Strategic Marketing Management: Volkswagen Crisis Report and Strategy

This report addresses the Volkswagen emissions scandal, also known as Dieselgate, and its implications for the company's brand and marketing strategy. It begins with a company background, highlighting Volkswagen's global presence and market position before the scandal. The introduction provides an overview of the scandal, detailing the intentional programming of diesel engines to cheat emissions tests. The report analyzes the problem statement, which focuses on brand crisis management and the need for a revised marketing strategy. A situational analysis, including a SWOT analysis, assesses the internal and external factors affecting Volkswagen. The report explores the impact of the scandal on the brand, examines crisis management, and discusses potential solutions. It delves into public relations crisis management, ethical considerations, and re-branding strategies, culminating in recommendations for a revised marketing strategy. The report emphasizes the importance of restoring confidence in the brand and preventing further negative impacts.

APPENDIX A: ASSIGNMENT COVER SHEET
ASSIGNMENT COVER SHEET
Surname
First Name/s
Nombulelo
Student Number
Subject
Strategic Marketing Management
Assignment
Number
02
Tutor’s Name
Examination
Venue
N/A
Date Submitted
02/05/2021
Submission (√) First Submission Resubmission
X
Postal Address
Pinetown 3610
E-Mail
Contact Numbers
Course/Intake
January 2021
Declaration: I hereby declare that the assignment submitted is an original piece of work produced by
myself.
Signature Date: 02/05/2021
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Contents
QUESTION..........................................................................................................................3-3
COMPANY BACKGROUND.............................................................................................4-4
INTRODUCTION................................................................................................................5-7
PROBLEM STATEMENT..................................................................................................8-9
SITUATIONAL ANALYSIS...........................................................................................10-16
IMPACT ON THE BRAND............................................................................................17-19
POSITIONING STRATEGY...........................................................................................20-21
CURRENT SOLUTIONS FOR FINALIZING VOLKSWAGEN SCANDAL...............22-24
PUBLIC RELATIONS CRISIS MANAGEMENT.........................................................25-29
ETHICS............................................................................................................................30-31
RE-BRANDING..............................................................................................................32-32
RECOMMENDATION....................................................................................................33-33
REVISED MARKETING STRATEGY..........................................................................34-43
BIBLIOGRAPHY............................................................................................................44-49
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QUESTION
Having been appointed as Marketing Manager of Volkswagen just after the emissions incident
happened, you are required to advise the board on the most appropriate brand crisis
management and provide a revised marketing strategy going forward, to restore confidence in
the brand and prevent any further negative impact on the brand.
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COMPANY BACKGROUND
Volkswagen Group is a German multinational automotive manufacturing company
headquartered in Wolfsburg, Lower Saxony, Germany. Following Toyota, Volkswagen is the
second largest automaker in the world. Over 600,000 employees scattered around the globe
produce over 28,000 vehicles per day in 2016. Volkswagen currently owns 12 subsidiaries which
make up the Volkswagen Group. These include Volkswagen Passenger Cars, Audi, Seat and
Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, and Volkswagen Commercial Vehicles,
Scania and Man T. Bowler (2015). Currently, the global automaker has 120 production plants
spread over 4 continents with the majority of manufacturing operations in Europe and China
Volkswagen AG (2017). Its vehicles are sold in 153 countries T. Bowler (2015). As outlined in
Appendix A, the 12 subsidiaries that make up the Volkswagen Group is composed of an
incredible 347 different models.
Volkswagen (VW) is a large international automobile manufacturer with its world headquarters
located in Wolfsburg, Germany. Volkswagen is owned by the Volkswagen Group - a
multinational corporation that includes other car manufacturers such as Audi, Bentley, Ducati,
Lamborghini, and Porsche McGee (2018). The firm is currently Europe's largest automaker with
a market share of over 20% as of 2010. Worldwide, Volkswagen has ranked as the third-largest
auto manufacturer behind Toyota and General Motors. In 2010, Volkswagen posted record sales
of 6.29 million vehicles, with its global market share at 11.4%.
In September 2015, Volkswagen admitted to United States regulators that it had deliberately
installed "defeat devices" in many of its diesel cars, which enabled the cars to cheat on federal
and state emissions tests, making them able to pass the tests and hit ambitious mileage and
performance targets while emitting up to 40 times more hazardous gases into the atmosphere
than legally allowed. The discovery had prompted the U.S. Environmental Protection Agency
(EPA) to halt the final certification of Volkswagen's 2016 diesel models, and Volkswagen itself
had halted sales of its 2015 models. As the fallout from the defeat devices developed,
Volkswagen posted its first quarterly loss in more than 15 years, and its stock plummeted. Top
executives were replaced, and Volkswagen abandoned its goal of becoming the world's largest
automaker Volkswagen (2016).
