business ethics group assignment ethical case study of kfc

History of KFC KFC Kentucky Fried Chicken was founded by Colonel Harland Sanders, an early developer of the fast food industry, in Corbin, Kentucky.. We are the original fried chicken ex

NATIONAL ECONOMICS UNIVERSITY

Advanced Educational Program

-*** -

BUSINESS ETHICS GROUP ASSIGNMENT

GROUP 6

ETHICAL CASE STUDY OF KFC

Lecturer: Dr Nguyen Bich Ngoc

Class: Advanced Accounting 63

Students: Cao Minh Huyen - 11219702Dao Thi Phuong Lien - 11213042 Nguyen Phuong Nga - 11219239 Nguyen Phuong Mai - 11213683

Hanoi, 2023

III.CASE 1: KFC’S 2017 DILEMMA 8

1 Background of The Dilemma 8

3 KFC's Business Ethics Issue in Vietnam 17

VI.OUR POINT OF VIEWS 19

VII RECOMMENDATION 20

VIII.CONCLUSION 22

IX REFERENCES 23

2

I INTRODUCTION

Kentucky Fried Chicken, commonly known as KFC, is a fast-food chain that was founded in 1952 by Colonel Harland Sanders KFC is known for its signature dish, fried chicken, and has since expanded its menu to include a variety of other fast-food items The company operates in over 140 countries worldwide, making it one of the largest fast-food chains in the world

Despite its global reach and popularity, KFC has faced numerous ethical issues in recent years that have brought its business practices into question One of the most significant concerns is acting against animals KFC has also faced several dilemmas and other business ethics scandals These issues have led to public scrutiny and criticism of the company's business ethics, and have eroded customer trust in the brand Nevertheless, KFC has been and continues to adapt and innovate to address these concerns and maintain its position as a leading player in the fast-food industry This document discusses KFC, a company that provides an excellent case study for exploring the challenges and opportunities involved in promoting ethical conduct in business

II ABOUT KFC 1 History of KFC

KFC (Kentucky Fried Chicken) was founded by Colonel Harland Sanders, an early developer of the fast food industry, in Corbin, Kentucky It is the world's fourth-largest restaurant chain after McDonald's, Subway, and Starbucks, with 26,934 KFC restaurants in over 145 countries and territories around the world (Yum! Brands company, 2021) KFC offers variable dishes such as fried chicken, fried potatop, sandwiches,

hamburger, and other products marketed under various labels

During the Great Depression, Harland Sanders started selling fried chicken from his roadside shack in Corbin, Kentucky In 1939, The Colonel created the 11-ingredient secret recipe for Kentucky Fried Chicken, and in 1952, he signed up his first franchisee By promoting chicken in the fast-food sector, KFC helped to diversify the market by starting a competition to the burger's dominance

KFC is a private corporation with an estimated 800,000 workers In the United States, the corporation has a sizable market share in fast-food chicken franchises, accounting for 10.6% of total industry revenue (IBISWorld - Industry Market Research, Reports, & Statistics) According to the Yum! Brands 2021 annual report, KFC's annual revenue is $31.365 billion

2 Core Values of KFC

There are three key house rules at KFC: ● Be your best self

● Make a difference

“Our food is always craveable We are the original fried chicken experts, and everything we do celebrates our passion for serving finger-lickin’ good food.”

KFC always takes pride in its food and recipes because of its uniqueness, which helps them stand out from other fast food chains They are committed to using high-quality chicken and food freshly prepared by skilled chefs

3 KFC’s Ethical Responsibilities

The special feature of the KFC Group is the way they deliver on their mission They make a sure promise that they will make an effort, and they definitely will Unlike the future vision, KFC wants and will do many things for the people who influence their business, such as customers, partners, and employees

Some of the missions that some KFC franchise companies around the world have launched are:

• “To be the leader in western style quick service restaurants through friendly service, good quality food and clean atmosphere”

• “To maximize profitability, improve shareholder value and deliver sustainable growth year after year”

• “You keep employees longer, they are happier, and they work better for you”

3.1 Employee

KFC establishes a higher minimum wage for its employees and ensures that all employees receive a competitive salary commensurate with the effort they put in to fulfill their assigned tasks and responsibilities

KFC's culture is built on the spirit of "How we win together" to be successful and united to reach out This helps motivate all members to work together to build a growing company that satisfies customers and makes each member feel proud to work at KFC KFC believes in its employees and that each employee can make a difference, so the company always listens to and respects every member's contribution The company also helps its employees develop their careers and develop a working environment that makes it easier for employees to have a work-life balance

