.

The scheme involved buying diamonds and supplying them to customers with the promise
they would make a substantial return. The fraudsters used a “sucker list” to source victims
and cold call them into buying diamonds priced several times the actual worth.

All the gems had been purchased out of a mainstream diamond catalogue before the gang
added mark-ups of up to 2,800 per cent. The fraudsters were eventually jailed and forced
to pay back the cash they made. They were also banned from holding company
directorships.
Unethical strategies in Recruitment
EXAMPLE:
November 2000: Important Career Center Information A
new spin on a recent trend to spam MIT people offering
them job advice. We suspect we know the list used by
these people. We also have spoken with the company and
they indicate that it is against their policy to send out such
solicitations. They are following up to determine and
correct the source.
Unethical strategies in Compensation plan

• Susan Holloway, director of executive compensation strategy at World atWork, says

that while incentive plans are a powerful way for a company to put a spotlight on

what they want to achieve, she agreed that “if left unchecked, it could lead to

unethical behavior.”

• Careful compensation plan design, she explains, should discourage “achievement at

all costs” through checks and balances. These can include concrete, verifiable

numbers, qualitative measures such as customer service or other quality metrics,

out-of-chain-of-command review of reports by financial professionals internally or

externally, both short and long-term incentive goals, and solid policies for

responding quickly and firmly to misreporting.

• EXAMPLE:
• Johnson adds that creating a compensation plan based on
sensible results reduces the chances that people will lie to
meet a goal and get the rewards: “If we give you an impossible
goal to keep your job, then you’re probably going to cheat.
There has to be a linear, rational relationship between the
result and the payout.”
 Unethical strategies in tax
• Amazon never seem to be out of the spotlight for one reason
or another. Whether it be tax avoidance (for which they are
under a boycott call from us) or the treatment of workers at
their fulfillment centers.
• They score badly in our rating system for all the policies we
rate them on, including environmental reporting, conflict
mineral use and supply chain management.
 Unethical strategies in production &
operations

• Nestle is subject to the world's longest running

boycott for the irresponsible marketing of baby milk
to mothers in the developing world. The company has
also been criticized for a number of other businesses
practices including the use of unsustainable palm oil
and genetically modified ingredients in its foods.