Organizational Learning and Change Analysis: A Volkswagen Case Study

This project analyzes Volkswagen's organizational framework, focusing on organizational learning and change. It begins with an introduction to the company, its history, and the 2015 emissions scandal. The project conducts an internal analysis, identifying Volkswagen's strengths (financial performance, sales, and brand image) and weaknesses (bad PR, poor corporate governance). It also examines opportunities (focus on sustainable mobility) and threats (political factors, changing consumer attitudes). An external analysis is performed using the PESTLE framework. The project then presents a literature review of change management theories, including Lewin's Change Management Model and Kotter's change management theory. Finally, it concludes with recommendations for organizational improvements, such as enhancing management systems, improving public relations, and developing electric car models, and launching MOIA minibus service. The analysis highlights areas for change and suggests strategies for future success in the automotive industry.

Running head: MANAGEMENT
Organisational learning and change
Name of the Student
Name of the University
Author note

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Introduction
The chosen organisation is Volkswagen a well-known automotive company that was
established in the year 1937 by Deutsche Arbeitsfront, DAF or better known as the German
Labour Front. The main idea behind founding this automobile was to make cars affordable so
that more people could afford cars. German Labour Front hired Ferdinand Porche an Austrian
automotive engineer who is credited for the original design of the car in 1934. The onset of
World War II did significant damage to the company but it grew rapidly in 1950s but it did not
sell much in the U.S in its initial years owing to the association with the Nazi Germany.
Currently the company chairperson is Dr. Herbert Diess and is a multinational automotive
company. In 2015, Volkswagen became the largest car manufacturing company surpassing
Toyota Motor Corporation (Blackwelder et al, 2016). However, the company garnered negative
public relation crisis when the U.S. Environmental Protection Agency (EPA) accused the
company of having software in their diesel-powered cars that altered the vehicles performance
and enabled them to pass the emission test. In answer to the accusation, Volkswagen admitted
having installed the defeat device and recalled more than ten million cars all over the world. The
recalling of the vehicles incurred heavy losses for the company with nearly $4 billion in America
alone (Fracarolli Nunes & Lee Park, 2016). The company officials were found guilty of other
crimes as well. The scandal that followed seems to have no effect on the sales of the cars as the
sales continue to increase. This project aims at analysing the organisational framework of
Volkswagen and suggesting possible recommendation for the company.

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Internal and External analysis of the Organisation
Internal analysis
Strength
 Strong financial performance- even after the scandal the company made a profit of €2.4
billion, while the revenue grew from €217.2bn to €230.7bn between the years of 2016 to
2017. This clearly shows that the company has strong finances revenue which will be
beneficial for it to grow in the future and make further innovation to expand in high
growth sectors (Brooks, 2016). This also shows that the company is stable financially and
will be able to carry through future goals.
 Increased sales- The sales of the cars was not affected by the scandal and increased by
4.3% year after year which set a new benchmark record of 10,741,455 cars sold
according to their annual report in 2017.
 Strong brand image:- Volkswagen remains the biggest car brand in Europe and has
grown significantly over its competition such as Ford and Renault. The brand image is
strengthened by its new innovative designs, manufacturing and other capabilities.
Weakness Bad PR :- The emission scandal garnered a very bad reputation of the company among
the customers. About 11 million cars were fitted with the “defeat device” that led to
recalling of the cars and incurred heavy loss and fine from the government. The scandal
decreased sales in the home country as well (Lynch, Cutro & Bird, 2016). Poor corporate governance: - the scandal pointed a deeper corporate failure that had
allowed mass production of the cars with the cheating device. The unethical practice led
to one of the worst corporate scandals of all time.

