Volkswagen's Emission Scandal: Case Analysis

This assignment delves into the Volkswagen emissions scandal, requiring a comprehensive analysis of its origins, consequences, and broader implications. Students must examine the ethical dilemmas involved, assess the company's actions, and explore the concept of corporate responsibility in the context of this event. The analysis should consider legal ramifications, public perception, and the long-term impact on the automotive industry.

Academic and
Professional Skills

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
ANALYSIS......................................................................................................................................2
Situation damaged reputation of Volkswagen............................................................................2
Organisation do to rebuild reputation.........................................................................................4
CONCLUSION................................................................................................................................5
RECOMMENDATIONS.................................................................................................................6
REFERENCES................................................................................................................................6

EXECUTIVE SUMMARY
The whole report is based on scandal of diesel emission of Volkswagen. This report
helped in analysing factors that got affected due to this scandal. Further, it also leads in finding
solution for the problem that is faced by the brand. This report shows actual image of
Volkswagen and how they cheated the customers and various other people that were connected
to that particular brand. In addition to this, strategies that has been used by Volkswagen in order
to achieve or rebuild the trust of the customers has also been summarised.
In addition to this, various approaches has been used by company as they changed the
CEO that introduced idea of manufacturing hybrid cars that would be environmental friendly to
keep environment healthy and safe.
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INTRODUCTION
The whole report is based on diesel emission scandal of Volkswagen. In this report
Volkswagen has been taken into consideration. It is also known as VW which was founded under
Adolf Hitler. It is headquartered in Wolfsburg. Its main market is basically situated in China that
delivers 40% of its sales and also its profits (An and et.al., 2018).
In this report the situation of scandal of diesel emission has been analysed that majorly
damaged reputation of Volkswagen. The Volkswagen emission scandal was started on 18th
September 2015 when united states environmental protection agency issued notice of violation of
Clean Air Act to German auto maker Volkswagen group. This brand installed secret software in
number of diesel cars in US that cheated emission tests (Barth, Eckert, Gatzert and Scholz,
2017). This made them as the using cleaner elements than they were on a road. Further, this news
of Volkswagen scandal wiped billions of market value and also affected number of cars all
around the world rather than only in US. The emissions of Volkswagen fraud issues has affected
recommendations of VW's products and services in social media. Moreover, there were over
1000 people on an average of one per day that were dissuading others in active manner in order
to purchase products of Volkswagen. This scandal has affected the reputation of Volkswagen to
a large extent and also various other elements as price, market share, customers, brand, industry
and many more. All this has been discussed in briefly in the following report.
Thus, it was also termed as an ethical nightmare for a brand built on reality. In addition to
this, this report also highlights on strategy in terms of rebuilding reputation of the selected brand
so that they can gain trust of their potential customers. They also paid fines in billions of
amounts and trying to produce or manufacture hybrid cars that are environmental friendly which
may pull huge customers and also build trust and reputation of a particular brand. This
assignment also helps in analysing recommendations in terms of future improvements.
ANALYSIS
Situation damaged reputation of Volkswagen.
Volkswagen is an auto mobile manufacturer of German that was basically found by
government of German in 1937. It was operated generally by German labour front a Nazi
organisation (Fuhs, Nesbitt, Farran and Dong, 2014). There are 12 brands that comprises with
these group. This brands are from seven European countries. Further, it offers a wide range of
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financial services that includes dealer and customer financing, leasing, banking and insurance
activities and also fleet management. Volkswagen is an iconic brand that damage Germany and
wider automotive industry which might be quite greater than that of Volkswagen itself. There
were none of the countries that have been accused of cheating a test as like Volkswagen.
Volkswagen had been installed elaborate software in 482000 clean diesel vehicles that
were being sold in US. This software helped them in controlling pollution of the cars which only
worked when it was being tested for an emission (Mansouri, 2016). Beside time of testing these
vehicles could freely spew hazardous smog forming compounds that cause pollutions in extreme
amount. This has affected reputation of Volkswagen to a great extent. This has affected various
other areas of Volkswagen that has been discussed as per below.
 Revenue- This scandal affected revenue to a large extent. As there was drop in revenue in
extreme manner in addition to more than $18 billion which Volkswagen has to pay as
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Illustration 1: Volkswagen emission scandal
(Source: How VW’s cheating on emissions was exposed, 2017)

