Procter & Gamble vs.

Unilever
August 2001 marked one of the most high profile incidents of corporate
espionage ever reported. The companies under limelight were Procter &
Gamble and Unilever. According to the magazine Fortune, Procter &Gamble
ran an illegal corporate espionage program against Unilever. According to
sources, the espionage had been taking place since 2000 and continued
through 2001. P&G had appointed paid spies, thought to be former US
government agents, to obtain crucial information on Unilevers marketing
plans for its hair care range. These agents introduced themselves as market
analysts and journalists.

Unilever and P&G have been rivals from around the 19th century when
Unilever first entered the US market competing directly with the market leader
P&G. This rivalry has only intensified in the last decade as both of them
expanded their horizons to the major markets around the world with P&G
dominating the US household and personal care market whereas Unilever
dominating the European household and personal care market. Although in
Asia, both were the market leaders and had equal dominance in both
household and personal healthcare products. Both the companies competed to
dominate over each other in every possible aspect from new product
development and launches to pricing and promotional strategies and entering
new markets.

Espionage started back in the late sixth century when the Byzantine emperor,
Justinian, hired two monks to visit China to smuggle silkworm eggs and
mulberry seeds to break its worldwide monopoly on silk production. And in
just a few years, Byzantine Empire overpowered China in the production of
silk.

As far as the case of espionage of information from Unilever by P&G is

concerned, P&G did admit that such an episode of collecting information from
Unilever had taken place but it was not in the knowledge of the higher
authorities. P&G claim that it did not indulge in any kind of illegal activities.
After the release of this news, P&G fired three of its managers who were
supposedly the ones to hire the corporate spies.
After this episode, came the negotiation of the two companies. Unilever
demanded hundreds of millions of dollars in compensation after discovering
about the paid spies. Under the term of settlement, it is believed that P&G will
pay around 7million pounds in compensation although the exact figures were
not disclosed.

P&G informed Unilever about the transgressions in April, and the two
companies have been trying to negotiate a settlement ever since. At our
deadline, a settlement was within reach. According to someone close to the
negotiations, the following points were being hashed out:

(1) P&G would reassign several key personnel in its hair-care business to other
positions in the company.

(2) P&G would be restricted in its market activity in the hair-care business.
Meaning, for instance, it could not launch certain new products until the end
of 2003.

(3) An independent, third-party investigator would be appointed to review

P&G's entire business plan in this area and would report back to Unilever to
ensure that any trade secrets stolen from Unilever would not be used.

(4) P&G would pay Unilever tens of millions in cash.

If no settlement is reached, of course, Unilever could decide to take P&G to

court.

Question1)

Comment critically on the business paradigm that the P&G managers suffered
that led them to the current situation?

Answer 1)

A business paradigm is an intellectual perception or view accepted by an

individual or a society as a clear example, model, or pattern of how things
work in the world. A paradigm. In business means a new way of reaching
customers and making money. We are living in a time of momentous change
and momentous opportunity. A paradigm is a standard, perspective or set of
ideas. A paradigm is a way of looking at something. According to me P&G
managers suffered in the ethical aspect of the business paradigm. P&G was
found engaged in illegal corporate espionage program against its arch rival,
Unilever.

P&G appointed agents misrepresenting themselves as market analysts and

used various other methods to collect information about Unilevers Hair Care
business. P&G later admitted that the information collection episode had
actually taken place but it had happened without the knowledge of the top
management. This was purely unethical and something not expected from big
giants like P&G. This was totally against the company core values of P&G.

Values and ethics are important in the workplace to help keep order, ensuring
that a company runs smoothly and remains profitable. Each individual
company makes its values and ethics known almost immediately after hiring an
employee, or many times, during the interview process. And in many
businesses, no matter how well an employee performs, if he doesnt follow
workplace values and ethics, it can result in termination.

