Submitted byPGDM - RM

Sunanda Banerjee - 03Purvi Mehta -25Shilpa Pillai - 49

Shanki Rathi- 54

Competitive Intelligence (CI): CI is a technique of applying industry/research expertise to analyze the information available on competition from public sources and draw conclusions based on this data.

Corporate Espionage (CE): CE can be defined as spying on business competitors for acquiring propriety information such as product designs, research projects, marketing plans, trade secrets, source code for new software, intellectual property, research information & other business strategies.

CI agents follow a set of legal & ethical guidelines formulated by the society of CI professionals.

Data is collected from information available on competition from public sources.

CE agents don’t abide by any legal or ethical guidelines and ‘do anything’ to get ‘competitive advantage’

Data is collected illegally through spying, lying, through fraud & cheating.

Defining intelligence goals: nature of information & purpose for which information is required

Collecting and organizing information: Information captured through various sources and organized with help of various tools

Analyzing the information: to identify new trends and competitor strategy

Reporting: report analysis & communicate to intelligence teams & top management.

Evaluating: Measure value of intelligence produced in terms of time & money saved and risks avoided by company.

A few practices are dumpster diving (searching in garbage/trash containers),

Social engineering (a method of using social interaction to trick people into revealing sensitive information

Interviewing disgruntled employees Bugging offices Hacking computer systems

CE services are offered by outwardly legitimate organizations such as corporate security agencies, detective agencies, and few ‘ less committed’ CI agencies

One of the largest FMCG company in the world, established in 1837.

Between 1940s and 1960s, embarked on a number of acquisitions, leading it to become the largest cosmetics company in US.

During 1990’s-began to face problems due to stagnancy in new product development, risk-averse culture seemed to stifle innovation.

P&G launched ‘organization 2005’ six year long organizational restructuring program in 1999.

Target was to increase global revenue from $38 bn to $ 70 bn by 2005.

By mid 2003 the company was on its way to reach its target.

It streamlined its product divisions into 5 business segments: Fabric and Home care, Baby, feminine & Family care, Beauty care, Health Care & Food and Beverages category.

P&G sold 300 brands under this segments to 5 bn consumers in 160 countries.

In 2003 it reported revenues of $43.38 bn.

Created in 1930 by the amalgamation of the operations of British soap maker Lever Brothers and Dutch margarine producer Margarine Unie.

Acquired Thomas Lipton (1937) and Pepsodent (1944) thus strengthening its presence in US.

In 1980s unilever decided to restructure its businesses to focus on four core industries: Foods, personal care, Home care & specialty chemicals business.

In 1999. it announced ‘ the path to grow strategy’ a five year growth program aimed to improve its operating margins, profits & its top line growth.

Unilever sold 635 brands under its 4 segments in 150 countries by 2003.

Direct competition in US markets in many segments of the household and personal care products markets.

In every aspect of operations such as new product development and launches, pricing and promotional strategies and entering new markets.

In the early 21st century, while P&G dominated the US household and personal care market, Unilever dominated the European household and personal care market.

Equal dominance in Asia, with both being market leaders (in household and personal care products).

In 1943,repoprted case of Bribery, to steal bars of soap (called swan) from Lever Brothers which was under development.

P&G used it to improve its own soap ‘Ivory’.

Legal action taken by against P&G for infringing on its patent. Espionage proved in P&G.

Private settlement – P&G paid lever Brothers $5.675 mn in settlement.

Few other instances over the years indicating the possibility that P&G and unilever engaged into corporate espionage.

P&G’s ‘Bold’ soap powder bore a close resemblance to unilever’s ‘Ala’ and ‘Skip’ brands.

In the same year, P&G took Unilever to court accusing that the latter's Persil performance tablets infringed upon P&G’s patent.

In late 2000, independent contractor hired by CI executive at P&G, to spy on the company’s competitor(especially unilever) in hair care business.

The independent contractor in turned hired subcontractors.

To gain access to such classified information misrepresented themselves to Unilever’s employees as market analysis and journalists.

Focus on Unilever’s best selling hair care brands such as Salon Selectives, Therma Silk etc.

