“All this talk about developing leading indicators of our process performance and customer needs is really missing the mark,” argued Ronald Melcher, the executive vice president of marketing for Industrial Foods, Inc. (IFI), which provides food items for airline kitchens. “What we need most are leading indicators of what Fulsome Foods, our chief competitor, will do. I know a very capable corporate intelligence

[CI] firm that will find out pretty much everything we need to know and do it very discreetly.”

Harold Baum, IFI’s CEO, agreed, “I don’t ever want to be in a fair fight. I want an edge everyplace I go. What type of information do you have in mind?”

“Well, how about how Fulsome makes decisions on pricing? I’m thinking that if we knew who has to approve price cuts and how long it takes them to make those approvals, we can find the right time, say when those people are out of town, and ambush them by offering serious discounts to their customers.

We can have the price cuts in place before they can respond. We can snare some serious market share.”

“Wait just a minute, fellows,” cautioned Kerry Kahaner, IFI’s chief financial officer. “I assume you know that industrial espionage is now a federal crime, and we can land in jail for 15 years and pay $10 million in fines for spying on our competitors.”

“Calm down, Kerry, nobody’s talking about doing anything illegal here, and besides, we won’t be doing it. That’s what consultants are for,” explained Melcher. “The CI firm I am talking about, New World Intelligence, assures me that what they do is legal, although some of their tactics stray into gray areas. But it’s their necks on the line, not ours. We just tell them what we want to know, and they generate the report.”

“And send us a hefty bill for their efforts,” retorted Kahaner. “Still, I want a better idea of their methods and possible results before I sign on. Do you have any examples, Ron?” “As a matter of fact, I read about one recent example in BusinessWeek. New World Intelligence

(NWI) saved Monsanto over $80 million in advertising planned to combat Sucralose, Johnson &

Johnson’s new competitor to Monsanto’s artificial sweetener, Nutrasweet. NWI got information from inside the US Food & Drug Administration (FDA) that, even though Canada approved Sucralose, it was unlikely that the FDA ever would. And you know what? The FDA still hasn’t approved Sucralose.

Monsanto would have wasted $80 million without NWI. Wouldn’t you buy information that can save

$80 million? That’s what I call a useful leading indicator.”

Required

a. Search your library or the Internet to find information on the practice, ethics, and legality of corporate intelligence.

b. Based on your research, how do you advise the management team of Industrial Foods regarding its plans to use corporate intelligence? In particular, what is your opinion of Ronald Melcher’s plan?

c. Some argue that the use of corporate intelligence is common practice in Asia and Europe and that US firms are foolish not to use it and use it as thoroughly as their international competitors. Others, including E. A. Kampouris, CEO of $5.2 billion American Standard, Inc., disagree. He stated,

“This is not warfare. I don’t consider our competitors as communists or Hitler.” Prepare a memo to IFJ management explaining your stand on the use of corporate intelligence.