Proctor & Gamble Unethical Practices - Case Study Example

PROCTOR & GAMBLE UNETHICAL PRACTICES al Affiliation) In 1837, Proctor and gamble was founded by William proctor and James Gamble in Cincinnati, Ohio. Proctor and gamble is a corporate company that deals with global household and personal care products. When it was founded, it used to operate as the soap and candle business. Today, the company has grown and has six divisions selling almost everything from baby wipes to batteries. The company’s revenue exceeds 85 billion dollars today and is an industry leader in market share. The company’s key success factors include when the company joined business with Drene in 1933 a company that dealt with hair care products including detergent based shampoo. In addition, the company expanded and began doing business internationally. This led to the acquisition of the Philippine manufacturing company that made Proctor and Gamble introduce its first operation in the Far East. In 1944, the company introduced its first drug product division to sell product thus growing the line of toiletry goods. Moreover, the company announced a joint venture in 1988 to manufacture products in China. This marked the company’s success by making it the largest consumer market in the world. According to IBIS world, the market share of proctor and gamble has increased since 2010. The compound annual rate of the company between 2010 and 2015 is predicted to be approximately 3.5% thus having revenue of $ 717,894.9 billion and $ 853,097.7 billion respectively. In addition, in 2010, the personal care products were the most profitable in 2010 with revenue of $534 billion. The threat of new entrants faces Proctor and Gamble just like any other business and this depends on the business segment and where the threat is coming from. Moreover, large amounts of money are required to set up and operate large scale productions as well as the knowledge of the technical operations. It is therefore important for companies to invest in research and development, strong advertising and marketing campaigns to be able to penetrate the new market. In addition, the company faces high entry costs as well as high exit costs thus proving to be difficult to enter and exit a market. In addition, the company faces intense competition therefore the need to enter a new market with a product that is already differentiated. This is because most reputable companies that have already established themselves and created successful brands have created relationships with retailers locally therefore competing for shelf space. Due to globalization, and the world becoming smaller and the ever changing consumer needs organizations need to meet the needs of the consumers globally, therefore P&G has entered into new markets to satisfy their current and prospect customers. In addition, there is need to satisfy the growing middle class of consumers who have different tastes in the developing markets. In addition, the company has the opportunity to increase awareness for personal hygiene. In this case, the company can leverage on Gillette or other brands that promote hygiene. According to the annual report of 2013, the company outlined long-term annual growth in sales targets in categories and countries in which the company competes. Proctor and Gamble’s objective is to deliver total shareholders returns focusing on the available resources with the aim of making the most profitable categories and markets. Proctor and gamble reputation is earned by their code of conduct. This is seen in the products they produce, the services they provide and how they treat each other. In addition, the company and its employees try to do the right thing at the right time and operate within the laws. Moreover, the company values feedback especially when notified of an allegation, report or finding that suggests an act of violation. However, the company seems to be at loggerheads with some companies due to unethical issues. For instance, the company and Unilever have been battling over soap shares and spying outrage. The most intriguing is when the two companies were competing over who is the best at saving the world. For instance, when bill gates announced that Unilever was his top of mind company that involved itself with sustainability efforts in a CNBC interview, P&G indicated that it would be communicating about its sustainability efforts. P& G now has active campaigns in regards to environmental efforts. They are seen to support the African girl in school by providing them with free sanitary towels. In addition, the two companies are informing people about their products and they have increased their marketing into mainstream brand advertising and assortments of products. P&G marketing efforts included investing in $20 million to purify 2 billion litres of water in Africa therefore saving more than ten thousand lives by the end of the year 2012. Consequently, another P& G scandal that faces the company is the continuous use of animals for doing research for household products as well as pet food that most campaigners feel is cruel and not necessary. Moreover, PETA is running campaigns against the use of P&G pet food brand. An investigator at PETA found a number of serious counts of the abuse of animals and he further reported that dogs were mistreated