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INTRODUCTION
The Volkswagen emissions scandal, also known as Dieselgate or Emissionsgate, began in
September 2015, when the United States Environmental Protection Agency (EPA) issued a
notice of violation of the Clean Air Act to German automaker Volkswagen Group. The agency
had found that Volkswagen had intentionally programmed turbocharged direct injection (TDI)
diesel engines to activate their emissions controls only during laboratory emissions testing,
which caused the vehicles' NO output to meet US standards during regulatory testing, while they
emitted up to 40 times more NO in real-world driving. Volkswagen deployed this software in
about 11 million cars worldwide, including 500,000 in the United States, in model years 2009
through 2015.
Executive Summary
To evaluate the strategy and performance of Volkswagen, the world’s second largest automaker,
internal resources and capabilities, industry environment, and institutional environment of the
company were evaluated. From these analyses, critical issues, threats, and challenges were
identified. Namely, the 2015 emissions scandal, company culture, quality and productivity, and a
new electric car strategy were identified as the primary issues which Volkswagen needs to
proactively address. Four recommendations were developed to not only address these issues but
increase the automaker’s competitive advantage as well M. Hanno, R. Magadia, A. Kadoo & D.
Akinsaya (2019).
This report examines the corporate governance practices of the German automotive
multinational, Volkswagen AG, in relation to the revelation of the diesel-engine emissions
scandal by the U.S Environmental Protection Agency (EPA) in 2015. The Analysis focuses on
how a monetary mindset and negligence towards other elements of 3P’s (People, Planet, and
Profit), that are embedded in corporate structure, ownership composition, Supervisory Board
(SB) and Corporate culture leads to decisions that serve the interest of power-hungry
shareholders at the expense of other stakeholders. The finding reveals power imbalance and
abuse-of-power from dominant shareholders; Porsche-Piëch family, the intrusion of Lower
Saxony (German Government) to ensure national employment, risk of labor inclusion on SB
under the Co-Determination Act and company culture focusing only on profit led to unethical
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conduct of ‘implanting cheating device’, hence displaying the firm’s poor Corporate Governance
procedures L.J. Lynch; C. Cutro; E. Bird (2016).
Furthermore, analytical research has been done using two prominent theories in this field –
Agency Theory and Stakeholder Theory. Using Agency Theory, it is found that the presence of
the controlling shareholder in Volkswagen induces principal-principal problem by exploiting
opportunities catered to their interest at minority shareholders’ cost. In addition, Germany’s two-
tier board system that ideally separates job is not effective for Volkswagen due to the dominance
and abuse of power from major Shareholders regarding controlling the direction of management
activity L.J. Lynch; C. Cutro; E. Bird (2016).
On the other hand, Principal-Agent Problem also exists due to the presence of Government as the
second-largest shareholder of the firm ever since World War II. This intrusion is negative to
Volkswagen due to conflict of interest between Government and Shareholders – focus on welfare
or increase shareholder returns. Furthermore, the inclusion of labor representatives in SB is also
risky due to the possibility of these representatives exercising decisions based on their personal
interest, maintaining their job. In view of Stakeholder Theory, it is found that Volkswagen’s
intention to save profits by carrying out activities that are unethical backfired, causing the firm to
incur a massive loss and damage its brand image. Therefore, the company’s long-term
sustainability can only be achieved if the company aligns its profit intentions with ethical
intentions of serving People and Planet. To improve good corporate governance practice in
Volkswagen, this report provides various recommendations to modify internal governance
procedures L.J. Lynch; C. Cutro; E. Bird (2016).
Firstly, setting a contract that specifies clear expectations and roles. Following this, the firm will
benefit greatly by having regular evaluations and instilling a whistle-blower protection system
managed by the third partyL.J. Lynch; C. Cutro; E. Bird (2016).
Secondly, to increase performance, reformation on the structure of SB needs to be conducted by
having more independent members, professional-hired as a government representative, and
allowing other representatives on the nominee committee to limit majority shareholders’ power
L.J. Lynch; C. Cutro; E. Bird (2016).
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Lastly, to restore its brand image and gain stakeholders’ trust, Volkswagen must rebrand and
plan on fulfilling corporate social initiatives that will gear the firm into strategic success and
sustainability in the long run L.J. Lynch; C. Cutro; E. Bird (2016).
