Volkswagen's Corporate Scandal: A Business Development Case Study

This case study analyzes the Volkswagen emissions scandal, also known as 'Dieselgate,' which involved the company's use of defective devices to cheat emissions tests in the US market. The scandal, exposed by the EPA, significantly damaged Volkswagen's reputation, share price, and global image, leading to financial losses and a loss of customer trust. The analysis explores the impact on share prices, the role of managers in the scandal, the consequences for public relations, and the response of regulators. The study highlights the importance of corporate social responsibility, ethical strategic planning, and the alignment of sustainability and finance. The case examines the damage caused by this scandal, including the company's efforts to mitigate the situation, and the overall extent of the damage caused by this case. The report highlights the importance of transparency, adherence to environmental regulations, and the need for strong corporate governance to prevent such incidents in the future.

VOLKSWAGEN CASE STUDY

EXECUTIVE SUMMARY
This assignment is based on the famous notorious scam by Volkswagen company in cheating
their US market shares by using the defective devices which came into light by EPA and affected
their reputation at global level in adverse manner. This created a huge halt of their vision of
becoming the world's largest auto-mobile company. This report gave insights on their mitigating
measures to face this challenging situational crises along with shedding light on the overall
extent of the damage caused by this case. It has also affected it s shares despite making a public
apology for violation of this environment regulations.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION ..........................................................................................................................2
ANALYSIS .....................................................................................................................................2
CONCLUSION................................................................................................................................6
RECOMMENDATIONS ................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Corporate behaviour in terms of maintenance of environment for achieving the financial
stability in sustainable manner has been considered as one of the conceptual framework to gain a
foothold in the global competitive marketplaces. This can be defined as the ethical strategic
planning and actions of an organisation that embark on the image and reputation at all levels. It
has been found the corporate social responsibility is the latest determinant to work towards the
alignment of sustainability and finance to fetch the maximum amount of profits (Shafiei and
et.al., 2012). Moreover, it is in relation to the slim chances that businesses face any crisis either
situational or natural calamity. Here, VW showed the corporate misbehaviour in the most
astounding manner without thinking twice about its image and reputation globally in their
customers' circuit.
In regard to the same, it's high time now to understand the implications that capitalist
ventures have done to accelerate their business growth by compromising the surroundings in the
most adverse situation. For the same, US Environmental Protection Agency (EPA) is doing some
great works to combat these conditions in proper manner. This regulatory body has exposed
some premium cases which have surpassed the laws, regulations and rules, making everyone
shocked that how corporations supposed to thrive in the market for longer run (Preston,2015).
This assignment is about the infamous 'diesel dupe' case of Volkswagen company. Their
designing team used defective devices in their diesel cars that were to be sold in the USA
Markets. Nonetheless, it focused on increasing the desired mileage by incorporating several
tactics to cheat the emissions tests at both state and federal levels. This tactic broke the air
regulations by discharge of poisonous gases up to 40 times from the restricted limits (Mathiesen
and Neslen, 2015). Moreover, this shed light on the deliberate installation of such defective parts
by Volkswagen team to reach their target ambition of becoming the world leading auto-mobile
company but in return their overall reputation was tarnished and led to spiralling effects on its
revenues, profits and detachment from their shareholders (Topham, 2015). This unethical
behaviour is unacceptable and cannot be ignored but can be reprimanded through strategic
decision making. Henceforth, the entire case study has been again explored below to understand
the overall impact it had on the VW's establishment with other companies working in the same
sector.

ANALYSIS
This case study had a huge impact on the structural outline of Volkswagen. It had
affected their first ever quarterly loss in more than a decade and also made their shareholders and
customers to question their credibility and loyalty. Along with this, their upper management also
got modified and was replaced by more technical and experienced executives to bring the bounce
back with respect to their profits, shares and revenues by laying the foundation of adoption of
sustainable innovation (Hassini, Surti and Searcy, 2012). However, there are many aspects that
have influenced their brand value and reputation at worldwide level. Above all, these factors
hampered their global image with a fallout of their purchase of these certified cars for deceit and
affected their task force's performance who undermined this act of intentional unlawful usage of
installation of parts. This analysis has focused on the following factors:
Share price: Due to the rigging of the emissions tests of Volkswagen diesel cars in US market
have impacted their shares in the real time access of their stability in the marketplaces.
Moreover, their shares saw a dip after this cheating came out in the public. If this problem was
based on software fix, it would have been an affordable method for this firm's to regain its
positioning. However, this was a mechanical fix and it led towards the path of redesigning,
redeveloping and executing the diesel car parts from the scratch in order to meet the fuel
efficiency with drive-ability components to survive and maintain as one of the renowned
companies. This fix definitely required a hefty amount for recalling the affected vehicles for
VW's establishment and affected their reliability and credibility as well. It brought attention to
the establishment's ignorance towards the environmental laws and concentrated on quantity in
terms of revenues and share hiking.
Nonetheless, The city firm from Bernstein has already stated that this crisis might bring
an end to the world of diesel cars in the European market. Moreover, this case had put additional
attention by brining their share prices to 2% market share in the US market and putting this
brand far behind their global competitors namely General Motors which have a share price of
17.1% and along with, the closest worldwide rival Toyota with 14.2%. Furthermore, this scandal
not only tarnished their reputation but also has damaging effects whether this company's going to
survive in this turmoil state with static efforts (Rothfeder,2016).

