Volkswagen Case Study

This report analyzes the Volkswagen diesel emissions scandal, examining its impact on the company's reputation, financial performance, and customer relationships. It explores the ethical implications of the scandal and provides recommendations for Volkswagen to regain trust and rebuild its brand image. The report also discusses the significance of supply chain trends and the role of regulators in addressing such ethical breaches.

Volkswagen Case
Study

EXECUTIVE SUMMARY
This report will help in creating a complete understanding about the diesel scandal of the
Volkswagen which has been occurred few years back. This study has included various precise
and helpful statements that will help the readers in identifying the overall impact of this huge
diesel scandal over the sustainability of the organisation. Various suggestions and advices also
help the company in possessing the high growth and development of the Volkswagen Company.
It will also help in identifying various consequences that make the CEO of the company able
enough to introduce more innovative ideas in sustaining the loyal customers of the company by
regaining its reputational and financial position over the market.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ANALYSIS......................................................................................................................................1
CONCLUSION................................................................................................................................4
RECOMMENDATIONS.................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Ethics can be defined as the values and moral principles that governs organisational as
well as individual behaviour of the organisation. Volkswagen is one of the most recognisable
brands that possess high reputation in market. This company is the leading producer of sports
cars that commonly manufactures a large variety of vehicles such as Sedan, Hatchback, Station
wagon, MPV, SUV, Cabrio etc. Audi brand is one of the most profitable auto-mobile companies
that offers a large variety of different models which have gained a rapid support of people in the
form of online reviews and social media comments. The study will be completely based on
scandal of Volkswagen in which organisation admitted that almost 600,000 manufactured cars
contains Defeat devices in order to make environmental auto-mobiles (Moravcsik, 2017). The
report will help in creating an understanding about decreased brand image of Volkswagen after
this huge Scandal. This will also help in explaining various impacts of such scandals on
reputation of organisation that has to suffer lots of decreased sales of such products in market
and therefore, it will directly impacts on profits of company. This scandal have damaged the
reputation of the firm.
The study will also focus on significance of supply chain trends that occurred during
“Dieselgate” Scandal which exposed the unethical practices that completely lost relationship
with group as well as loyal customers of company. So, this report is going to explain exploited
reputation of organisation which resulted in loss of company's brand image in terms of
relationship with customers and company dealers.
ANALYSIS
In September 2015, environmental protection Agency (EPA) has found that
Volkswagen’s clean diesel vehicles were found to be in violation of the Clean Air Act. This can
be considered as the biggest scandal in which 600,000 cars were been deliberately fitted with
defeat devices that have been the arrived as a major issue of corruption (Bachmann, Ehrlich and
Ruzic, 2017). This have almost disturbed the comprehensive responsibilities for the commitment
of the human rights against the commitment to the environment and the battle against the
environment. International council on clean transportation (ICCT) conducted a test on diesel and
it was found that Volkswagen have incorporated Emission of fuels and such unethical practices
impacts on the environmental issues of the society. These tests were initially performed on the
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labs and after this the CARB (California Air resources Board) tested the Passat, Jetta and BMW
X5 models of the Volkswagen upon open road. Researchers found something wrong and started
investigated into this matter strongly.
In 2014 December, Volkswagen have noticed the voluntary recall of 500,000 vehicle in
US (Nemeth and Carvalho, 2017). Although after this massive scandal in 2015, The CARB and
the US environmental protection agency have warned the Volkswagen Company that they would
not be able to certify its line of 2016 TDI until and unless they meet the emission standards of
the government. Emission of harmful gases in the air have affected the health of the society. In
September, 2015 when the company is unable to meet the expectations then finally they accepted
that such cars were being intentionally designed in order to provide the inaccurate emission test
results which results in the resignation of the CEO of the Volkswagen company named Martin
Winterkorn. On 23rd September, 2015 CEO also throws a statement which was aimed at talking
the responsibilities of whole situation. This has completely exploited company's reputation that
has led to significant financial concerns for Volkswagen that resulted in lowered goodwill and it
have ultimately affects the main turnover and sales of company (Blackwelder and et.al., 2016).