Besides, KFC also regularly supports everyone to have the conditions to realize their full potential At KFC Vietnam; every job always starts with the question, "What to do to achieve results?" Therefore, creative ideas are inspired by each individual who works with responsibility, ability, and enthusiasm to promote collective strength

Incentive Policy For Employees

Employees working at KFC are given a membership card for each person, when buying goods, they will receive a 10% discount at the coffee shop partnered with KFC and a 20% discount when buying food at the store

• Participating in accident insurance 24/24

• A clear and open career path to becoming a restaurant manager

• Working in a dynamic environment, helping employees develop communication, problem-solving, and work management skills

3.2 Ingredient and Suppliers

6

All products and services throughout the supply chain are sourced ethically and through sustainable methods

The company applies ethical labor practices to its supply chain partners, including using certified products that meet fair trade standards KFC puts quality first and commits: strictly complying with regulations on food hygiene The chicken ingredients used by this company are not raised with stimulants Especially during the "sensitive" time of avian flu, KFC has applied many positive measures, ensuring that when necessary, it will use reserved chicken to ensure the quality of the ingredients

The type of oil used by KFC stores today is especially concerned with the health of customers So they changed soybean oils to reduce the risk of obesity as well as cardiovascular problems In addition, the stores also use specialized test paper to check the condition of metamorphosis in the oil

KFC Vietnam only chooses reputable and quality raw material suppliers, affirming the quality of its products with quarantine certificates

3.3 Environment

In addition to complying with basic environmental laws, the company is actively undertaking initiatives to reduce its carbon footprint and investing heavily in being environmentally conscious

products were switched to modern microwave ovens and limited frying to create environmentally

beneficial to consumers' health and improve the company's high reputation with customers

3.4. Related Parties

All stakeholders, including suppliers, employees, and distributors, are treated with respect and fairness

Despite being a franchise corporation, KFC still tries to manage and supervise all of its business partners All restaurants bearing the KFC name must be clear about their obligations, responsibilities, capabilities, motivations, and future The business philosophy is to show the way ahead, helping managers and employees understand each other's ways of working, and that they have the same goal, so that work goes smoothly, and misunderstandings are avoided

Customer retention is another important goal of KFC, which is achieved by increasing the quality of products and services The company has put quality at the heart of its work, and its employees are trained to provide unsurpassed customer service Periodic surveys are held to solicit customer opinions, and the collected data is then used to further improve the

quality of products and services according to customer expectations

KFC focus on creating satisfaction, bringing beneficial values to all subjects that affect the company's operations, and wanting and desiring to be recognized Their responsibilities to the market and society are as follows:

• Providing customers with fast and delicious food, served in a friendly environment, to attract smart, knowledgeable customers around the world • Maximize profits, increase shareholder value, and deliver steady company

growth year after year

• Recruit, develop, stimulate, reward, and retain employees with exceptional ability, providing them with favorable working conditions, and good leadership Performance and work-based pay, highly attractive benefits program,

opportunities for advancement, and high levels of job security

8

III CASE 1: KFC’S 2017 DILEMMA

KFC faced a dilemma concerning the presence of medically important antibiotics in its products after the standard of the fast food industry changed in 2015

1 Background of The Dilemma

In 2015, McDonald’s, one of the competitors of KFC, declared that it would no longer serve chickens raised with the use of human antibiotics This decision came from the growing pressure from various organizations engaged in environmental issues as well as from the medical community The concern shared by these organizations was that medically important antibiotics should not be used in raising food animals Food producers use human antibiotics when

raising food animals to enhance animals’ growth or make them gain more weight upon consuming less food Officials have said that when these substances are transmitted to consumers, it can lead to germs becoming resistant to drugs, making antibiotics no longer effective in treating some illnesses in humans Routinely feeding antibiotics to animals raised for food has been linked to the surge in resistant strains of bacteria that cause serious human

illnesses, blamed for about 23,000 additional deaths annually and US$55 million in health care costs, according to the US Centres for Disease Control and Prevention Nowadays, the World Health Organization and the United States Food and Drug Administration (“FDA’s Strategy on Antimicrobial Resistance”) suggest avoiding the use of antibiotics in raising food animals

