Homework Title / No. : 1 Course Instructor: Ms. Preet Kanwal Date of Allotment: Students Roll No.

RQ2202B50, 11201582

Course Code: MGN645 Course Tutor (if applicable):Ms. Preet Kanwal Date of submission: 08-02-2014 Section No. : Q2202

Declaration: I declare that this assignment is my individual work. I have not copied from any other students work or from any other source except where due acknowledgment is made explicitly in the text, nor has any part been written for me by another person. RAVI SHARMA Students Signature Evaluators comments: _____________________________________________________________________ Marks obtained: ___________ out of ______________________

Introduction Kentucky Fried Chicken (KFC) Corporation, based in Louisville, Kentucky, is the world's most widespread chicken restaurant chain offering services to more than 12 million customers in 109countries all around the world. KFC operates more than 5,200restaurants in the United States and more than 17,000 units around the world. KFC was founded by Harland Sanders (Sanders) in the early1930s. He started cooking and serving food for hungry travelers who stopped by his service station in Corbin, Kentucky, US. He did not own a restaurant then, but served people on his own dining table in the living quarters of his service station. His business expanded and by 1964, Sanders franchised more than 600 chicken outlets in the US and Canada. Now customers around the globe enjoy more than 300 other products from Kentucky Grilled Chicken in the United States to a salmon sandwich in Japan. KFC has been a brand and operating segment, of Brands since 1997 when that company was acquired from PepsiCo as Trico Global Restaurants Inc.

SWOT Analysis: STRENGHTS Second best global brand in fast food industry in terms of value ($ 6 billion). Original 11 herbs and spices recipe. Strong position in emerging China. Combination of KFC Pizza Hut and KFC Taco Bell. KFC is the market leader in the world among companies featuring chicken as their primary product offering. WEAKNESES 1. Untrustworthy suppliers. 2. Negative publicity. 3. Unhealthy food menu. 4.High employee turnover 5.Lack of strong marketing efforts

1.

2. 3. 4. 5.

OPPURTINITIES 1. Increasing demand for healthier food. 2. Home meal delivery. 3. Introducing new products to its only chicken range.

THREATS 1. Saturated fast food markets in the developed economies. 2. Trend towards healthy eating. 3. Local fast food restaurant chains. 4. Currency fluctuations 5. Lawsuits against KFC

Background of the Ethical Issue Recently KFC faced accusation from non-government organizations like PETA and Greenpeace Regarding unethical practices from KFCs supply chain such as Pilgrims Pride and Cargill .KFC was accused of ill-treatment towards its chicken by PETA and Greenpeace blamed KFC for its role in the destruction of the Amazon rainforest. This case study discusses these ethical issues in detail and concludes with suggestions and recommendations from the case study team, on how similar issues could be avoided or tackled. PETA Perspective Every year more than 1 billion chickens are killed from the chicken farms, meant for KFC. The improper breeding of birds combined with improper working conditions of workers and lack of ethically efficient operation processes led to improper practices in KFCs suppliers poultry Farms. As a result KFC was accused of animal abuse by PETA, on the suppliers farm. The People for Treatment of Animals (PETA), an animal right protection organization, accused KFC for its unethical treatment (behavior) towards the chicken in KFCs supplier factory farms. Pilgrims Pride (PP) is one of KFCs award-winning supply operations and the second largest processor of chickens in the United States. PETAs investigations in Pilgrims Pride poultry farm brought to light the inappropriate practices that prevailed in KFCs supplier operations. PETA released a shocking video that clearly depicted thrill- treatment of chickens and the unhygienic behavior in the Pilgrims Pride poultry farm. Experts commented the video to have depicted the worst cruelty towards chicken and the worst employee behavior. The release of the video led to widespread protest against KFC around the world .In India, on August 20, 2003, a five-foot tall chicken complete with an ensemble of feathers and beak hobbled on a pair of crutches outside Kentucky Fried Chicken's(KFC) was kept in an Indian outlet in Bangalore. The chicken was brought by PETA activists, who carried play cards reading, "Quit India" and "Stop Playing Fowl". The chicken was placed at the center and peaceful protest was held against the alleged ill treatment of birds in KFC's poultry farms. Media persons were called to give the demonstration a wide coverage. As a result of widespread protest, in Canada PETAs new animal welfare plan was implemented in KFCs suppliers plants. According to the new plan, 100 percent of chicken purchases w ere tube done from suppliers that use controlled PETAs protest is against the cruelty and ill- treatment towards KFC chicken. They do not intend to overhaul KFCs overall manufacturing process. Instead PETA urges KFC to adopt animal welfare program developed by the five members of its own (KFC) Animal Welfare Board and to adopt Controlled Atmosphere Killing (CAK).As per PETA, The Pilgrims Pride poultry farm did not adhere to any animal welfare standards. The chickens suffered intensely in the poultry farms before being slaughtered as highlighted below. 1. Overcrowded farm environment The chickens are stuffed by tens of thousands into overcrowded sheds where they hardly find space to move freely. To save space and avoid chicken hurting each other, the sensitive chicken beaks are cut off with hot blade without giving any painkillers. Overcrowding and poor litter quality in the farms also caused painful ammonia burns on the chickens. The injured chickens received no treatment and had to bear the pain throughout their life. 2. Improper breeding Birds are fed genetically modified feed in order to accelerate their growth rate. As a result they suffer from ailments such as extreme obesity and fatty livers and kidneys, heart attacks and other problems.

