Ethics

Ethics (also known as moral philosophy) is a branch of philosophy which seeks to

address questions about morality; that is, about concepts like good and bad, right and
wrong, justice, virtue, etc. Ethics is derived from the Greek ethikos, meaning
"character." Issues of personal character, and the search for the best patterns for living,
were at the core of Greek ethical philosophy.

Major branches of ethics include:

• meta-ethics, about the theoretical meaning and reference of moral propositions

and how their truth-values (if any) may be determined;

• normative ethics, about the practical means of determining a moral course of

action;

• applied ethics, about how moral outcomes can be achieved in specific

situations;

• moral psychology, about how moral capacity or moral agency develops and
what its nature is; and

• descriptive ethics, about what moral values people actually abide by.
Business Ethics
Business ethics (also known as corporate ethics) is a form of applied ethics that
examines ethical principles and moral or ethical problems that arise in a business
environment. It applies to all aspects of business conduct and is relevant to the conduct
of individuals and business organizations as a whole. Applied ethics is a field of ethics
that deals with ethical questions in many fields such as medical, technical, legal and
business ethics.

In the increasingly conscience-focused marketplaces of the 21st century, the demand

for more ethical business processes and actions (known as ethicism) is increasing.
Simultaneously, pressure is applied on industry to improve business ethics through new
public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).
Businesses can often attain short-term gains by acting in an unethical fashion; however,
such behaviors tend to undermine the economy over time.

Business ethics can be both a normative and a descriptive discipline. As a corporate

practice and a career specialization, the field is primarily normative. In academia
descriptive approaches are also taken. The range and quantity of business ethical
issues reflects the degree to which business is perceived to be at odds with non-
economic social values. Historically, interest in business ethics accelerated dramatically
during the 1980s and 1990s, both within major corporations and within academia. For
example, today most major corporate websites lay emphasis on commitment to
promoting non-economic social values under a variety of headings (e.g. ethics codes,
social responsibility charters). In some cases, corporations have redefined their core
values in the light of business ethical considerations (e.g. BP's "beyond petroleum"
Ethical Issues in Business
Ethical issues arising from the nature of markets

- The 18th Century economist Adam Smith demonstrated how in a free market the self
interest of producers and consumers will produce an outcome desirable to all concerned
- But the market can also lead to inequality of income, wealth and market power:

• Monopoly suppliers can exploit consumers

• Monopsony buyers can exploit supply firms
• Worldwide inequality of income can result in unethical practices such as the child
labour

Ethical issues and society - examples

• Involvement in the community

• Honesty, truthfulness and fairness in marketing
• Use of animals in product testing
• Agricultural practices e.g. intensive faming
• The degree of safety built into product design
• Donation to good causes
• The extent to which a business accepts its alleged responsibilities for mishaps,
spillages and
• leaks
• The selling of addictive products e.g. tobacco
• Involvement in the arms trade
• Trading with repressive regimes

Ethical issues arising from internal and industry practices - examples

• Treatment of customers - e.g. honouring the spirit as well as the letter of the law
in respect to warranties and after sales service
• The number and proportion of women and ethnic minority people in senior
positions
• The organization’s loyalty to employees when it is in difficult economic conditions
• Employment of disabled people
• Working conditions and treatment of workers
• Bribes to secure contracts
• Child labour in the developing world
• Business practices of supply firms
Unethical Business Practices
The financial sector is abuzz with acts of violation of norms to amass wealth in an
unethical manner. Following are some of the activities that come under the ambit of
unethical practice.
• Resorting to dishonesty, trickery or deception.
• Distortion of facts to mislead or confuse.
• Manipulating people emotionally by exploiting their vulnerabilities.
• Greed to amass excessive profit.
• Creation of false documents to show increased profits.
• Avoiding penalty or compensation for unlawful act.
• Lack of transparency and resistance to investigation.
• Harming the environment by exceeding the government prescribed norms for
pollution.
• Invasion of privacy used as leverage, for obtaining personal or professional
gains.
• Sexual discrimination