by been confined to barren steel cages and cement cells and were left to suffer without any veterinary care. Moreover, in 1995, BUAV’s autumn campaign carried a major expose on P&G who had released some details in regards to their animal experiments in the scientific press. Some of the details revealed after investigation showed that sunscreen ingredients that were considered safe for humans was as a result of forcing rats to feed on them through stomach tubes. Some of it was tested on pregnant rabbits in reproductive studies then administered in massive doses to carry out the tests. In addition, researchers from P&G also carried out tests on rats using some of the household products that the company produces such as fabric softener as well as washing machine liquid. This is the reason BUAV was on top making noise and encouraging consumers not to use the proctor and gamble products. This is because of the mistreatment and poor handling of animals. Consequently, in 2001, Unilever was paid a total of $10 million through a third party audit of P&G to resolve a disagreement that came up after it accepted that they had taken documents that were discarded in Unilever trash bins outside their Chicago offices. This is unethical behaviour since it proves that P&G wanted to steal some information in regards to some of Unilever’s products. However, officials from both companies did not disclose the terms of the settlements or how much of P&G will be monitored and for how long. In addition, Unilever had made the demands that P&G did not make any changes to the marketing or product development plans for the hair care business. P&G accused its agents of violating company ethical policies that prohibited rummaging through garbage of a competitor company to acquire information. The company notifies Unilever that agents working for them had obtained their documents improperly and given them to the company officials. As much as, the documents were obtained by outside contractors that were hired by P&G, three staff members were fired from the company. P&G and Unilever are seen to compete vigorously over the hair care products. In addition, P&G has introduces new products like Physique as well as buying brands like Clairol. On the other hand, Unilever has various hair care brands including and not limited to Suave, Finesse as well as Salon selective. P&G Company is known for its usage of palm oil, which is a common substance, found in the company’s line of beauty and household care products. In addition, the company gets most of its palm oil from BW plantations, which is said to be operational in Indonesia. However, BW plantations together with its subsidiaries are among the top countries known for having unethical practices. The company is known for massive practices of deforestation of a jungle known as Sumatran. This has caused the extinction of animals like Orangutan and Tiger. In addition, it is known that the palm oil sector is the greatest driver of deforestation in Indonesia. This has led to the loss of forests as reported by GreenPeace an environmental friendly organization. P&G is greatly involved in unethical practices as it is seen to contribute to unethical practices of deforestation through the allocation of consumer profits to fund BW plantations as well as their subsidiaries. This is unethical practice because it seems that P&G does not care about forestry and the extinction of animals since all they care about is manufacturing products using palm oil and selling the product. Moreover, the stakeholders of P&G seem to be supporting the unethical practices carried out by the major supplier palm oil BW plantations. For instance, the CEO and chairman as well as the Vice chairman are people who are within the upper level management and have the knowledge of the wrongdoing but they continue to run the business. In the long term, this will tarnish their name as well as the corporate image. In addition, the companies functioning employees are also stakeholders who produce the products of the company. As much as they may not be aware of the unethical practices, they have an interest in the company and affected as much when the unethical practices are revealed. Additionally, the investors of the company are also affected by the internal unethical practices. Externally, the people who are affected include the community, the customers and the endangered species. P&G is also accused of not been cautious on the environment this is because in the year 1991, the company was criticized for polluting the Fenholloway River with 50 million gallons of wastewater each day in Florida. The animals in the river including the fish were contaminated us with poisonous dioxin. This is very dangerous especially to the human beings who depend on the river for fish thus causing health problems to the community because after the consumption of the fish, the people in the community begin having health problems. In addition, the water in the river became allegedly unsafe for drinking. In addition, the company is accused of polluting the environment with excessive packaging papers including plastic bags. Consequently, due to the large production of the company, it has cause pollution of the air. This is because the raw material the company uses contains large numbers of environmental hormones that can