3. Cruelty in the slaughter house The chickens are slaughtered before they are 6 weeks old. At the slaughter house, chickens are hung upside down and transferred through conveyor belts to the killing room fully conscious. Too many chickens are dumped from the crates to the fast moving conveyor belt that caused the birds at the bottom to get suffocated. Unable to manage the large inflow of chickens, the workers threw away some chickens slamming them to the walls or floors. During the processing, to remove feathers, the live chickens are thrown into scalding-hot water. 4. Frustrated Workers Due to poor wages and working conditions, employees used the chickens as a means to vent frustrations and alleviate boredom. They twisted the birds heads off, spat tobacco into their eyes and mouths, spray-painted their faces, used them as footballs and squeezed their bodies so hard that the birds expelled faces. GREENPEACE Perspective Another unethical issue raised against KFC is its link with the destruction of the Amazon Rainforest. In May, 2006 Greenpeace volunteers came up to enlighten the whole world about the mass deforestation in Amazon rainforest caused by KFC. Greenpeace has come up with a term for KFC as KFC Amazon Criminal. According to Greenpeace, KFC is fuelling the destruction of Amazon by selling cheap chicken fen on soya grown on deforested land. Greenpeace investigation clearly traced that large area of rainforest has been destroyed by direct sales of cheap soya via Cargill by KFC , in order to sell billions of chickens to its customer every year, at low cost. The demand of soya fed for its chicken by KFC to Cargill has led to this unethical activity, which is affecting the global climate. Rainforest that covered 14% of earths land area has reduced to 6% due to deforestation, which clearly shows the high overall impact of business practices. Greenpeace wants KFC and Cargill to ensure that animal feed they buy does not contribute to destruction of Amazon and that none of their soya products are genetically engineered. Issues concerned with the case This case can be solely related with both market stakeholders and non-stakeholders of KFCs environment. a) Stockholders KFC is one of the brands among the Yum brands, which have been operating in various corners of the world. The activities practiced by the KFC and its suppliers have larger impact on the stockholders. The protest initiated by various organizations has effect on operations and if the company fails to solve the current issues, the company would may be solely responsible for missing out to take advantage of opportunities that lies, ahead in future. The stockholders have invested in the company and if the company closes down, their investment would be at risk. b) Customers Consumers continue to return to KFC because of the quality and good prices of their food products. KFC has many fans and continues to grow to provide better customer service. From research we learned that KFCs suppliers have been breeding unhygienic, drugged birds that could possibly have negative impact on the customers health. KFC should investigate the suppliers breeding and poultry process so that proper quality of their chicken are maintained. c) Suppliers KFC has numerous suppliers among which, Perdue Farms, Tyson Food and Pilgrims Pride supplies the major chicken to KFC, and those chickens are further processed to be served into their chain of restaurant all over the world. Proper steps and methods should be applied to evaluate the suppliers and

their products as suppliers largely affect the overall operation and business of KFC. Suppliers should focus on their improvement as when KFC is affected; they are also likely to be affected, as KFC is the suppliers main buyer of their chickens in huge mass.