fines and also as repairs to diesels. This scandal of secret system may affect the
environment to a great extent. And the country can not afford it.
 Share price- Sales of Volkswagen in United states were 13% for the first six months of
2016. Their sales were very bad that they trumped 38.8% increase in their sales. It has
also been appeared that the cited brand has lost significant portion of its American
Market share and might be considered as they wont get it back. They were losing 35% of
its share capitalisation within 2 days. As this scandal very implementing their extreme
effort on share price. It is not termed as secret that Volkswagen is plagued with awkward
and unsolvable conflicts in terms of interest
 Managers- Volkswagen have therefore suspended 10 senior executives in an investigation
part that has been rocked as biggest car maker of Europe. There were number of
managers who were involved closely with development of engine at centre of scandal
were also suspended. The real issue here is lack of motivation.
 Customers- Volkswagen has affected customers to a large extent. They were so
devastated by knowing that they were harming environment by using such device. In
addition to this, 9 out of 10 drivers in Britain were greatly affected by diesel emissions
scandal and believes as they must receive compensation for this. This cars were
ridiculously harming environment that may also affect health of people. So it became
dangerous for customers.
 Industry or sector- Volkswagen cheated is such manner that it affected its brand. The
automotive sector has also been underperformed these days. The main problem that they
have to face is spillover into European market. Further, it appeared as death knell of
diesel in US that sounds as the most dramatic. But it has also been noticed that it
represents approximately 1% of US market and also implications for diesel market which
is outside US are complicated as by differing markets of regulatory environments and
also importance of manufacturers.
 Regulators- Volkswagen also cheated regulators by try to grow sales in US. The main
motive of it was to target doubling of sales in US by 2018 that was driven by its offer of
allegedly clean diesel (Patra, 2016). Thus, it will have to change strategy and structure
and will have to go back and repair the damage and earn reputation back. Thus, this
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scandal has affected environment and climate of the world, so it became tough for them
to gain trust of regulators.
Organisation do to rebuild reputation.
Thus, to avoid harm to its global reputation even further, it becomes duty and even
responsibility for car maker that they ensure that all queries and even customers must not face
any type of extra cost and effort (Rhodes, 2016). Call centres of Volkswagen plays essential role
in this strategy related to crisis that took place. They must fasten their decision making process
and must build a decision as to develop a simple self service system that would be a first step
towards right direction. Therefore, by this system that is related to self service, Volkswagen
could be able in order to support 40 percent of enquires related to customers. They also tried to
reduce queues of contact centres and also easing down pressures or burdens that has been faced
by customer service team. Thus, they deliver customers with content that were important and
informative and also tried to guide them in such way that helped them in reducing anxieties of
customers and also in strengthening confidence in a particular brand.
In addition to this, if Volkswagen wants to build customers trust again towards the brand,
they will have to continue along path that is related to clarification and transparency and also by
offering excellent service and deal with high inflow (Stanwick and Stanwick, 2017). Hence, with
car-maker that were suffering loss in its value as of 40%, Volkswagen nurtured the relations that
played a crucial role in order to retain loyal customer base and also in securing future of the
particular brand. They also send product recall letters and set up a basic system of self service
which was termed as a part of logical process in terms of customer management. Further, they
have to do many more in order to keep customers firmly in loop or in overcoming risk that
damage brand loyalty in long term. They also tried in keeping customers up to date and
informed. Volkswagen also appointed new CEO and eliminated risk related to false information
and also spreading of negative publicity.
The company further tried to offer hybrid cars that was the biggest change process in the
Volkswagen groups history. The new CEO than attempted to make amends in terms of potential
damage that has been done to environment that resulted in emitting 40 times the legal limit of
nitrogen oxide. They also made multibillion dollar deal with US regulators and owners that was
termed as a major step in order to overcome legal issues that has been surrounded the scandal.
The car maker also planned to merge components units of each brand into one new entity which
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includes more than 70000 employees at various locations in the whole world. This allowed or
helped them in order to save the cost and also helped them in boosting efficiency from a single