Moreover, the measurements regarding the risk in pricing can be minimised by buying
their shares of VW in different locations or to further, lessening this risks by hedging the
purchasing through usage of put option. In addition, this company can look into selling of their
shares by anticipating the price risk contained while borrowing or returning it thereby mitigating
this pricing risk so that they could be able to regain its lost shine among their customers from all
over the world by finding their foothold with transparency and authenticity.
Role of Manager: This company had a long acquaintance of a ruthless, yet one of the brilliant
and technically sound manager named Ferdinand Piech. His ambition drove this company's
commitment in reaching the top position also led to the political hefting. Moreover, his presence
brought remarkable changes along with the amendment made by the German government to
incorporate the onboard diagnostic system. As per the shareholders' ideology, it was the major
obligation of the enterprise's managers to understand the rate of return with conflict resolving
issues (Mauldin, 2012). It must be stated that managers play imperative role in underlying the
rules, policies and regulations to establish the corporate governance effectively.
Illustration 1: Share Prices of VW
(Source: Arnett, 2015)

With reference to the case study, the managers either knew about this cheating or was
clearly defied of this situation and fell prey to the clutches of this lamest movement that brought
queries and questions at Volkswagen's credibility to a larger scale. However, they failed
miserably in conducting their operational activities in smooth and transparent modes. They also
did not implement the policies with management of new details that might have affected the
strategic decision making in context to the quality of life, self-regulation and more.
Therefore, they minimised this damage by bringing and approaching the policy making in
a more reformatory manner to fetch the particular instructions and guidelines in an absolute
profound methodology to attain the stability in the marketplaces (Leggett,2018). Along with,
they must have tried harder to follow the regulations as per the operating country's
environmental regulation to avoid the occurrence of such mis-happenings in further cases.
Lastly, they must adhere strict discipline in their auditing, monitoring and supervising techniques
in all the production departments to reap benefits in sustainable manner (Penna and Geels, 2012).
Public Relations: Due to rigorous follow up with this case, the US media coverage emphasised
the involvement of more than ten prosecutors who were hired from different countries such as
Canada, France, Germany and more to check the effects of the emission tests outcomes and also
to analyse the extent of this scandal's reach among Volkswagen customers'. This had put their
image at stakes and thus, many executives left, resigned and move out by breaking all their
connections with VW. Along with, their pledged of green push was just another marketing tactic
to lure their customers' by violating the norms in the most unauthorised manner. For instance,
one of the loyal customers who drove this brad for more than four decades named Gray Olive
started a movement on social media channels with #BoycottVWShame on you. Moreover, this
also upset many loyal people even from media, who showed shock on their confession of
generating more than one million tonnes pollution in the air (Preston,B., 2015).
In addition, they argued and brought concern with their burning questions that included
the benefits of diesel led cars on the roads, their emissivity power, technological glitches and
more. This have also fuelled bogus advertising that mentioned about their green policing with
fraudulent credentials in both print and electronic media. Moreover, they also rigged several
terms of legal significance that have put horrific damages on the overall reputation and brand
awareness in the global competitive marketplaces (Hotten,2015)

However, their public relations were always on good basis but after this scam, they got
flak and criticism from all sphere of media coverage. They put the human life to great risks and
agitated the people associated with PR and the overall framework. Although this firm can rebuild
their rapport by creating a transparent and coherent channel of communication between their
human resources department and various PR agencies (Hendrix, Hayes and Kumar, 2012). Along
with, they must try to provide the correct statistics and report to bridge the gaps in appropriate
manner by employing the ethical approaches.
Regulators: There were many regulatory investigations that were conducted to check their
authenticity in all the countries where they were operating. Along with, these regulators reported
the intensified repercussions of this incident on the environment. Here, there was an evaluation
that substantial amount of nitrogen oxide hit the atmospheric layers leading to heightened
production of smog, leading to depletion of ozone and formation of promoters for diseases like
asthma, bronchitis etc. along with, there was a halt on the operations related to VW's 2016 diesel
models and its 2015 model that was forced due to interventions made by the Environmental
Protection Agency (Juergens and Brumlop, 2017).
VW officials aggravated these regulators by their remarks to cover up this issue and
antagonized them through the employment of legalistic hedging. This company's misbehaviour
had a long list of scandals and escaped every time through their immense presence on world
amp. Moreover, this company's follows a quasi-state entity that had always kept these regulators
at stream rolled (Rothfeder,2016).
In regard to the same, the strategic move that VW can follow to keep these regulators at
bay is to adopt methodologies that can assist in rectifying the emissions problems by making it
feasible and viable using replacement tactics. They can also design a plan to optimise the utility
of three way catalytic converters which were used by scrubbing out the oxides along with
unburned hydrocarbons etc. Moreover this led to the disengagement of the control procedure in
terms of pollution levels by yielding a better performance in terms of speedy acceleration and
torque.
CONCLUSION
It has been summarized that this corporate misbehaviour by the Volkswagen was widely
criticised and brought attention to all the other companies working in the same sector. However,