Various areas of the company which are majorly affected by this Scandal which was occurred in
2015 September.
Revenue
The emission of scandal led to significant financial concerns for Volkswagen
organisation as initially company have to face the loss of 17$ billion. This is an estimated figure
which do not contains the total amount of penalties, fines and compensation charge. Analysts are
projecting almost 10 billion euros which are involved at the time of the scandal faced by the
company. Organisation adopted the strategy 2018 which helps them for the stability and
development of the customer relationship in order to increase the sales of the company which
will help the company in generating the desired profitability. They started focussing on
maintaining the healthy customer relationship by providing them best quality of eco-friendly
motor cars that help them in overcoming the situation of scandal. In order to sustain the business
and regain its reputation from all over the world. Company managers started focussing on
implementation of the new strategies that will might help them to retain the public relation.
Company started manufacturing quality cars considering the environmental factor which
ultimately helps them in regaining their loyalty after this biggest scandal to the public. Then after
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implementing the effective strategies in the business, Volkswagen started gradually building trust
in the minds of the people by providing the quality products. This increases the sales of the
organisation and they started recovering their loses and thus, leads to the development of the
trust and faithful relation with employees as well as customers (Blackwelder and et.al., 2016).
This strategy ultimately helps them in generating more profitability for the firm.
Board of Managers and Share price
Volkswagen is a publicly traded company in which Porsche AG holds the largest position
as 31.5% of the total 475,731,296 shares as on December 31, 2014. The current voting
distribution gives 50.73% voting rights to Porsche. With respect to the major voting power,
Volkswagen higher authority staff have appoints member to the Porsche executive board.
Organisational structure of the Volkswagen includes seven members of the management board
and recently elected CEO named as Mathias Muller. There are 20 members of the supervisory
board who is mainly responsible for monitoring the management that takes part in taking the
important corporate decisions. They are also responsible for appointing the members of the board
of directors (Siano and et.al., 2017). In Volkswagen company, all the supervisory board members
can be listed in Exhibition 4.
Customer or patients
After losing the credibility of the customers, they begins to lose their customers as
consumers found that they are victimised and such unethical practice of the Volkswagen have
completely affected the trust factor of the public. Company begins to lose their loyal customer.
Therefore the Production abilities rapidly declines which results in the imbalanced supply chain.
This results in the higher profitability which contributes towards the sustainability of the
Volkswagen. So, the CEO of the company started planning to introduce new strategies that will
help in retaining the growth of the Volkswagen (.Dybus and Lemmen, 2017). So in order to
promote new ideas in the company, CEO of the mainly values the opinions of their employees
and hence this makes the healthy working environment of the company. Although, on 2014 there
were nearly 443,000 employees participated. Here, management provides a report for each
business area in which supervisors review their performance with their direct reports of the
individual activities. In order to motivate the workers of the company, Volkswagen uses reward
technique that helps in motivating the workforce of the company towards thinking creatively.
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In order to sustain the Volkswagen organisation for the longer duration company started
applying for the apology for those manufactured cars which contains the defeat devices. This
strategy helped the CEO of the company to again attract its loyal customers so that the
organisation can be able to gain its goodwill and reputation that leads to increased sales of the
company which results in maximum profitability. In order to engage more employees towards
regaining the customer relationship employees were even rewarded to share their innovative
ideas towards the improvement of the customer relation.
Regulators
In December 2007, under the direction of CEO Martin Winkerkorn, Volkswagen group
has launched a “Strategy 2018” which has developed in order to sustainability and ambitious
growth of the firm in order to derive the Volkswagen again as a top global auto-mobile industry.
This industry mainly focus towards the providing the high quality production that builds the
customer satisfaction. This time the manager of the company aimed at increasing the unit sales of
the company which is estimated as 10 million vehicles a year. In order to achieve the major
growth of the market, Volkswagen brings those strategies into action which is aimed at
deploying the above-average share of growth that can be acquired by deploying the intelligent
innovation. Volkswagen group is also focuses towards the sustainable sales considering various
dynamic marketing situations that is ultimately aimed at strengthening the solid financial
position of the organisation.
