Volkswagen's Corporate Reputation and Scandal Response

The assignment discusses Volkswagen's efforts to rebuild its reputation after being involved in a major diesel emissions scandal. It mentions the company's involvement with independent verification agencies and the use of value-based approaches to value its employees. The assignment also references case studies on Volkswagen's crisis management, including a study on organizational communication management during the scandal.

Academic and
professional analysis

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................1
INTRODUCTION ..........................................................................................................................2
ANALYSIS......................................................................................................................................2
CONCLUSION ...............................................................................................................................6
RECOMMENDATION ..................................................................................................................6
.........................................................................................................................................................7

EXECUTIVE SUMMARY
This given assignment is based on the scandal that occurred in Volkswagen. This consists
of analyses and consequences of the emission scandal. Volkswagen was badly affected by this
scandal. This company lost it's brand image and reputation. The level of motivation and
employee engagement declined in Volkswagen. It is not easy to build image rapidly but it is
important for company to build reputation as it has to sustain in marketplace. There is a huge
impact of scandal on the organisation and this scandal caused catastrophic consequences for the
company. For achieving this goal, the company must have a strong leadership and a clear vision
and goal. The organisation must support a strong code of ethics and make workers to perform
ethically and achieve their tasks. This assignment will help to analyse and evaluate the cause of
scandal. The core values are principles that guide how a company wants it's employees to behave
or act. If there is an effective code of ethics in the organisation, organisation will work in an
appropriate manner and develop good image.
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INTRODUCTION
Business ethics is defined as the study of business practices and policies that help in
smooth running of business (Clemente and Gabbioneta, 2017). This includes the study of
corporate governance, bribery, discrimination, fiduciary responsibilities, insider trading and
corporate social responsibility. These laws describes business ethics and guidelines that business
selects for gaining public approval. Volkswagen is an multinational automobile organisation that
based in Germany. The headquarters of his company are situated in Wolfs burg, Germany. This
company is a leading company but in mid 2014, the profits of the company decreased. Therefore,
the managers of the company thought to become leader in automotive sector by adopting every
possible activity. Volkswagen introduced diesel engines in it's cars for achieving the goals and
objectives of the company in less time. The diesel engines were called as the defeat devices.
These diesel engines caused harm to environment. This scandal caused a great loss to the market
share of Volkswagen worldwide. Volkswagen fitted defeat software in cars so that system cannot
detect harm caused by engine to environment. The Volkswagen group was warned by the
Environmental Protection Agency (EPA) and given notice to this company. The cars of
Volkswagen have programmed Turbocharged diesel engines so that it can be under control of
emission. These motors were installed in around 11 million cars of Volkswagen.
There is an organisation naming General Motors that is associated with assembling and
manufacturing of car and other vehicle's auto parts. This is a reputed company in the automotive
sector and it has not been into any scandal or frauds. The main objective of this company is to
provide good service to it's customers and following all ethics.
The main objective of this assignment is to evaluate and analyse the predicaments of
Volkswagen. This assignment will help in knowing about the ethical ways of doing business
without involving into any frauds. After this analysis of case, different factors that affects
managerial decisions at Volkswagen and causes of scandal. Moreover, this assignment discusses
about the conflicts and arguments that occurred during the scandal.
ANALYSIS
Volkswagen was one of the leading organisation of automobile sector industry (Delogu,
and ET. AL., 2018). This company has adopted some unethical ways of making profits in
business. Volkswagen was involved in launching defeat system in it's vehicles and cars. The
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mangers of company admitted rigging in diesel emission test and this caused cost burden to the
company. For coping p from this crisis, Volkswagen associated with some public relations
companies situated in United States, Germany and Britain. Volkswagen hired former
communication of BMW as a consultant. This company has to deal with various international
rules and regulation. The affects caused by this unethical action are described below-
Threatening health of people
The defeat software launched in Volkswagen cars and vehicles produces toxic emissions
and harmed environment. It caused premature death of people in United States (Jung and
“Alison” Park, 2017). It is concluded in a research that nitrogen dioxide is an harmful element
present in smog and this was present in emissions produced by engines installed in Volkswagen
cars. Nitrogen dioxide causes heart diseases, respiratory diseases, bronchitis, premature death
and cardiovascular diseases. Excess of nitrogen dioxide in environment will create acid rain and
it harms architecture and monuments.