d) Media Mass media is also highly affected, as most of the protest made all around the world initiated by nongovernment organizations, were made from the channels of the media. Media made people, organization and business firms, to be more aware about their activity, and draw the line between the right and wrong. Through information gained from media, people have changed their decision and demonstrated their activities against the KFC. e) Non-Government Organization (NGO) NGO such as PETA and Greenpeace are highly influenced by the supplier poor management for birds handling by the workers. PETA has been involved into protest to make people aware about the activities of KFC suppliers, mainly Pilgrims Pride, and they have also mentioned some corrective course of action that can improve the life of birds. Likewise Green Peace organization, made the whole world aware about the Cargill, one of the supplier of KFC for soya fed for chicken, who was highly responsible for Amazon rainforest deforestation. f) Rules and Process Due to poor implementation and execution of rules and process of chicken handling, transporting and slaughtering has led to this scenario. PETA has explained in their article that KFC should bound their supplier to work on animal welfare program, to ensure that birds are taken care properly because, these birds are sent to restaurant all over the world. What supplier breeds, are consumed by the final consumer, so organization should be aware about the rules and process to handle birds. Greenpeace is highly concerned with the destruction of Amazon rainforest, they claim to KFC to not seek cheap soya that are feed to birds back in their suppliers farm. KFC should be sound and responsible for the effect on the environment and should take corrective action to minimize the impact on the worlds environment. Defending the case from KFCs Perspective With response to various protest made by various organization, KFC counter claims the claims made by PETA and state that those claims are false, misleading or inaccurate. From KFCs perspective the truth behind the wall are like these. The claims are not valid and their explanations are written as below: KFC is well committed to serve its customer with famous fried chicken that is being well treated in their factory farm. KFC is highly aware of their responsibilities through Animal Welfare guidelines and they claim to be assured that these guidelines are practiced, in every suppliers farm. KFC adds We buy chickens from the same trusted brands that consumer buy from the local supermarkets and that other restaurants purchase from. KFC explains that they do not operate any factory farm; rather they get their raw materials i.e. chickens from suppliers that fully follow the guidelines of Animal Welfare Program developed by five members of KFC. They also guarantee that those workers who express disrespect against chickens and violate the guidelines are bound to undergo certain action taken by the suppliers. In order to ensure proper quality from suppliers, KFC has placed full time inspector in their suppliers plant. Pilgrims Pride (PP) has fired 11 employees, who

were highly involved going against the guidelines of Animal Welfare program. With objective to demotivate such activities, PP has placed cameras in farm factory, PP also provides special training to its manager to follow and promote sound animal welfare and handling. KFC also claims that it has taken leadership position in the specialized area of poultry welfare. KFCs animal welfare advisory council consists of highly regarded experts in the field, including some of the nations most respected authorities in the areas of Animal and Poultry science, Veterinary Medicine, Poultry Physiology And Poultry Science. KFC has certain regulation that checks how chickens are breed in suppliers farm. KFC has made its suppliers to have special design poultry housing that is engineered with birds comfort and health in mind. The cleanliness of these facilities and the health of the birds are top priorities of suppliers .KFC explains that their suppliers dont use growth hormones drugs on poultry. Their Suppliers work with primary breeders who provide poultry specifically selected with health and wellbeing in mind. KFC supplier ensures proper care of chickens that are meant for consumption. Extreme care is taken to ensure the health and safety of birds during handling and transportation process. KFC claims that Any injury to a bird lessens its value to the supplier, as crippled, and lame birds as loss to farmers. With response to high protest of PETA and other animal rights group, to adopt Controlled Atmosphere Stunning (CAS), KFC claims that they have practiced CAS, and they do fund research for electrical stunning and other alternative methods of slaughter. KFC has taken industry leadership position in areas of Animal welfare and meets regularly with its Animal Welfare Advisory Council. KFC closely work with this council to ensure welfare of these animals raised for food. Recommendations with Justification KFC suppliers should focus more on preventing animal abuse rather than punishing their employees. As per our basic understanding following recommendations can help in preventing animal abuse. 1. KFC should make sure that all its suppliers follow the good practices recommended beta regarding Controlled Atmosphere Killing (CAK) and installation of video-surveillance cameras. Justification: CAK will help the chickens to have a painless death. Videos in the plants will force the employees to behave properly in the plant. Hence these measures will take care of the cruelty and pain given to towards chicken. Moreover PETA will also understand that KFC does care about the chickens and they are trying to do their best to make the company function in a socially responsible manner. 2. KFC should focus on reducing employee frustrations; by providing them with fair salaries and good working condition in the factory farm and slaughter houses. Justification: If the employees who handle the chicken at KFC are happy, satisfied with their working conditions and pay, the chance of mistreating chicken would go down. Right now, the employees who handle the chicken are not satisfied with the working condition or pay; hence they treat the chickens badly. 3. KFC should highly focus on designing federal animal welfare laws and procedure to handle and slaughter chicken. Even though the Humane Methods of Livestock Slaughter Act in the United is designed to protect livestock like cattle, horses mules etc. during slaughter, it does not include chickens. Justification: Laws and legislations can guide organizations to function according to the requirements of the law. Violation of these laws could lead to severe consequences. Hence animal welfare laws for chicken will surely provide better chances of being treated properly.