Unethical practices in marketing - examples

• Pricing lack of clarity in pricing

• Dumping – selling at a loss to increase market share and destroy competition in
order to subsequently raise prices
• Price fixing cartels
• Encouraging people to claim prizes when they phoning premium rate numbers
• “Bait and switch” selling - attracting customers and then subjecting them to high
pressure selling techniques to switch to an more expensive alternative
• High pressure selling - especially in relation to groups such as the elderly
• Counterfeit goods and brand piracy
• Copying the style of packaging in an attempt to mislead consumers
• Deceptive advertising
• Irresponsible issue of credit cards and the irresponsible raising of credit limits
• Unethical practices in market research and competitor intelligence

Unethical practices relating to products - examples

• Selling goods abroad which are banned at home

• Omitting to provide information on side effects
• Unsafe products
• Built in obsolescence
• Wasteful and unnecessary packaging
• Deception on size and content
• Inaccurate and incomplete testing of products
• Treatment of animals in product testing
The Ethical Issues involved in Kentucky Fried Chicken's
(KFC) business operations in India
• Understand the significance of cultural, economic, regulatory and ecological
issues while establishing business in a foreign country.

• Appreciate the need for protecting animal rights in developed and developing
countries like India.

• Understand the importance of ethics in doing business.

• Examine the reasons for protests of PETA (People for Ethical Treatment of
Animals).

• Identify solutions for KFC’s problems in India.

KFC’s History

KFC was founded by Harland Sanders (Sanders) in the early 1930s, when he started
cooking and serving food for hungry travellers 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 chicken delicacies became
popular and people started coming just for food.

Kentucky Fried Chicken was born. Soon, Sanders moved across the street to a motel-
cum-restaurant, later named 'Sanders Court & Cafe,' that seated around 142 people.
Over the next nine years, he perfected his secret blend of 11 herbs and spices and the
basic cooking technique of chicken. Sanders' fame grew and he was given the title
Kentucky Colonel by the state Governor in 1935 for his contribution to the state's
cuisine.

Sanders' restaurant business witnessed an unexpected halt in the early 1950s, when a
new interstate highway was planned bypassing the town of Corbin. His restaurant
flourished mainly due to the patronage of highway travellers. The new development
meant the end of this. Sanders sold his restaurant operations. After settling all his bills,
he was reduced to living on a meager $105 social security cheque. But Sanders did not
lose hope. Banking on the popularity of his product and confident of his unique recipe
for fried chicken, Sanders started franchising his chicken business in 1952. He called it
Kentucky Fried Chicken. He travelled the length and breadth of the country by car,
visiting as many restaurants as possible and cooking batches of chicken. If the
restaurant owners liked his chicken, he entered into a handshake agreement that
stipulated payment of a nickel9 for each plate of chicken sold by the restaurant. By
1964, Sanders franchised more than 600 chicken outlets in the US and Canada.

KFC's Entry in India

Foreign fast food companies were allowed to enter India during the early 1990s due to
the economic liberalization policy of the Indian Government. KFC was among the first
fast food multinationals to enter India.

On receiving permission to open 30 new outlets across the country, KFC opened its first
fast-food outlet in Bangalore in June 1995. Bangalore was chosen as the launch pad
because it had a substantial upper middle class population, with a trend of families
eating out. It was considered India's fastest growing metropolis in the 1990s. Apart from
Bangalore, PepsiCo planned to open 60 KFC and Pizza Hut outlets in the country in the
next seven years. However, KFC got embroiled in various controversies even before it
started full- fledged business in India. When the issue of granting permission to
multinational food giants to set up business in the country came up for discussion in the
Indian parliament, some members from the opposition parties were vocal in their
displeasure.

Problems for KFC, from the very first day of opening its restaurant, KFC faced problems
in the form of protests by angry farmers led by the Karnataka Rajya Ryota Sangha
(KRRS). The farmers leader, Nanjundaswamy, who led these protests, vehemently
condemned KFC's entry into India, saying that it was unethical to promote highly
processed 'junk food' in a poor country like India with severe malnutrition problems.
Nanjundaswamy expressed concern that the growing number of foreign fast food chains
would deplete India's livestock, which would adversely affect its agriculture and the
environment. He argued that non-vegetarian fast-food restaurants like KFC would
encourage Indian farmers to shift from production of basic crops to more lucrative
varieties like animal feed and meat, leaving poorer sections of society with no affordable
food. KRRS held a convention on November 01, 1995 to protest the entry of fast food
multinationals and the Westernization of local agriculture.