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Opportunity:-
 There has been a decline in buying cars after the care for hire and carpooling service
providers are increasing. Research show that this trend is likely to increase in the future
as more people opt for these service providers to commute than invest in buying a car.
Volkswagen has recognised this trend and strategized to cater to this sector and has
announced zero emission transport service known as MOIA minibus service (Hao, 2019).
The company is focusing on sustainable mobility; it is a clever attempt to exploit this
opportunity to establish a better image for the customers.
Threats:-
 The US president Donald Trump has levied 20% tariff on Europe made cars if Europe
does not remove taxes on the US made products. This will certainly affect the sale of
Europe made car manufactures such as Volkswagen since they export 50% of their
product to America (Lovely, Cohen-Setton & Jung, 2018).
 The changing attitude of people and government that is stressing on sustainable eco-
friendly cars or ultra-low emission cars is a threat for Volkswagen, which mainly
produces diesel and petrol run cars and less innovation in the electric car section. The UK
government initiative Road To Zero aims to bring transportation emission to lowest
levels by 2040 is something that the company should pay attention to (Palade, 2016). A
motivation for venturing to make electric cars.
 The negative PR move has garnered backlash from a lot of governments and incurred the
company heavy losses paying fines. The company faces further law suits from the public
which will lead to further financial loss.

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 The hiring of car service providers are gaining market importance as more consumers are
availing the service, this has led to reduction in the sale of cars and is likely to further
decrease in the future. This is certainly a threat to the company (Belgiawan et al, 2014).
External analysis
The external analysis will be performed through PESTLE analysis. They are discussed as under:-
Political:-
The political environment is an important factor that effects the company’s revenue
significantly. US is a major importer of Volkswagen cars, however the political stance adopted
by the American President Donald Trump which now levies 20% tax in EU which was
previously 2.5% since 1960s (O'Reilly et al, 2016). Secondly, the UK policy of reducing petrol
diesel cars by 2040 as an environment initiative is putting pressure on companies like
Volkswagen that has to focus on building electric cars. A more environment conscious consumer
has led to 20% decrease in diesel car sales in 2017 (Lovely, Cohen-Setton & Jung, 2018).
Thirdly, the Brexit of the UK government has affected the economy as well as a result of which
it has reduced sales of cars and may further impact the future sales as well.
Economical:-
The political environment has a direct impact on the economy; Volkswagen is the largest car
manufacturer in Europe. It has about 25% share in the Europe market, and has record sale
volume with more than 4.7 million cars sold in Europe, 1 million in North America and 4.5
million in Asia pacific region (Ewing, 2015). The changing markets is greatly effected by the
UK to follow through brexit which has led to 5% increase in the car prices, consumers are
demotivate to spend on cars in this market (Hou et al, 2016).

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Social:-
Changes in the social perspective, which may be changing market, attitude change in the
demographic, inflation and changing job and education environment. The rising trend of car
sharing or hiring platform such as Uber has affected the attitude of the current demographic
(Alemi et al, 2018). Hiring a car means less expenditure on fuel and maintenance and is better
for the environment this has led to massive change in the social perception. Thus making it a
deterrent social factor in the future years (Belgiawan et al, 2014).
Technological:-
Volkswagen and other car companies are faced with the self-driving car technology.
Companies such as Tesla is making ground-breaking performance in launching the first ever
driverless cars. The cars are equipped with artificial intelligence, mapping cameras, radar, terrain
sensor and extreme safe driving. These autonomous cars are gaining momentum in the market
and effecting the demographic attitude towards cars. A survey conducted by KPMG show that
the car ownership is likely to decline by 2025 by 60%. Therefore, this can be an opportunity for
Volkswagen to explore in innovation (Dickmann et al, 2015).
Legal:-
The emission scandal of Volkswagen of 2015 has caused immense damage to the company’s
reputation. The penalties that the company had to pay in criminal fine and retribution has raked
up to $4.3 billion dollar for violation of the emission standard. The result of which the company
is still facing public lawsuit and yet to pay fines in several countries in Asia Pacific. Moreover,
the company had to recall all the faulty cars that incurred further loss to the company. These
legal lawsuits has damaged the reputation of the company decreasing in its sales in the