companies like BMW, Renault-Nissan etc. rejected the claim of using any defective parts and
followed the law with strict adherence. Furthermore, recently all the regulatory bodies have
started putting the compliance of regulations and policies to support the carbon footprint in
proficient manner and assisted in generating awareness among common man by issuing index
reports annually. Moreover, it also brought revolutionary changes in the customers' approach
before buying cars or any auto mobile. They have become vigilant and do not waste their money
in futility of false claims made by these car manufacturers who also use several publicity stunts
to attract them. Lastly, there is also a vocal agreement to follow and implement the new
technologies in context to testing the engines and their emissive power. This would help in the
evaluation and suitable assessment of the parameters involving share-prices with shareholders,
managers, regulators etc. to be watchful and more vigilant while handling the operations at VW.
To sum up, the following reconsiderations below if followed would lay the foundation of
validation and reliability back in their customers' base.
RECOMMENDATIONS
With such a fiasco, it has become a tiresome job for Volkswagen to bring back their
customer base as this unethical approach affected their brand reputation at stakes. However, by
following few moves, they can try win back their shareholders steadily, along with consumers in
their established global markets.
1. Volkswagen production team must increase their supervision by including the screening
mechanisms to inform the sections involved appropriately and making them report in
neutral and trustworthy order. This would help them to avoid such similar fiasco in near
future and do not have to cover it up (Penna and Geels, 2012). Along with this, random
auditing must be promoted by only including few officials to bring transparency in the
working practices of Volkswagen designing, production and other departments.
2. Along with this, they must also use the third party approach for establishing a
professional behaviour in context of suitable maintenance of standards and norms by their
teams. Moreover, this corporation must be self motivated in following the policies, norms
and regulations in relation to fulfilling the expectations made to inculcate the sense of
responsibility towards the environmental aspects (Mansouri, 2016). This would aid in
maintaining better relationships with the regulators and other bodies.

3. Additionally, the corporate governance at this enterprise must be in lines with the policy
making with respect to regulatory bodies, country's exclusive perspectives in combating
it and lastly understanding the ideologies of shareholders'. This would lay a platform of
comprehending the optimisation of resources allocation by moulding the political
opportunities and highlighting their preferences. Along with, it leads a path of better
usage of available materials and manpower in more profound order to bring more
productivity and transparency at workplace.
4. Nevertheless, they must focus on the re-branding as it would support the acceleration of
their adoption of the programs in context to effectiveness and could eliminate the
negative publicity it gained after this case. This further would support in better execution
of logistics with proper implementation of reliable channels (Shafiei and et.al., 2012).
5. Along with, few strategic altercations can be made in their management to bring open
communication channels in this structural setup that emphasis on new lease of life in
terms of competition, business opportunities, governance make-up and more. Along with,
it would emphasis on overall assessment of all the operations in proper auditing and
conditioning.
6. Lastly, they must promote the utility of green initiatives to develop the already prevalent
CSR practices to shape the consumers' purchasing decisions (Mathiesen and Neslen,
2015). Thus, making VW more responsible towards the corporate behaviour prominently
in the eyes of their customer', shareholders and other distributors, dealers etc.

REFERENCES
Books and Journals
Hassini, E., Surti, C. and Searcy, C., 2012. A literature review and a case study of sustainable
supply chains with a focus on metrics. International Journal of Production Economics.140(1),
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Hendrix, J.A., Hayes, D.C. and Kumar, P.D., 2012. Public relations cases. Cengage Learning.
Juergens, U. and Brumlop, E., 2017. Rationalisation and industrial relations: A case study of
Volkswagen. In Technological change, rationalisation and industrial relations(pp. 73-94).
Routledge.
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.
Mauldin, M.L., 2012.Conceptual information retrieval: A case study in adaptive partial
parsing (Vol. 152). Springer Science & Business Media.
Penna, C.C. and Geels, F.W., 2012. Multi-dimensional struggles in the greening of industry: A
dialectic issue lifecycle model and case study. Technological Forecasting and Social
Change.79(6), pp.999-1020.
Shafiei, E. and et.al., 2012. An agent-based modelling approach to predict the evolution of
market share of electric vehicles: a case study from Iceland. Technological Forecasting and
Social Change.79(9). pp.1638-1653.
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