Problems faced by KFC in India

KFC entered India in 1995 and has been in midst of controversies since then. The
regulatory authorities found that KFC's chickens did not adhere to the Prevention of
Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium
glutamate (popularly known as MSG, a flavor enhancing ingredient) as allowed by the
Act. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of
Animals (PETA), an animal rights protection organization. PETA accused KFC of cruelty
towards chickens and released a video tape showing the ill-treatment of birds in KFC's
poultry farms. However, undeterred by the protests by PETA and other animal rights
organizations, KFC planned a massive expansion program in India.

Re-entry of KFC into Indian Market

A case in point is KFC. KFC entered India in 1995, but a controversy surrounding the
levels of MSG in its preparations and subsequent protests from farmers' groups and
animal rights activists spelt trouble for the company. Ultimately, the company had to
shut all but one outlet in the country. Only recently in 2003 it made a quiet re-entry into
the Indian market. Then came up with the strategies and menu that is desirable by the
Indian consumers. And since 2003 it is expanding successfully its business in India.

The Aftermath

By late 2003, PETA further intensified its campaign against the cruel treatment meted
out to chickens by KFC through protests at regular intervals. Celebrities like Anoushka
Shankar, daughter of the legendary sitar maestro Ravi Shankar, directly supported the
cause of PETA.

Anoushka, a sitarist herself, wrote a letter to the top management of PepsiCo

condemning the continued cruelty of KFC in spite of repeated requests of PETA. The
organization also had the support of other celebrities like the famous cricket player Anil
Kumble (based in Bangalore), popular Indian models like Aditi Govitrikar, the late Nafisa
Joseph and John Abraham, who promoted vegetarianism. Film actresses like Raveena
Tandon and Ameesha Patel also took up the cause of animal abuse. Undeterred by the
continued protests, KFC added three more outlets to its existing one at Bangalore. KFC
also announced a major expansion programme for 2005. Sharanita Keswani (Keswani),
KFC's Marketing Director, said that as the retail business was poised for a boom in
India, they considered it the right time for expansion...

Feeling positive about the flourishing malls in all big cities, Keswani revealed that this
time KFC planned to have a presence in prime locations or in a mall where turnout
would be assured.
The company aimed at targeting cosmopolitan cities like Chandigarh, Pane, Kolkata,
Chennai and Hyderabad, where mall culture was fast developing.
PepsiCo also decided to concentrate on the expansion of KFC since its other brand,
"Pizza Hut", had successfully established a strong foothold in India.
Vegetarianism was predominant and was a way of life in India. Many people ate non-
vegetarian food only occasionally and avoided it during festivals or religious occasions.
Cultural Factors contributing to KFC’s success in India

• Reducing the psychic distance by handing over of operations to local people so that
customers could relate to them more easily.
• Able to adapt to cultural differences, tastes and preferences. For example keeping in
mind the Indian tastes buds KFC launched a fierier “ZINGER BURGER”.
• Got an edge since chicken is a staple dish and is taken more frequently in Asian
countries.
• More accustomed to take out food over the counter.
• The target customer of KFC [upper, middle and above] are health conscious and
hence to cater to their interest Kentucky fried Chicken changed its name to KFC.
• Price sensitivity of the two economies drove KFC to introduce menus that were easy
on the consumer’s pocket.

Cultural Factors in India that goes against KFC’s original recipe

• KFC is perceived as a restaurant serving only chicken-Indian families obviously

wanted more varieties.
• Believed to be expensive, therefore no value for money.
• Wanted to position itself as a “family restaurant”, not as a “teenage hangout”
• Ambience was missing.
• Perceived differences in eating habits.
• Tried to target the vegetarian segment. However this backfired as in India having veg
food cooked in a non-veg kitchen doesn’t come out well with the vegetarian segment.