Ethical Issues: KFC in India

Submitted by Arun Trikha
16 March 2013


Heublein Inc.000 restaurants in over 80 countries 2 . was acquired by Reynolds Industries and In 1986. Sanders franchised more than 600 outlets in the US and Canada and sold his interest in the company in the US for USD 2 MM to the group of investors Founded by Harland Sanders in early 1930s in Corbin Kentucky. the company was further acquired by PepsiCo for USD 840 MM By 2004. Sanders was awarded with the name of Kentucky Colonel by the State Governor. KFC emerged as world’s most popular chicken restaurant chains with 11.for USD 285 MM In 1982. Company was listed on New York’s stock exchange In 1971. for his contribution to state’s cuisine In 1952. company was acquired by Heublein Inc. Sanders started franchising his chicken business and called it as Kentucky Fried Chicken In 1966.KFC – Background By 1964. the US In 1935.

Chairman and CEO of KFC  Operating 5200+ restaurants in the US and over 15.KFC – At Present  One of the largest food chain serving chicken  Part of global restaurant system known as Yum!  Company’s headquarters are found at Louisville.000 units around the world  Offering services to over 12 MM customers in 120 countries around the world  Earned a revenue of USD 15 Bn in 2011 3 . Kentucky in the US  Roger Eaton.

KFC – India  First fast food multinational food chain to enter India after the economic liberalization policy of the Indian government. and economists 4 . nationalists. in early 1990s  Received permission to open 30 new outlets across the country from the Indian government  Opened first fast-food outlet in Bangalore as it had a substantial upper middle class population  Planned to open 60 KFC and Pizza Hut outlets in the country in the next 7 years  Faced opposition and entangled in various controversies due to opposition from farmers.

Farmer leader Nanjundaswamy led the protest and condemned KFC’s entry to India 2 Protest by cultural and economic activists 3 Protest by PETA in the late 1990s 4 Support of celebrities in against of KFC 5 .KFC – Problems Faced in India 1 Protest by angry farmers led by the Karnataka Rajya Ryota Sangha (KRRS).

Consequently. and avoid placing harmful chemicals in their commodities Health and Safety of Workers  The company also looks out for the health and safety of their workers. there is an element of fairness when it comes to the way the company treats its employees 6 . disability or any other factor  The issue of wages is also top on KFC's list. This is due to the fact that the company does not discriminate against individuals on the basis of race. gender.KFC – Ethical Issues Strict Vendor Engagement Policies  Suppliers have to adhere to the ethical policies of KFC which includes paying fair wages to the labor. not employing under age labour. KFC always ensures that their employees work for them voluntarily. Company detests forced labour and ensures that their employees work for them voluntarily Ethical Employment Policies  Kentucky Fried Chicken employment practices are also ethical. The company believes that workers should be paid Fare Wages according to their efforts.

Chickens contained nearly three times more monosodium glutamate(popularly known as MSG. 1954. a flavour enhancing ingredient) as allowed by the Act Ill-Treatment of Bird’s in KFC  PETA asserted that KFC'S suppliers normally mistreat chicken in the slaughter houses. heart attacks and other health problems Overcrowded Farm  Chickens were stuffed by tens of thousands into over crowded sheds where they hardly find space to move freely 7 . They claimed that the chicken are chained by metal shackles and placed in electric water baths  Birds were fed genetically modified feed in order to accelerate their growth rate Improper Breeding o As a result they suffer from ailments such as extreme obesity and fatty livers and kidneys.KFC – Ethical Issues (Negative) Non-Conformity with Food Product Regulations  Regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act.

Virginia A non-profit corporation with 300 employees and 2 MM members and supporters Claims to be the largest animal rights group in the world Slogan says "animals are not to eat. experiment on.PETA – People for the Ethical Treatment of Animals American animal rights organization based in Norfolk. wear. or use for entertainment” 8 .

PETA had been protesting for a long time against KFC at international level. PETA highlighted that KFC was extremely cruel toward chickens and did not keep the birds in hygienic conditions. PETA used a slogan “KFC stands for cruelty” for the protest Released Video Documentation  PETA also released a video portraying the daily suffering of thousands of the chickens in a factory farm 9 . PETA distributed pamphlets with a graphic description of cruelty done to the chickens. PETA started a protest against KFC in India.Campaigns by PETA (1/3) In late 1990s. The various steps taken by PETA are as follows: Launched Extensive Program  PETA India launched an extensive protest program against KFC’s Indian outlet. PETA urged the Indian public to not to go to KFC’s restaurants and demanded outlets closure in India Introduced Mass Education Program  PETA started mass education program to educate people about the chickens condition at KFC poultry farms.

Campaigns by PETA (2/3) "Each bird whom KFC puts into a box or a bucket had a miserable life and a frightening death. making it difficult for the birds to breathe. antibiotics and arsenic chemicals to fatten them quickly. However." – Nanjundaswamy In 2004. KFC planned a massive expansion program in India 10 . No one with a grain of compassion should set foot in KFC. undeterred by the protests by PETA and other animal rights organizations. PETA accused KFC of cruelty towards chickens and released a video tape showing the illtreatment of birds in KFC's poultry farms. The air inside these filthy barns reeks of ammonia fumes. and the birds are given hormones. People would be shocked to see our footage of a KFC supplier's employee who walks through a barn.” – Ingrid Newkirk. Director. PETA "The chicken they serve is full of chemicals. carelessly lighting lamps and letting flames fall on the terrified birds.

Campaigns by PETA (3/3) 11 .

SWOT Analysis  Delicious and well-liked recipes  First mover advantage/ global penetration  Close substitutes  Franchising strategy is not culture sensitive  Product innovations at long gaps  Inconsistent services across the outlets  Usage of added flavors such as MSG Weaknesses Strengths  Widely recognized brand image  Strong cash flow generation  Loyal customer  Large number of outlets at prime locations  Brand recognition  Retail boom in India  New entrants  Health issues  Change in customer demand Opportunities  Growing Indian economy  Adoption of western culture  Increasing trends to have meals outside home  Economy of scale Threats  Organizations working for animal rights  Spread of diseases such as bird flu 12 .

the moral and legal obligations that KFC has adhered to and also the ethical misgivings that the company has engaged in too 13 .Conclusion KFC has to deal with different ethical issues in their capacity as a business corporation. Any company worth its salt should have a code of ethics and must be prepared to stick by it KKC has breached a substantial number of their ethics codes The purpose of this study was to provide an in-depth analysis of the fast food industry through two contrary ideas.

info/sde/case%20studies%20mba/044%20KFC%20in% 14 .andhrauniversity.asp http://www.html http://www.htm http://www.html http://money.

Questions ? 15 .

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