4. KFC should also focus more on adopting and implementing Animal Care Standards to provide better standard of living for the chickens e.g.: to minimize the amount of ammonia in the atmosphere of factory farms, to improve the living spaces and lighting in chicken shed along with prohibition of intentional starving of breeding. 5 Feeding chicken with drugs to speed up growth and increase weight should be stopped. Instead breeding should focus on normal healthy growth of chickens Justification: The overall working system, process practiced by KFC is absorbed by the KFCs customer; because customer are the ones consuming improper chickens breed. Drugs and hormones fed to the chickens will adversely affect the consumers health as they will be more prone to abnormal and premature growth and other diseases. 6. External auditors should be appointed to conduct surprise inspection of the plant operation, and implementation of welfare standards will help minimize the human behavior against poor birds, and improve the quality of foods that are being served at the restaurants. Justification: At present KFC claims to have animal welfare programs though there is no proof for its claim. The video released by PETA proves the opposite. An external auditor who will make surprise visits to these plants can reveal the truth. Moreover the plant managers and workers will be more conscious of their behavior due to surprise inspections. This will also help to improve the chicken quality processed from these farms. 7. External auditors should be appointed to conduct surprise inspection of the plant operation, and implementation of welfare standards will help minimize the human behavior against poor birds, and improve the quality of foods that are being served at the restaurants. Justification: At present KFC claims to have animal welfare programs though there is no proof for its claim. The video released by PETA proves the opposite. An external auditor who will make surprise visits to these plants can reveal the truth. Moreover the plant managers and workers will be more conscious of their behavior due to surprise inspections. This will also help to improve the chicken quality processed from these farms.

Conclusion According to PETA and Greenpeace companies like KFC, which serves a major population through their fast food services should make sure that all its stakeholders behave in a socially responsible way in all its business aspects. KFC failed to keep track of its major suppliers standards on animal welfare and environmental related issues, in spite of its claim of having proper welfare guidelines. KFC should take strict measures against the unethical practices towards the chicken in its supply chain along with mass destruction of Amazon rainforest and should adopt measures to avoid such practices in order to give a painless life to the chickens that Turn into Kentucky Fried Chicken. PETA as an organization has protested against various organizations such as McDonald and another fast food companies. KFC claims PETA as a radical extremist group, whose sole agenda is to promote vegetarian lifestyle. Despite of PETAs effort KFC explains that, as a company KFC is proud to serve the worlds most famous fried chicken and support the customer who loves to eat meat. From the research, we learned that both KFC and NGOs like PETA and

Greenpeace has their own point of view about these situation. As students of Corporate Social Responsibility, we believe that if KFCs suppliers follow these recommendations, it should not have any face similar problems in the future.