KFC Case Study

[Romel White]

1. Identify several specific stakeholder groups in the case study and
discuss their relevance. According to the stakeholder model, which of
these stakeholder groups in each case study would be considered
primary stakeholders? Use facts from the case study to support your
argument.

People for the Ethical Treatment of Animals (PETA )is a secondary
stakeholder. According to the stakeholder model, examples, such as
activist groups are considered a secondary stakeholder because the
relationship to Kentucky Fried Chicken (KFC) is less mutually
immediate, beneficial, burdensome, or have the power to influence the
firm’s decision. PETA is boycotting KFC, and its suppliers, for the
treatment of chickens used in the production of their foods.

KFC, as well as the companies, under Yum! Brands is the primary
stakeholder. KFC buys chickens from 18 independent companies, which
operate over 50 chicken farms and slaughterhouses.

In theory, the perspective of who is a primary or secondary
shareholder is dependent on the stakeholder. For example, since PETA
declared “war” on KFC, PETA would consider the chicken suppliers for
KFC to be primary stakeholders. KFC, according to the stakeholder
model would consider their suppliers as secondary shareholders.

2. What facts specific to the case study are consistent with the
market capitalism model of competitive markets?

Yum! Brands is the largest quick-service restaurant corporation with
35K restaurants world wide. This fact is consistent with the market
capitalism model of competitive markets; specifically, the model’s
assumption that business owners are powerfully motived to make profit,
as well as the ethical duty of management is to promote the interests
of the shareholders.

PETA’s formation to protect animal rights worldwide is consistent wit
the market capitalism model of competitive markets, specifically the
model’s assumption that markets discipline private economic activity
to promote social welfare.

KFC’s profitability during PETA’s boycott increased by 12% and net
income increased to 24%. This is another example that is consistent
with the market capitalism model of competitive markets. Even though
the boycott lasted for several years, KFC’s overall performance over
this time increased, which is consistent with the assumption that
business owners are powerfully motivated to make profit, as well as
the duty of management to promote the interests of the shareholders.
In addition to this, the following assumption is also relevant, that
the proper measurement of corporate performance is profit.

3. What facts specific to the case study are not consistent with the
market capitalism model of competitive markets?

KFC’s way of blaming the suppliers for the treatment of chickens and
not theirs, or their lack of taking some responsibility for the
mistreatment of chickens is not consistent with the market capitalism
model of competitive markets, specifically, the assumption that moral
restraint accompanies the self-interested behavior of business. This
fact undermines KFC’s, and Yum! Brands business by not being diligent
and ensure that their suppliers are humanely treating chickens.

KFC’s profitability during the time of is not consistent with the
market capitalism model assumption that if free competition exists,
the market will hold profits to minimum and the quality of products
and services will rise as firms to try to attract more buyers. This
fact is inconsistent because as one several companies under Yum!
Brands, it becomes the largest quick-service restaurant worldwide;
because the products offered were in question, whether the company
ethically treated the animals.

4. What specific facts of the case study are consistent with the
stakeholder model of competitive markets?

KFC’s profitability during the PETA campaign is a fact consistent with
the stakeholder model of competitive markets. The stakeholder model
is an ethical theory of management in which the welfare of each
stakeholder must be considered as an end. Stakeholder interests have
intrinsic worth; they are not valued only to the extent that they
enrich investors.

Along the lines of profitability, KFC was able to create income for
its investors and a product that was still in demand by consumers.
This fact is associated to the stakeholder model belief of managing
the stakeholders through the managers because it is ethical and the
stakeholders have moral rights that grow from the way powerful
corporations affect them. As a result of the profits, stakeholders,
primary and secondary, were influenced to stay loyal to KFC and Yum!
Brands.

5. What facts specific to the case study are not consistent with the
stakeholder model of competitive markets?

KFC’s inadequate response to PETA’s campaign in the end is a fact that
is not consistent with the stakeholder model of competitive markets.
Even though PETA and those consumers that support PETA’s campaign, KFC
did not seem eager to make concessions to appease PETA and their
supporters because they do not directly influence the decisions made
at KFC.

6. Which one of the fourteen different theories of ethical behavior
detailed in chapter 8 could best describe the firm’s actual behavior?
Is this theory consistent with the market capitalism’s model of
competitive markets? Explain your answer.

The conventional ethic best describes KFC’s (and Yum! Brands) actual
behavior in the case study. The conventional ethic states that
business is like a game with permissive ethics and any action that
does not violate the law is permitted. This ethic best describes
KFC’s actions for several reasons. First, when PETA announced their
campaign, KFC easily placed the blame of the treatment of chickens on
their suppliers, who were independent entities from KFC. KFC would
not acknowledge any unethical treatment on their behalf. Next, in
part of their response to PETA’s accusations, KFC felt they (their
suppliers) were operating under government regulations and felt that
their was no mistreatment on the behalf of KFC and their suppliers.
Finally, KFC was only trying to appease PETA when they made agreements
to improve the conditions for chickens.

7. Would you characterize the firm’s philosophy concerning corporate
social responsibility in the case study as being consistent with the
market capitalism model? Explain your answer.

Yes in one sense and no on many levels that was more relevant to the
stakeholder model. KFC’s philosophy concerning corporate social
responsibility was consistent with the market capitalism model by
abiding to the following broad principle that corporations are
economic institutions run for profit. Over the duration of the PETA
campaign, KFC’s profits increased 24%.

8. Would you characterize the firm’s philosophy concerning corporate
social responsibility in each case study as being consistent with the
stakeholder model? Explain your answer.

No. KFC’s philosophy concerning corporate social responsibility was
not consistent with the stakeholder model. Their philosophy went
against most of principles of corporate social responsibility.
Managers must act ethically. In the case study, only one of KFC’s
upper level managers, Bruce Friedrich, raised concerns for PETA’s
allegations. Corporations have a duty to correct adverse social
impacts they cause. In the case study, KFC did not do enough to
address conditions with their suppliers accused of mistreat of the
chickens. Managers should try to meet legitimate needs of multiple
stakeholders. KFC compromised the needs of animal rights activists to
ensure profits their profits by not nudging their suppliers to improve
animal conditions.

9. What specific role, if any, did government play in the case study?
Was the government’s actions influenced in any way by the firm?

In the case study, government became involved in the PETA vs. Yum!
Brands case where PETA sued Yum! Brands claiming that Yum! Brands had
false statements on its website concerning the treatment of chickens.

10. Were there any specific business practices in the case study
that stood out as either tremendously innovative or remarkably
flawed? Explain your answer.

A specific business practice in the case study that was remarkably
flawed was how easily that KFC (and Yum! Brands) blamed their
suppliers for PETA’s accusations; not taking the allegations seriously
to make changes that were more humane in the mass production of
chickens.

Another example that I felt was remarkably flawed was PETA’s actions
used in their activism. I felt PETA’s actions were unprofessional and
its actions during this time I felt deterred many people from
listening to their cause to boycott KFC because of the mistreatment of
chickens.