The main goal of the Strategy 2018 was to position the Volkswagen group which leads to
the global economic and environmental leader in the world (Jung, Chilton and Valero, 2017).
This regulatory concept have leads to the achievement of rebuilding the brand name and
reputation in the society.
CONCLUSION
From the above study, it has been concluded that Volkswagen group has completely
destroyed its brand image after adopting the unethical practice at workplace. This report will also
describe the damaged economic situation that experienced loss of sales and decreased stock
market price. The report has also provided various consequences that has influenced the
reputation of the firm. The study has also evidenced many obstacles that impacted on the subset
of the group members which demonstrates the reputational spill overs on other groups also. It
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will also help in identifying the Scandal's effects on sales, stock, returns and social media
sentiments, etc. It will also help in creating a complete understanding about significance of
deliberately equipped Diesel engines with equipped device which subsequently aimed at
defeating or rendering the inoperative elements of the vehicles emission system that aimed at
harming the society.
RECOMMENDATIONS
In order to sustain the Volkswagen company for the longer run in the market, managers
of the company have to constantly develop the innovative ideas to serve the society with the best
quality Auto-mobile services (Krall and Peng, 2015). As this company is still overcoming the
company loses of the 2015 which are involved in the major scandal during which Volkswagen
has lost its reputation so company have to mainly focus towards building the strong relationship
with the customers which results in the regaining the loyal customers of the company. Various
recommendations and suggestions are involved in retaining the brand image and bring it again
back in the most popular trends of the world. Such suggestions are as follows:
 Company should constantly focus towards the marketing requirements of the consumers
this might increase the trending production of the company which may rebuilds the trust
and credibility factor in the organisation.
 In order to strengthen the customers as well as financial position of the company,
managers should also take frequent reviews regarding the use of the cars.
 There should be the transparency in the communication between the higher authority
management of the Volkswagen and production department of the company. The
manufacturing activities of the firm should be monitored timely to keep check on the
ethical practices being performed within the company (Volkswagen Diesel Scandal,
2018).
 CEO of the Volkswagen need to strictly follow up the updated regulatory system so that
such scandals can never be happen in the future.
 In order to again re-establish their branding image and world-wide reputation company
should strictly focus towards the happy and satisfied clients in order to sustain the loyal
customers of the company again.
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 In order to wrap up the one of the most serious tragedy within the organisation now
company should plan to introduce new product soon. After that diesel scandal
Volkswagen have to plan towards launching more electronic cars.
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REFERENCES
Books and Journals
Bachmann, R., Ehrlich, G. and Ruzic, D., 2017. DP12504 Firms and Collective Reputation: the
Volkswagen Emissions Scandal as a Case Study.
Blackwelder, B. and et.al., 2016. The Volkswagen Scandal: Case Study.
Dybus, C. and Lemmen, J., 2017. “Dieselgate” and Consumer Law: Repercussions of the
Volkswagen scandal in the Netherlands. Journal of European Consumer and Market
Law. 6(2). pp.91-94.
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.
Krall, J.R. and Peng, R.D., 2015. The Volkswagen scandal: Deception, driving and
deaths. Significance. 12(6). pp.12-15.
Moravcsik, A., 2017. Faster, Higher, Farther: The Volkswagen Scandal. Foreign Affairs. 96(5).
p.183.
Nemeth, K. and Carvalho, J.M., 2017. “Dieselgate” and Consumer Law: Repercussions of the
Volkswagen scandal in the European Union. Journal of European Consumer and Market
Law. 6(1). pp.35-35.
Siano, A. and et.al., 2017. “More than words”: Expanding the taxonomy of greenwashing after
the Volkswagen scandal. Journal of Business Research. 71. pp.27-37.
Online
Volkswagen Diesel Scandal. 2018. [Online]. Available through:
<onlinelibrary.wiley.com/doi/full/10.1002/tie.21876>
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