At that time, KFC’s dilemma was either to support the trend or to ignore it, and both options were potentially unethical and harmful

2 KFC's Initial Action

When the news about McDonald’s decision appeared, the organization’s

representatives were either unavailable for comments or refused to explain anything

Moreover, the statistics on who KFC buys chickens from and how much it buys annually were not disclosed

In 2016, NRDC released an annual scorecard and report ranking the nation’s 25 largest fast food and fast casual restaurant chains on their antibiotic use policies The number of restaurant chains with passing grades doubled compared to the last year Against this backdrop of leadership, KFC is still failing to do its part to protect people from antibiotic-resistant superbugs, earning a failing grade two years in a row while its competitors —Subway, Chick-fil-A, McDonald’s, Wendy’s, and Taco Bell—pass them by, committing to prohibit the routine use of antibiotics in their chicken supply and making real progress in implementing that policy

Then, 350,000 concerned consumers signed petitions calling for KFC to end the routine use of antibiotics important to human medicine in their chicken supply This public call to action was met with silence

3 KFC's Final Decision

However, the later response was different In May 2017, KFC improved and currently says it is committed to "serving chicken raised without antibiotics” The new policy will apply to 4,200 restaurants serving about 2,000 domestic chicken farms KFC's "no to antibiotics" policy will apply depending on the conditions in each country The head of KFC also revealed that although the above change may incur some costs, the company will find a way to manage it more effectively, not put it all into the price for customers to bear

4 Effect of The Decision on Major Stakeholders

Concerning KFC itself and its owner, the refusal to buy chickens from suppliers who used antibiotics would have been a major shock and could have cost the company millions of dollars that would have needed to be spent on modifying the supply chain

10

Concerning KFC’s suppliers, the policy change is expected to have a widespread effect on the poultry industry, because KFC — owned by Yum Brands — buys its chicken from a great many flocks as a food-safety precaution, according to Lena Brook, food policy advocate at the Natural Resources Defence Council If those suppliers refuse to eliminate antibiotics from feeding, they may be accused of jeopardizing people’s health In addition, if the industry’s largest players, including KFC, refused to buy from them, the suppliers would most likely be forced to stop using antibiotics for production purposes altogether Although KFC's decision caused a lot of trouble for suppliers, some units are ready to comply Tyson, America's largest poultry producer, has announced plans to eliminate antibiotics from the diets of farmed chickens by September 2017

Concerning the advocates of terminating the practice, they have succeeded in promoting their agenda, and KFC’s response showed that they can continue to change the standards in the food industry

Concerning the customers, they may feel safer now knowing that KFC adheres to the antibiotic-free-chicken policy

5 KFC's Two Options

There are probably two options KFC could choose

First, KFC could have refused to work with suppliers who employed antibiotics in raising food animals and could have made a statement on this decision to the public It would have attracted praise from the opponents of antibiotic use in food production, and KCF could also gain a competitive advantage in terms of its reputation and image among the members of its target audience It would have been a strong statement on how much the company cared about the health of its customers However, the company could have suffered serious losses due to the need to create new supply chains The current supplier would have been harmed, and the new ones might have been hard to find

Another alternative would have been to continue the initial response and refuse to make comments concerning the use of antibiotics at all It is a widespread practice, as many companies try to hide their mistakes or improper practices by misrepresenting or concealing facts However, it has been repeatedly demonstrated that transparency and honesty (Crane and Matten 460) are more effective strategies KFC’s attempt to conceal the presence of human antibiotics in its products and to ignore the topic could have resulted in lowered customer trust, and the company would have suffered serious reputational losses

KFC's final decision is a wise business move that meets today’s consumers’ demand, and obviously, businesses cannot continue to exist without them Research shows that more and more eaters are leading with their values at checkout They want to see better ingredients in their food, they care about how food is produced, and, above all, they are looking for companies to be open and honest about the production practices behind the food they sell.KFC has managed to meet the requirements issued by the FDA, to respond to the claims made by the opponents of antibiotic use, and to comfort KFC’s customers by stating that they should not worry about antibiotic resistance

KFC’s execution in less than two years is commendable considering the chain received an “F” rating from advocacy groups for its antibiotics policies less than three years ago With nearly 2,000 farms involved – most of them family-owned and managed this transition was no small feat –This success shows a great statement of commitment and capacity to drive positive change

With more than 4,000 U.S restaurants, KFC’s announcement is a big step for the antibiotics-free movement