Procter & Gamble’s Procter & Gamble’s Corporate EspionageCorporate Espionage

Presented byPresented by::Gaurav Thakur Gaurav Thakur 92 92

P&G P&G Established in 1837 by William Procter Established in 1837 by William Procter

& James Gamble.& James Gamble. One of the Largest FMCG Companies One of the Largest FMCG Companies

in the world.in the world. Number One maker & Marketer of Number One maker & Marketer of

Household Products in U.S.Household Products in U.S. Five Business Segments includes Five Business Segments includes

Fabric & Home Care, Baby, Fabric & Home Care, Baby, Feminine and family care, Beauty care, Feminine and family care, Beauty care, Health care, Food and BeveragesHealth care, Food and Beverages

P&GP&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.

UnileverUnilever Formed in 1930 By the merger of Formed in 1930 By the merger of

Margarine Unie (Dutch Company) & Margarine Unie (Dutch Company) & Lever Brothers (British Soap Lever Brothers (British Soap Company)Company)

Main Focus on it’s Foods, Personal Main Focus on it’s Foods, Personal care & Home Care Business.care & Home Care Business.

Second largest Consumer goods Second largest Consumer goods Company (After P&G)Company (After P&G)

Third largest Food Firm after Nestle Third largest Food Firm after Nestle & Kraft Foods in the world.& Kraft Foods in the world.

UnileverUnilever The Group operates through seven The Group operates through seven

segments: segments: a) Soaps and Detergentsa) Soaps and Detergents b) Personal Productsb) Personal Products c) Exportsc) Exports d) Beverages d) Beverages e) Foodse) Foods f) Ice Creams and Other f) Ice Creams and Other Significant Business in US, Europe, Asia Significant Business in US, Europe, Asia

& Latin America. & Latin America.

P&G and UnileverP&G and Unilever Unilever entered the u.s market in late Unilever entered the u.s market in late

1919thth cent. & Competed with the market cent. & Competed with the market leader P&G.leader P&G.

P&G dominated the U.S household & P&G dominated the U.S household & personal care market while Unilever personal care market while Unilever dominated the European market.dominated the European market.

Equal Dominance of P&G & Unilever in Equal Dominance of P&G & Unilever in Asia.Asia.

Both Competed in every aspect of their Both Competed in every aspect of their operations.operations.

Fiercest Competition in Soaps (Body Fiercest Competition in Soaps (Body care & Fabric Care) & Shampoo care & Fabric Care) & Shampoo (Hair care) segments.(Hair care) segments.

Both among the Heaviest users of Both among the Heaviest users of CI.CI.

Many instances since 1940 proving Many instances since 1940 proving their involvements in Corporate their involvements in Corporate espionage.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. Competitive Intelligence vs. Corporate EspionageCorporate Espionage

Competitive Intelligence (CI) Competitive Intelligence (CI)

CI is Information acquired by a market CI is Information acquired by a market competitor about the companies with which it competitor about the companies with which it competes.competes.

CI may be acquired from, CI may be acquired from, the competitor's customers (current and the competitor's customers (current and former), former), suppliers,suppliers,former employees, former employees, stockholder meetings, stockholder meetings, industry associations andindustry associations andtrade shows, trade journals, newspaper trade shows, trade journals, newspaper articles, research studies, or advertising copy articles, research studies, or advertising copy

Companies need to be aware of their Companies need to be aware of their competitor’s strategies and make efforts competitor’s strategies and make efforts to effectively counter those strategies in to effectively counter those strategies in order to sustain themselves in the marketorder to sustain themselves in the marketMajor companies using CI are;Major companies using CI are;• MicrosoftMicrosoft• MotorolaMotorola• P&GP&G• HPHP• IBMIBM• Coca-ColaCoca-Cola• XeroxXerox

CI PracticesCI Practices

Acquisition of trade secrets from business Acquisition of trade secrets from business competitors, a reaction to the efforts of competitors, a reaction to the efforts of many businesses to keep secret their many businesses to keep secret their designs, formulas, manufacturing designs, formulas, manufacturing processes, research, and future plans. processes, research, and future plans.

Practices that fall under CE are;Practices that fall under CE are;• Dumpster DivingDumpster Diving• Social EngineeringSocial Engineering• InterviewsInterviews• Bugging offices and Hacking systemsBugging offices and Hacking systems

Corporate Espionage Corporate Espionage (CE)(CE)

Difference between CI & Difference between CI & CECE

A dumpster diver would say ‘A dumpster diver would say ‘I want I want it allit all’ & a savvy CI analyst would ’ & a savvy CI analyst would say say ‘I have to act quickly, so what ‘I have to act quickly, so what is the minimum information I is the minimum information I need to draw a conclusion?’need to draw a conclusion?’

Evolution of Corporate Evolution of Corporate EspionageEspionage

History dates back to sixth century.History dates back to sixth century. China had monopoly in silk production.China had monopoly in silk production. Justinian hired monks to gain Justinian hired monks to gain

understanding about silk production.understanding about silk production. Monks succeeded in smuggling Monks succeeded in smuggling

silkworm eggs and mulberry seeds out silkworm eggs and mulberry seeds out of China.of China.

Byzantine empire replaced China as the Byzantine empire replaced China as the largest silk producer.largest silk producer.

1818thth century France sent spies to steal century France sent spies to steal Great Britain’s Industrial secrets.Great Britain’s Industrial secrets.