be containing some chemicals therefore causing great pollution. However, the company is doing some research on the contamination of the products. The solution is to use environment friendly material in the production of their products. Moreover, the company has been accused of producing fake fat known as olestra that was marketed under the name Olean. As much as it was approved in 1995 by FDA for testing in the American market, the product is seen to cause harm to its consumers including diarrhoea. The most alarming issue is the claim that olestra has the capability of removing certain nutrients believed to be important for preventing diseases. On the other hand, one of the consultants to P&G calls olestra a very good innovative product that can be used to control weight. P&G has been accused by senior senators for practicing corporate censorship. There are claims over TV adverts that were placed by Neighbour to Neighbour that campaigned for a boycott of the Folgers coffee, which is the bestselling brand in North America. The advert claimed that the use of the Salvadorian beans leads to an automatic poverty, destruction and ultimate death. All the company’s adverts were suspended a day after the advert was shown. The director of Neighbour to Neighbour accuses P&G for silencing them because of the fact that the company has money. In addition, P&G is also known for mistreating employees according to an economist. He reports that many of the current and former P&G employees have been manipulated and abused. Moreover, the competitor and customers of the company have also been abused by the company and have gotten away with it. Consequently, the company is seen to sack workers or reducing the number of employees in an effort to reduce its operation costs in line with those of the main competitors. On the other hand, the CEO is rewarded with a lump sum of money including bonuses. The huge sum that is given to senior officials in the company is troubling and insulting to workers. In 2007, the company lost some credibility due to the products of they produced. For instance, there was a case where some customers stained their teeth and suffered the loss of a sense of taste. This is unethical practice since, the company does research and development for their products therefore, they need to produce market and sell quality products that will not have a bad effect to the end user. In addition, the employees of P&G have to ensure that their employees follow the standard procedures to the later. Moreover, whenever the company’s products have some standard issues it is important for the progress and the results of the investigation to be announced to the public. Finally, the company is in a good stand when dealing with ethical issues. It has shown success factors in dealing with some of the ethical issues faced by the organization. For instance, when their agents collected some of the important Unilever documents, the company is seen to acknowledge that they had collected the information, was willing to pay a huge sum of money to Unilever, and never used the marketing plan for the hair products. Moreover, they are also seen to put on hold all their adverts until the advert that run portraying the consumption of coffee has negative effects. In conclusion, the company is putting extra effort to ensure that it is dealing with environmental friendly materials thus reducing pollution. The company also commits to the society by having a sustainability program to ensure that they meet their commitment by improving the lives of the community. The company is also seen to be engaged in various CSR projects like providing sanitary towels to the African girls who attend school. Moreover, they have also build more than 100 schools in poor areas thus ensuring that even the children from poor background get education. P&G is committed to excellence and is committed to meeting all the laws and requirements in the countries in which they operate business. Moreover, the company expects all employees to abide by the work rules as well as know the laws and policies that apply to the activities of the company. In addition, all employees are asked to report any issue that they think is unethical to ensure that business is conducted in a manner that is responsible and lawful and alert to any situation that pose ethical questions. P&G relies heavily on employees to make good judgment in whatever it is that the employee is dealing with. The employees should put in mind the values and policies as well as seek guidance from the management of the company when making decisions. References Adage.com,. 2015. Unilever, P&G War Over Which Is Most Ethical. Retrieved 22 June 2015, from http://adage.com/article/news/unilever-p-g-war-ethical/125460/ (2015). Retrieved 22 June 2015, from http://www.pg.com/images/company/who_we_are/pdf/values_and_policies907.pdf (2015). Retrieved 22 June 2015, from http://mba.tuck.dartmouth.edu/pdf/2005-1-0095.pdf BARNES, J. 2015. P.& G. Said to Agree to Pay Unilever $10 Million in Spying Case. Nytimes.com. Retrieved 22 June 2015, from http://www.nytimes.com/2001/09/07/business/p-g-said-to-agree-to-pay-unilever-10-million-in-spying-case.html Business Pundit,. 2011. 10 Most Notorious Acts of Corporate Espionage - Business Pundit. 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