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subsequent years (Cavico&Mujtaba,2016).
Environment:-
The global population is leaning towards sustainable mobility. Eco-friendly cars, zero
emission, less use of fossil fuels are some of the key factors the current demographic looks for in
the car today. Volkswagen therefore needs to emulate such innovative designs that can help them
dominate the market. The car company has recognised the future trends and is coming up with
zero emission bus sharing service known as MOIA. It emphasises sustainable transportation and
eliminates the emerging threat in the car hailing service by entering the market. Launching
ecofriendly cars and other services will help Volkswagen improve their social policies as well.
Summary and possible changes required-
The above internal and external analysis achieved by SWOT and PESTLE analysis has
revealed some significant areas of threat in internal and external environment. UK is going to
issue an indirect ban on petrol and diesel cars to reduce pollution. It is better if Volkswagen
develops suitable designs to improve their electric car models in order to stay relevant in the
market. The analysis shows that the demographic has a change in the attitude regarding the car
ownership therefore; it is indeed a lucrative move for Volkswagen to enter the minibus service
by launching MOIA. This move also helps to improve their image in front of customers and
stakeholder (Alemi et al, 2018).
The emission scandal points to a weak corporate management that allowed the
installation of the defeat device, therefore it is suggested that they improve their management
system and public relation, focusing on delivering the right goods to the customer. They should
try to improve their image that has been damaged significantly.

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Literature Review:-
This segment reviews various change management theories and aims to identify different
areas where change management can be implemented. Change management refers to adopting
new ideas, procedures, or behaviour in an organisation as a means to compete effectively against
its competitors. Change management is a continuous remediation process that is aimed to bring
about positive change in a company. The main advantage of change management is that it
enables the company to maintain its budget, therefore increasing ROI and realisation of benefits
(WASIM, 2017). Since the market is always changing, it is essential that the organisational uses
change management theories to improve their business plan. Lewin’s Change Management
Model and Kotter’s change management theory is discussed under.
Lewin’s Change Management Model
This model was created by Kurt Lewin in 1950 and is one of the most effective change
management theory which is valid till today. Lewin was a physicist and a social scientist who
elucidated this theory by taking the changing block of ice. His theory consists of three stages that
are Unfreeze, Change and Refreeze (Hayes, 2018).
Firstly the unfreeze stage according to Lewin is the preparation for change. Preparation
for change is a very vital first step as it allows the organisation and the various people associated
with the company to anticipate the change that is about to follow. It is natural that the people
may oppose the change that is why it is important to break the normative pattern. It is important
to explain people the need for the change and how it can be advantageous. This step also
involves the organisation to re-examine its core values. Second step is change; this is where the
real transition takes place. The process maybe time consuming as people take time to embrace

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new changes and development. The change can be a confusing time for the employees thus it is
very important that the leader of the organisation to steer the employees and stakeholders in the
right direction of the change. The last step is the refreeze, this is where the people in the
organisation have accepted the change and the organisation stabilizes. This step requires
monitoring to ensure the change is constantly implemented. To illustrate, Volkswagen should
create an urgency to address their management issues. The urgency came in the form of the
Emission scandal that led to significant change in the company policy and this led to firing of
high-level staff and the CEO Martin Winterkorn during that time.
Kotter’s change management theory
John P. Kotter developed the model that has been found effective in change management
organisation all over the world. John Kotter is a professor at Harvard School of Business
Management and has written several books on this topic. His model is divided into eight stages.
The first stage creates a sense of urgency among people to motivate them to move forward with
the change. The second step is to build a team of right people with different skill and knowledge
and can stimulate the change. The third step is to create a vision that helps people to commit to
the change process emotionally. The fourth step is to communicate with people regarding the
change. The fifth step focuses on accelerating change process to remove hindrance and accept
constructive criticism. The next step focuses on achieving short-term goal by dividing the
ultimate goal into smaller goals. Good and permanent change is gradual and therefore it is
important to remain patient no matter what. The last step is to make the change and ensure the
change is emulated into the work culture (Neumeier, 2013).
One example of company that has implemented this organisational change is Toyota.
Toyota just like Volkswagen is an automotive company that faced significant challenge after the