An important aspect of workplace values and ethics is integrity, or displaying

honest behaviour at all times. For instance, an employee who works at a cash
register is expected to balance the drawer and deposit the correct amount of
money at the end of the night. Integrity in the business world also might mean
being honest when turning in an expense report or not attempting to steal a
sales account from a co-worker.
Employees in all industries are expected to act accountable for their actions.
That means showing up when they are scheduled and on time, and not taking
advantage of time allotted for breaks. It also means accepting responsibility for
when things go wrong, gathering yourself and willingly working toward a
resolution. And sometimes it might mean working longer than planned to see a
project through to completion.

In almost every industry, workplace values and ethics consist of teamwork.

Thats because most companies believe that when morale is high and everyone
is working together, success will follow. So it is important for employees to be
team players--whether assisting co-workers on a project, teaching new hires
new tasks, or following the instructions of a supervisor.

Employee conduct is an integral aspect of workplace values and ethics.

Employees must not only treat others with respect, but exhibit appropriate
behavior in all facets of the job. That includes wearing proper attire, using
language thats considered suitable around the office and conducting
themselves with professionalism. Every company enforces its own specific
rules on conduct, and typically makes them extremely clear in employee
handbooks and training manuals.
It is a case of Corporate Espionage. It details the covert operation conducted
by P&G to gain competitive information about Unilevers shampoo business in
the US. Here in order to collect information about Unilevers hair care business
P & G appointed agents who allegedly misrepresented themselves as market
analysts.

P&G admitted about the information collection episode, but without the
knowledge of top management Refuted Fortune Magazines claim that P&Gs
agents misrepresented themselves and also claimed that it had not indulged in
any illegal activities & these were against its strict business policies.

Many analysts felt that what P&G did was right as it occurred in the intensely
competitive hair care business in US. However some analysts argued that P&G
had made a mistake by voluntarily disclosing its transgression to UNILEVER.

Competitive intelligence
A technique of applying industry/research expertise to analyze the information
available on competition from public sources & draw conclusions based on this
data. Agent follow a set of legal & ethical guidelines formulated by the society
of competitive intelligence professionals.

Corporate Espionage

It can be defined as spying on business competitors for acquiring proprietary

information such as marketing plans , trade secrets, products designs, research
objects, source code for new software, intellectual property, research info. &
other business strategies .Agents do not abide by any legal or ethical
guidelines, & do anything to get competitive information. It includes dumpster
diving, social engineering, interviewing disgruntled employees, bugging offices
& hacking computer systems.
Corporate Espionage is not a healthy practice and what P&G did is illegal &
unethical.

To avoid such instances certain steps are to be followed:

Update security measures

Proper training for employees to prevent them from divulging sensitive info.
Law

more stringent increasing the level of punishment

Q2. Comment on how the top management of a company escape its liability
by saying that the information was acquired without its knowledge? What
could be the reasons for this behavior?

In the case, the top management tried to escape from its liability by saying the
following points:

The benchmark in any case of espionage is to deny the involvement of the top
authority of the company. In this case the top management at P&G tried to
escape by saying unavailability of information of such things.

The top management argued that they hired the competitive intelligence
independent contractor to spy on the company's competitors (especially
Unilever) in the hair care business which is legal.
Dumpster diving as an intelligence gathering technique which is legal& could
be performed by any company so the top management could argue that
Unilever was careless to allow its most confidential papers to be lying in a
dustbin.

The reasons could be possible for their behavior:-

First of all no one in the top authority wants to caught in such type of illegal
practices thats why they always deny of this type of information.

The chairman of the P&G may not have been aware of the extent of spying
done by the executives.

Athough the top management should have taken moral responsibility, it took
the moral high ground by appearing to be more transparent.

The top management at P&G was aware of the of the fact that they are
performing legal practice of competitive intelligence technique and not
breaking any laws so they made effective use of it.

The risk involved when obtaining such classified information was high hence it
was withdrawn.

The case of corporate espionage is very serious and illegal. It will badly affect
the companys image and higher management is forced to resigned if they
caught in practicing such illegal things.

In the top management it is a difficult situation to keep a track of how much

information is being gathered and what techniques the CI agents are applying
for gathering information.