management and unified strategy (Strittmatter and Lechner, 2017). They also established a
corporate structure that was designed in such way which helped the brand in order to speed up
the process in terms of making any type of decision related to company. Further, Volkswagen is
also likely in order to announce plans related to portfolio review that could lead to sale of non
core assets. Volkswagen expansion into broad range of product lines and also brands performs
under one roof. The new strategy was only a beginning of the groups road in order to recover.
Thus, only time will tell whether it is genuine movement that will later see Volkswagen in
redeeming trust of customers in order to become global leader of mobility that are sustainable.
Further, it is also impossible to known that the announcement is an attempt by the company's
team of public relation in order to turn out reputation of Volkswagen around (Tse and et.al.,
2017).
CONCLUSION
From the above report, it has been concluded that Volkswagen was the number one brand
till 2015. But after their scandal of installing secret system in their cars to pass out emission test
has brought this brand to the ground. This scandal lead them in loosing their potential customers
and also huge number of market share. This affected various other parts in Volkswagen as
managers, shareholders customers etc. it has also been analysed by this report that they were
charged with huge fine by the government. Later they also adopted various strategy to rebuild
their broken reputation and also trust of their potential customers.
Further, corporate strategy and sweeping strategy review has been discussed in this report
deeply. In addition to this, this assignment also highlights on various recommendations that
company or cited brand must adopt in order to overcome this situation and achieve high
profitability and long term success.
RECOMMENDATIONS
 They must also try to give their brand greater independence and also autonomy in terms
of philosophy, research and development and also in terms of manufacturing.
 They must also focus on e cars development efforts of groups.
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 They must also try to move their step towards direction of standardised electric
architecture for passengers cars and also towards light commercial vehicles.
 Volkswagen will have to announce for a new corporate strategy that includes accelerated
implementation of an efficiency program. Further, they must also announce reorientation
of diesel strategy along with most advanced technology, where there must be cut in fixed
costs and also yearly reduction in investments.
 They must also try to build their multi brand empire into three groups as volume,
premium and super premium. Further, units of trucks and buses must be separated as a
part in terms of planned preparedness of readiness for capital market.
 This new groups will lead them in systematically leverages synergies in the operating
units of an individual and also helps in speeding up decision making skills and process.
 Volkswagen must also introduce new structure that may promote style in terms of divide
and conquer rather than control and divide style.
 They must also focus on strategy that may relate to safety of a passenger. They must
research on importance of safety systems and later provide a wide suite of driver safety
system on select premium models. Thus, they should appropriate decision in order to
pursue extensive modularity among models that may enable them in order to provide this
technology as a standard across whole world.
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REFERENCES
Books and Journal
An, Q. and et.al., 2018, June. Volkswagen’s Diesel Emission Scandal: Analysis of Facebook
Engagement and Financial Outcomes. In International Conference on Big Data(pp. 260-
276). Springer, Cham.
Barth, F., Eckert, C. and Scholz, H., 2017. Spillover Effects from the Volkswagen Emissions
Scandal: A Comprehensive Analysis of Stock, Corporate Bond, and Credit Default Swap
Markets.
Fuhs, M. W., Nesbitt, K. T. and Dong, N., 2014. Longitudinal associations between executive
functioning and academic skills across content areas. Developmental Psychology. 50(6).
p.1698.
Mansouri, N., 2016. A case study of Volkswagen unethical practice in diesel emission
test. International Journal of Science and Engineering Applications. 5(4). pp.211-216.
Patra, B., 2016. The deliberate deception: case study on Volkswagen emission scandal. The
XIMB Journal of Management. 13(1). pp.139-148.
Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies. 37(10). pp.1501-1518.
Stanwick, P. and Stanwick, S., 2017. Volkswagen emissions scandal: The perils of installing
illegal software. International Review of Management and Business Research. 6(1). p.18.
Strittmatter, A. and Lechner, M., 2017. Sorting on the Used-Car Market After the Volkswagen
Emission Scandal.
Tse, Y. K. and et.al., 2017. Exploring the hidden pattern from tweets: Investigation into
Volkswagen emissions scandal. In Supply Chain Management in the Big Data Era (pp.
172-198). IGI Global.
Online
How VW’s cheating on emissions was exposed. 2017. [Online] Available through:
<https://www.ft.com/content/103dbe6a-d7a6-11e6-944b-e7eb37a6aa8e>
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