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Second World War. The Japanese market was in ruins and the company faced challenge from
American car manufacturer like Ford and General Motors. Taichi Ohno an engineer at the
company convinced his managers to change the manufacturing unit. He proposed to reduce cost
of ordering and storing a lot of heavy machinery and equipment and instead use supplies that
were ready to use. That way the company could save immensely on storage and could directly
use products that were ready to use. The change was gradual but it helped Toyota to overcome
the challenges making it one of largest car manufactures in the world (Hallam, Muesel &
Flannery, 2010).
Volkswagen has been in the business a long time but the emission scandal has
deteriorated the company image and consequently affected the sales. Thus, Volkswagen should
definitely adopt a new strategy to undergo cultural and holistic change in its organisation.
Kotter’s eight-step model can be a good strategy to implement changes within the company and
improve the business.
Possible change strategies required to improve the situation.
 Volkswagen should invest time and resources to re-establish the credibility of the
company. The emission scandal has long lasting effect therefore the company should
prioritise damage control, compensate their customers, and take action to fix the damaged
cars.
 The company needs to initiate organisational change and pave way for change that is
holistic and culturally appropriate. The loss in faith among the consumers and
stakeholders, Volkswagen should ensure that they deliver an honest heartfelt regret in the
failure of their management and ensure that this is never repeated in the future. They
should take up serious corporate responsibility practice to gain customers and investors.

10ORGANISATIONAL LEARNING AND CHANGE
 The company should decentralise the management structure to improve their decision-
making, communication and avoiding scandals. Promote entrepreneurial thinking and
concept and encourage a cooperative environment for future success (Lechaba, 2013).
 Volkswagen should continuously research and analyse their organisational framework to
improve and maintain quality. The company should initiate systematic and through
investigation from time to time to ensure such scandals are not repeated again.
 Volkswagen should strategies to improve their technological advancement so that it can
meet the expectation of the changing trends in the market. Even though, the company has
invested billions in improving their technology, yet it is failing to meet the expectation of
the investors. They need to pay attention to build more electric car models and
autonomous cars that needs to meet the standards of other car rivals such as Tesla and
other new entrant in the market like Apple and Google (Hettich, and Günter Müller-
Stewens, 2017).
Recommendations of the most suitable strategies.
Out of the above strategies, two main strategy could be extremely beneficial for Volkswagen
are as follows:-
 The first strategy is the practicing effective and conscious corporate social
responsibility. The emission scandal still stands out as one of worst scandals in
corporate history. Therefore, the company should genuinely invest in proper
corporate social responsibility and make proper contingency plans to avoid any such
scandal in the future (Zhang et a, 2016).
 The last strategy is investing money in design of new electric cars that can help this
EU company to garner new consumers. It faces main rivals such as Tesla that has

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already established new benchmark in the electric car section. Therefore, Volkswagen
needs to enter the market targeting sustainable and affordable electric cars.’
Required resources
To achieve the first resource for the company one of the primary resource is the financial
resource, which can help it to hire the appropriate CSR personnel for the job (Zhang et al, 2016).
The second resource is the human resource that is required to accomplish the goals that is
decided by the organisation. The company needs to hire professionals that can help to achieve
these goals. The company will also require IT resource in order to plan and analyse recent
statistics and development so that it can ideate for future improvements.
The second strategy requires IT resource to develop and design better electronic cars. The
financial resource is one of the most important factor in this strategy as developing car models is
an expensive process and requires a significant investment. The process also requires physical
resources refer to the tangible resources that is required to implement the strategy such as time,
labour for various purposes for analysing data, research, low skilled labours, energy and raw
material. These are the following resources required to implement the above strategies.
Conclusion
The company Volkswagen is one of the oldest automotive company in the world and has
been one of the most reputed companies in the world. However, the scandal has affected its
growth significantly and as a result lowered sales. Additionally it has lost the faith of the
customers and stakeholders that will take a lot of time and effort to rebuild it again. The analysis
points at the various challenges that Volkswagen is facing and will likely face in the future. The
external environment is not under control but the company should improve its internal

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environment to gain control. Management change is inevitable and necessary something that
Volkswagen should definitely implement.

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