Power loom plans were stolen by Power loom plans were stolen by Americans from England in 1811.Americans from England in 1811.

Technological advancements in 1990’s Technological advancements in 1990’s made companies invest heavily in R&D made companies invest heavily in R&D activities.activities.

The late 20th century corporate world The late 20th century corporate world had to have the right information at had to have the right information at right time to make decisionsright time to make decisions

2121stst century, CE had found wide century, CE had found wide acceptance and usage in many nations.acceptance and usage in many nations.

Almost every Fortune 500 company was Almost every Fortune 500 company was engaged in some form of CI activity.engaged in some form of CI activity.

Companies engaged in Illegal or Companies engaged in Illegal or Unethical activities were not negligible.Unethical activities were not negligible.

Economic Espionage Act, Economic Espionage Act, 19961996

To prevent the theft of American Intellectual To prevent the theft of American Intellectual Property by Foreign companies and Property by Foreign companies and Governments.Governments.

The act made The act made CECE (buy or possess trade (buy or possess trade secrets obtained without owners authorization) secrets obtained without owners authorization) a criminal offense.a criminal offense.

10 years imprisonment or a fine of $250,000 on 10 years imprisonment or a fine of $250,000 on any person or $ 5 million on any company any person or $ 5 million on any company violating the Act.violating the Act.

Leading BrandsLeading Brands

A Shocking RevelationA Shocking Revelation

““Procter & Gamble found engaged in Procter & Gamble found engaged in illegal Corporate Espionage against illegal Corporate Espionage against archrival, Unilever” – archrival, Unilever” – FortuneFortune magazine magazine August 2001August 2001

John Pepper, then chairman of Procter John Pepper, then chairman of Procter and Gamble, discovered this operation and Gamble, discovered this operation which did not violate U.S. law but, which did not violate U.S. law but, violated strict guidelines regarding P&G violated strict guidelines regarding P&G business policies. business policies.

Begun in late 2000 to spy on hair care Begun in late 2000 to spy on hair care business of Unileverbusiness of Unilever

Planned by the Competitive Analysis team by Planned by the Competitive Analysis team by hiring outsidershiring outsiders

““Dumpster Diving” also called as Rubbish Dumpster Diving” also called as Rubbish archeologyarcheology

Misrepresentations as market analysts & Misrepresentations as market analysts & journalistsjournalists

$3 million was spent on the operation.$3 million was spent on the operation.

P&G’s Secret OperationP&G’s Secret Operation

Shampoo Giants Tell Spies Shampoo Giants Tell Spies to Wash and Goto Wash and Go

market strategies

margins

launch plans

prices

Spying Operation

Advertising budgets

Product Development

plans

P&G’s Top Management P&G’s Top Management Shocked !!Shocked !!

P& G’s Top Management found about CE P& G’s Top Management found about CE in early 2001.in early 2001.

Unilever & P&G were competing to Unilever & P&G were competing to acquire “Clairol”.acquire “Clairol”.

Decision on offer price was to be made Decision on offer price was to be made after considering CI on Unilever’s hair after considering CI on Unilever’s hair care business which was far too detailed care business which was far too detailed & sensitive.& sensitive.

P&G sacked the 3 executives involved in P&G sacked the 3 executives involved in the covert operation.the covert operation.

P&G Makes Admission on P&G Makes Admission on Violation Violation

P&G wrote letter to Unilever.P&G wrote letter to Unilever. Company’s chairman John Pepper Company’s chairman John Pepper

called Unilever’s co-chairman Niall called Unilever’s co-chairman Niall Fitzgerald to settle the issue.Fitzgerald to settle the issue.

Invitation to Unilever to interview Invitation to Unilever to interview P&G staff as well as the agents to P&G staff as well as the agents to identify the extent of transgression.identify the extent of transgression.

Unilever Dissatisfied Unilever Dissatisfied

Unilever was not satisfied by the Unilever was not satisfied by the level of co-operation.level of co-operation.

P&G did not sack any of their P&G did not sack any of their employees.employees.

P&G won the auction for Clairol for P&G won the auction for Clairol for $4.95 billion in May 2001$4.95 billion in May 2001

Settlement Terms & Settlement Terms & ConditionsConditions

Reassignment of key personnel to other Reassignment of key personnel to other business divisions of the companybusiness divisions of the company

Restriction on launch of certain new Restriction on launch of certain new products until the end of 2003products until the end of 2003

Appointment of a 3Appointment of a 3rdrd party investigator party investigator to review P&G’s Business & Marketing to review P&G’s Business & Marketing strategiesstrategies

Cash payment of more than $10 million Cash payment of more than $10 million in settlement. in settlement.

90% of the information on any company is available 90% of the information on any company is available in the public domain if the investigators know what in the public domain if the investigators know what and where to look for.and where to look for.

Unilever should have at least taken routine Unilever should have at least taken routine precautionary measures to destroy its documentsprecautionary measures to destroy its documents

Laws related to espionage practices should be more Laws related to espionage practices should be more stringent by clearly defining every activity that falls stringent by clearly defining every activity that falls under under CE.CE.

Companies should formulate an internal code of Companies should formulate an internal code of Ethics & ensure that employees abide by that code Ethics & ensure that employees abide by that code and the concept of and the concept of CICI should not be maligned by should not be maligned by CECE..

Lessons to be LearntLessons to be Learnt

THANK YOUTHANK YOU