CUEGIS: KFC China
Background (Para 2): KFC is a subsidiary of Yum! Brands, which is itself one of the largest restaurant
companies in the world. KFC specialises in fried chicken, and is the second largest fast food
restaurant chain, only behind McDonalds. With its headquarters in Louiseville, Kentucky, KFC’s
restaurant chain extends over 120 countries throughout the globe, with its largest chain in China.
Extra background: KFC is known for its slogans "Finger Lickin' Good", "Nobody does chicken like KFC"
and "So good". KFC’s original product is pressure fried chicken pieces, seasoned with Sanders’ recipe
of 11 herbs and spices, which is a trade secret of KFC. KFC’s chain in China is the largest, to the point
that Yum! earns almost half of its profit from China, largely through the KFC brand.
CHANGE + ETHICS
Key point 1: Pressure groups (Antibiotics use in suppliers)
Link to BM concept: Ethics, through pressure groups, may bring about change in business
operations. The external environment of ethics as outlined in STEEPLE leads to the presence of
pressure groups that attempt to influence business decision and activity. Often, ethical decisions and
objectives go against profit maximisation objectives a company might have. As such, pressure
groups, an external stakeholder, act to keep businesses in check by pressuring them to take on
ethical decisions, rather than solely profit-making ones.
Example and link to CUEGIS: In 2012, Shanghai Food and Drug Administration (SFDA) found that KFC
China supplied with chicken in China that contained excessive amounts of antibiotics. Using
medically-important antibiotics on chicken supply is morally wrong, as it would lead to the
proliferation of superbugs, which would lead to a major public health issue. KFC China has said it will
implement new quality control measures and has cut off more than 1,000 small producers used by
the company's 25 poultry suppliers from its supply network. KFC’s decision shows how ethics brings
change to business operations.
Advantage: KFC’s decision is advantageous as it helps protect KFC’s brand image. This is especially so
given that its major competitor, McDonald’s released a statement that it’s chicken and raw materials
pass through independent third-party lab tests after the scandal broke out. This decision would help
to retain ethical customers which might have otherwise stopped patronising KFC, while ensuring
that its competitor, McDonald’s, does not have a competitive edge over it in the aspect of ethics.
This in turn would ensure long-term survival, growth and profitability of KFC.
Disadvantage: However, this decision may prove to be costly, and may hurt the profitability of KFC.
Without the antibiotics to prevent infection of the chicken, hygiene levels in farms must be raised
significantly, which is labour intensive. The increase in costs for KFC’s chicken suppliers would be
indirectly borne by KFC. The increase in the variable costs of a main ingredient, chicken, reduces
KFC’s gross profit and net profit.
CEO’s perspective: KFC’s CEO, Roger Eaton, has supported the decision. In doing so, it has helped
saved his personal image as an ethical leader in KFC, given the fact that he has earlier ignored a
petition by 350, 000 consumers with regards to this issue, before the “F” grade was given.
Stakeholders: However, a stakeholder group negatively affected by this decision are KFC’s poultry
suppliers, which have to quickly change their operational procedures and pump in finances to
become more hygienic, lest they lose their major customer: KFC.
Key point 2: Products offered (Health issues in China)
Background (Para 2): KFC is a subsidiary of Yum! Brands, which is itself one of the largest restaurant
companies in the world. KFC specialises in fried chicken, and is the second largest fast food
restaurant chain, only behind McDonalds. With its headquarters in Louiseville, Kentucky, KFC’s
restaurant chain extends over 120 countries throughout the globe, with its largest chain in China.
Extra background: KFC is known for its slogans "Finger Lickin' Good", "Nobody does chicken like KFC"
and "So good". KFC’s original product is pressure fried chicken pieces, seasoned with Sanders’ recipe
of 11 herbs and spices, which is a trade secret of KFC. KFC’s chain in China is the largest, to the point
that Yum! earns almost half of its profit from China, largely through the KFC brand.
CHANGE + ETHICS
Key point 1: Pressure groups (Antibiotics use in suppliers)
Link to BM concept: Ethics, through pressure groups, may bring about change in business
operations. The external environment of ethics as outlined in STEEPLE leads to the presence of
pressure groups that attempt to influence business decision and activity. Often, ethical decisions and
objectives go against profit maximisation objectives a company might have. As such, pressure
groups, an external stakeholder, act to keep businesses in check by pressuring them to take on
ethical decisions, rather than solely profit-making ones.
Example and link to CUEGIS: In 2012, Shanghai Food and Drug Administration (SFDA) found that KFC
China supplied with chicken in China that contained excessive amounts of antibiotics. Using
medically-important antibiotics on chicken supply is morally wrong, as it would lead to the
proliferation of superbugs, which would lead to a major public health issue. KFC China has said it will
implement new quality control measures and has cut off more than 1,000 small producers used by
the company's 25 poultry suppliers from its supply network. KFC’s decision shows how ethics brings
change to business operations.
Advantage: KFC’s decision is advantageous as it helps protect KFC’s brand image. This is especially so
given that its major competitor, McDonald’s released a statement that it’s chicken and raw materials
pass through independent third-party lab tests after the scandal broke out. This decision would help
to retain ethical customers which might have otherwise stopped patronising KFC, while ensuring
that its competitor, McDonald’s, does not have a competitive edge over it in the aspect of ethics.
This in turn would ensure long-term survival, growth and profitability of KFC.
Disadvantage: However, this decision may prove to be costly, and may hurt the profitability of KFC.
Without the antibiotics to prevent infection of the chicken, hygiene levels in farms must be raised
significantly, which is labour intensive. The increase in costs for KFC’s chicken suppliers would be
indirectly borne by KFC. The increase in the variable costs of a main ingredient, chicken, reduces
KFC’s gross profit and net profit.
CEO’s perspective: KFC’s CEO, Roger Eaton, has supported the decision. In doing so, it has helped
saved his personal image as an ethical leader in KFC, given the fact that he has earlier ignored a
petition by 350, 000 consumers with regards to this issue, before the “F” grade was given.
Stakeholders: However, a stakeholder group negatively affected by this decision are KFC’s poultry
suppliers, which have to quickly change their operational procedures and pump in finances to
become more hygienic, lest they lose their major customer: KFC.
Key point 2: Products offered (Health issues in China)