Slump in Bonus of workforces
The sales of Volkswagen was decreased after this scandal took place. For coping up from
this crisis, Volkswagen decided to reduce bonus of chief management and other executives.
Company introduced several models which contributes to fair solution.
Drop in sale of Volkswagen
After the scandal, top brands of Volkswagen like Skoda and Audi were badly affected.
There was a major decrease in sales of these cars. Customers shifted to other brands due to
decrease in customer loyalty.
Plunge in shares of the company
The share value of Volkswagen decreased after the scandal. This scandal created
decrease in customer loyalty. One third of share of Volkswagen was decreased after this scandal.
Creating Hassel for dealers of Volkswagen
After the scandal took place in Volkswagen, a program is organised for dealers to tackle
the affects of emission scandal. In this program, a huge amount of investment is required as
employees are given incentives, sales bonuses or subsidiary for handling lower sales and profits
(Jung, Chilton and Valero, 2017). The crisis that took place in Volkswagen has negatively
affected it's brand reputation. The management of Volkswagen is searching for effective
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solutions for coping up from scandal's affect and improving motivation and satisfaction of
customers as well as employees.
Reasons for the Emission Scandal
The scandal of defeat devices in Volkswagen has negatively impacted the brand image
and reputation. It has also resulted in decline of sales and profit of the company. Volkswagen is a
leading manufacturer and dealer of cars and thus it is important for this organisation to enhance
the competitive advantage and grab protection against competitors (Kumar, Rahman and Chan,
2017). Volkswagen wanted to become the best car manufacturer in the world and therefore when
sales of company declined, managers started formulating strategies to be implemented in
company for achievement of goals and objectives within specified time frame. Volkswagen has
introduced defeat device in diesel engine for becoming better than it's competitors. When this
cheat device was known to the world, the reputation of company declined. The executives of
company accepted that they have used a cheating software in turbocharged direct injection
models in cars. During the initial stage, company accepted partial guilt so that it could have time
to resolve this solution. The company made confession in public when they were threatened by
US regulators of withdrawing certificate. There are different factors that affect the occurrence of
emission scandal in Volkswagen which are described below-
Environmental uncertainty
The environmental uncertainty is one of the main reason behind this scandal. This is a
challenge for company as it is operating in fast environment. Volkswagen was not able to
compete with it's competitors and it lacks latest technology (Le-Khac And ET. Al. , 2018). So
managers decided to adopt unethical way of becoming the market leader of cars. The managers
of Volkswagen do not have enough knowledge so they implemented the defeat system in cars.
They thought they will not get caught in carbon dioxide scheme.
Lack of motivation
Volkswagen has forced its employees for achieving the targets of the company in given
time. The mangers of this company are not able to make profits and they took an unethical
decision under pressure. Volkswagen introduced defeat devices to system as it was unable to
build an engine that is effective enough to meet the standards of United States. The scientific
management perspective states that set of activities and tasks should be obtained in effective
manner without focusing the human relations perspective of worker. The workers of Volkswagen
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were exploited by the scientific management perspective adopted in the company. This
perspective states that anything can be done to improve the productivity of workers. The
managers and leaders of Volkswagen were not allotted roles and responsibilities in correct
circumstances. In Volkswagen employees were fired if they are not able to achieve their targets
in time. The leaders of Volkswagen just order their employees to work hard and achieve goals
and objective in specified time frame (Painter and Martins, 2017). The workers of Volkswagen
were unable to deliver a low emission and good fuel economy engine. The workers of company
spread the news of emission cheat to people outside the organisation because of company's bonus
structure.
Organisational culture
The organisational culture of the organisation is the traditional way of implementation of
tasks and activities in the company. The reason behind scandal is bonus system of employees.
Workers of Volkswagen are given bonus according to individual's performance. Volkswagen
follows achievement culture and managers of this company rewards its employees for
performing better. Employees are not allowed to speak freely in Volkswagen and they can't
express their opinions and views on anything. There was no employee who can place his
economic welfare at risk so they do not tell about unethical actions of company to people outside
the company. A plan is formulated for building the reputation of company again and gain trust of
stakeholders. This scandal affected business of Volkswagen across suppliers, dealers and value
chain around the world. The stakeholders like employees, customers, regulators and shareholders
get affected by this scandal.