These brands competed directly with P&G’s popular hair care brands such as Pantene, Head & Shoulders.

Tried to lay hands on information regarding new product launches, marketing strategies etc.

P&G’s top management found about the espionage program in early 2001, when both P&G and Unilever were competing to acquire Clairol, Bristol-meyers Squibb co’s popular hair coloring brand.

P&G found that they had detailed and sensitive information.

Upon further investigation the company found out abut the secret spying operation.

Reportedly the top management was shocked at the magnitude of the operation.

The company immediately sacked 3 executives who were directly involved in the operation.

In April 2001, P&G wrote a letter to Unilever intimating it of its transgressions.

P&G invited Unilever executives to interview P&G staff as well as the espionage agents.

P&G came out with 50 documents containing details marketing plans, ad budget, pricing policy and product development plans for Unilever’s hair care brands.

Unilever took over 3 months to complete the investigation and made it clear that if Unilever did not like the settlement terms put forth by P&G it planned to take legal action.

Apart from cash penalty, Unilever placed other demands to settle outside the court.

Reassignment of key personnel (who has access to sensitive information on Unilever) of P&G’s hair care division to other divisions of the company.

Restrictions on marketing activities of P&G’s hair care business in 2003 i.e. restrictions on launch of certain new products into the market by P&G until the end of 20003.

Appointment of 3rd party investigator to review P&G’s business and marketing strategies (for its hair care business). This was to ensure that these strategies were not based on the information acquired from unilever, through P&G’s covert operation.

A cash payment of more than $10 mn from P&G to Unilever in settlement of the issue.

On September 06, 2001, P&G and Unilever announced that they had finalized the terms for a mutually acceptable settlement agreement.

However the details of the agreement were not disclosed.

Espionage Act of 1917: To convey information with intent to

interfere with the operation or success of an organization.

Passed as American Federal Law on 15th Feb 1917

Indian Constitution still does not have specific acts on Espionage.

Though Indian Acts comprising of any such act of espionage is punishable under criminal proceedings.

General Motors vs. Volkswagen: In 1996, GM filed a case against Volkswagen claiming that GM’s former head of production was lured (by Volkswagen) into stealing trade secrets. This case became a landmark intellectual-property case. In the end, GM obtained an enormous settlement from Volkswagen.

Ferrari vs. Toyota: In Dec 2003, the Italian auto giant Ferrari sued Toyota charging that the later stole the design for its formula one racing car. Ferrari claimed that Toyota’s TF103 was a copy of Ferrari F2002 model. Subsequently, the German police arrested an aerodynamic engineer who worked for Toyota (and had previously worked for Ferrari.)

The National Counterintelligence Center (http://www.nacic.gov) offers the following suggestions to assist companies in safeguarding their corporate information:

Obtain support for information security from senior management.

Do not waste resources protecting that which does not require protection.

Identify what information should be protected and for how long.

If extremely sensitive, information should be hand-carried or transmitted using encryption techniques.

To dispose of sensitive information, shred it or make it unreadable.

Valuable company information must not be left unattended; this includes printed copies and removable media.

E-mail and voice-mail passwords must be protected and changed frequently.

All sensitive materials must be removed from conference rooms, and chalkboards and whiteboards must be erased after meetings.

Where possible, conduct background investigations on all individuals with access to sensitive information.

Obtain nondisclosure agreements from employees, vendors, and others. Disgruntled employee is the greatest threat to an organization.

Telephone conversations, both fixed and mobile, are vulnerable to intercept.

Be knowledgeable regarding your organization's physical assets, information assets, and vulnerabilities.

Comprehensive IP security audit and due diligence.

Corporate espionage program development, implementation, training and assistance.

Streamline controls and processes. Development of practical policies in line

with regulatory requirements, industry best practices, and your business needs.

Corporate espionage awareness training for company personnel.

Corporate espionage is a real problem that affects many organizations. Companies spend billions of dollars in research and development. But if they are not spending an adequate amount to protect those developments, then their competition will likely find a way to take advantage of their valuable and vulnerable assets.