Impact of scandal on organisation
Volkswagen deals with external as well as internal environment factors for coping up
from catastrophic scandal. Different external factors like suppliers, competitors, labour market
and customers affect the operations of company. Managers of Volkswagen chosen unethical
ways of earning profits as they were forced to achieve targets in less time. This resulted in
addition of illegal software in cars. When the scandal took place in company, suppliers start
putting extra restrictions in dealing with Volkswagen (Wiemann, 2017). This affects future
performance of company. Volkswagen wanted to gain back trust of stakeholders and employees.
On the other hand, there are several internal factors that impacts the performance and morale of
employees. Volkswagen fired top executives of the company as they didn't took any action
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against launch of defeat software. Volkswagen is planning to cope up from this scandal by
working ethically without job cutting. These help in gaining the reputation of company again.
The company implemented qualified software and systems for meeting the standards of US
emissions.
CONCLUSION
This is concluded from the findings and analysis of emission scandal that companies
should always perform ethically and operate the company by following all ethical rules and
regulations. Volkswagen was a complicated case that consists of dramatic hassles for direct as
well as indirect stakeholders. The action of implementing hazardous diesel engine is unethical
action which has resulted in disastrous affects (Xie and ET. AL , 2018). This company was
ordered by government authorities for green punishment as this is the best option for gaining
reputation of company. The electronic cars are used for reducing time and cost and helps
environmental protection agencies. Volkswagen Group was penalised for implementing defeat
devices and green punishment was given to this brand.
RECOMMENDATION
The scandal of Volkswagen affected the culture and structure of the company badly. In
Volkswagen, compliance based business ethics was followed which does not allow leaders to
treat employees equally. When workers are not treated ethically then they are demotivated. The
Environmental Pollution Agency are concerned about pollution and emission. This plays an
important role in giving new technologies to research and development department of the
organisation. Volkswagen ensures that it will not conduct any unethical ways of performing
business and no scandal will occur in future. This company is advised to value its employees by
use of value based approach. The Environmental Policy Agency offers several programs for
automotive engineers for ensuring the level of emission and pollutants. Volkswagen is
emphasising on building it's reputation again. This company is making efforts towards re-
establishing credibility of the company. The various ways by which Volkswagen develops brand
image by joining independent verification agencies.
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Another option for Volkswagen is that it can sell one of its brand and post a bond. This is
an expensive way but effective one. The company should involve in doing more corporate social
responsibility activities for building image and reputation again.
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REFERENCES
Books and journals
Clemente, M. and Gabbioneta, C., 2017. How does the media frame corporate scandals? The case
of German newspapers and the Volkswagen diesel scandal. Journal of Management
Inquiry. 26(3).pp.287-302.
Delogu, M. and ET. AL., 2018. Challenges for modelling and integrating environmental
performances in concept design: the case of an automotive component
lightweighting. International Journal of Sustainable Engineering, 11(2), pp.135-148.
Jung, J.C. and “Alison” Park, S.B., 2017. Case study: Volkswagen's diesel emissions
scandal. Thunderbird International Business Review. 59(1). pp.127-137.
Jung, K., Chilton, K. and Valero, J. N., 2017. Uncovering stakeholders in public–private relations
on social media: a case study of the 2015 Volkswagen scandal. Quality & Quantity.
51(3). pp.1113-1131.
Kumar, D., Rahman, Z. and Chan, F. T., 2017. A fuzzy AHP and fuzzy multi-objective linear
programming model for order allocation in a sustainable supply chain: A case
study. International Journal of Computer Integrated Manufacturing. 30(6). pp.535-
551.
Le-Khac, N.A. And ET. Al. , 2018. Smart vehicle forensics: Challenges and case study. Future
Generation Computer Systems.
Painter, C. and Martins, J. T., 2017. Organisational communication management during the
Volkswagen diesel emissions scandal: A hermeneutic study in attribution, crisis
management, and information orientation. Knowledge and Process Management.
24(3). pp.204-218.
Wiemann, J., 2017. Export of German-style vocational education: a case study in the automotive
industry in Puebla, Mexico. International Journal of Automotive Technology and
Management, 17(2), pp.208-222.
Xie, H. and ET. AL , 2018. A distribution density-based methodology for driving data cluster
analysis: A case study for an extended-range electric city bus. Pattern Recognition, 73,
pp.131-143.
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