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PROBLEM STATEMENT
The purpose of this research report is, firstly, to analyze the reasons that triggered the state of the
brand crisis and then look at the strategies to manage the brand in 6 particular the typical
components of a marketing strategy that can be useful for the mitigate the problem.
The report will interrogate every possible solution through situational analysis and then employ
every suited strategy to perform the brand impact diagnostic, while more emphasis will be put on
brand positioning for customer confidence purposes. From this report, the revised plan will be
produced to the board for them to be able to deal with other future similar crises related to the
brand.
On 18 September 2015, the US Environmental Protection Agency (EPA) informed the public
about Volkswagen’s and Audi’s violation of the Clean Air Act by installing “defeat devices” that
allow their cars to pass all tests but then emit nitrogen dioxide at up to 40 times the permitted
level. The Volkswagen engineers had initially admitted to the EPA on September 3 that defeat
devices had been fitted to 480,000 diesel cars in the US – but the news only reached the wider
world on 18 September when the regulator, not Volkswagen, disclosed the issue M. Wang, J.
Fitzpatrick (2019).
In 2015, the world became aware that Volkswagen had installed “defeat devices” in 500,000 of
its American diesel cars, enabling them to pass America’s strict emission standards and then
return to non-compliant emissions during normal driving. It has been several years since the
initial news broke, but the repercussions from this scandal are ever evolving, from the many
fines and lawsuits that Volkswagen will have to contend with, to the arresting of Volkswagen
Group executives over their involvement. There is urgent need to work on Communication
Strategies with media resources and to address the nation effectively M. Wang, J. Fitzpatrick
(2019).
On 2 November, the EPA said it had uncovered another defeat device in the VW Group’s other
cars, namely in Audi, Porsche, and VW 3-litre diesel cars, which affects a further 85,000
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vehicles. VW’s response to this was short and quick, denying that they had installed any
software that would alter emissions characteristics M. Wang, J. Fitzpatrick (2019).
On 4 November, Volkswagen made a U-turn and admitted to a third emissions problem: 800,000
cars had understated their carbon dioxide levels, and that the company was setting aside €2
billion to deal with the problem. Despite their commitment to solving the problem, critical
information was only revealed after probing questions to VW officials M. Wang, J. Fitzpatrick
(2019).
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SITUATIONAL ANALYSIS
This section will analyze the situation faced by Volkswagen for the emissions incident that
happened which resulted in penalties imposed after Volkswagen admitted to the US court
regarding the cheating mechanism, they employed in order to get the license and the brand
damage. The reason we will do the situation analysis is that, before we develop any marketing
strategy, it is important to conduct a situation analysis to determine the impact on the business
brand. This analysis serves as a useful tool for determining Volkswagen's business's strengths
and weaknesses, and any opportunities and threats (SWOT) that can affect the brand.
Volkswagen had been in the automobile manufacturing industry since 1937. Over the years it
rose to popularity with a consumer needs centric mindset. In 2009 it became the largest
automotive manufacturer worldwide Auto car (2015). However, in 2015 it was overtaken by its
rival Toyota, as the top ranked automotive company in terms of sales Morris (2015).
Indeed (2020) explains situational analysis as a collection of methods used to analyze the internal
and external factors in a business. It allows you to use market research to evaluate projected
growth, define your potential customers, assess your competitors and evaluate the state of your
business.
An effective situational analysis includes an examination of both internal and external factors.
The key elements for that analysis are:
 Strengths: Strong points about your brand, products, and services, and marketing
programs.
 Weaknesses: Aspects of your products, brand image, and marketing programs that you
could improve upon.
 Opportunities: Includes ways you can increase success, such as new ways to reach
customers or a new market you could enter.
 Threats: External elements that could negatively impact your sales or profitability.
According to D. Vrontis, A. Thrassou (2006) the situation analysis or audit is described as the
‘where are we now, is the means by which a company can identify its own strengths and
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weaknesses as they relate to external opportunities and threats. It is thus a way of helping
management to select a position in that environment based on known facts.
According to M. Wang, J. Fitzpatrick (2019) initially, it looked like Volkswagen were going to
nail their crisis communication response. They responded quickly, with then-CEO Winterkorn
immediately committing to resolving this issue and being transparent (in the future). As we teach
in the Honest Words and Crisis Apology module of our media training workshop, it is all well
and good to make public commitments; provided you can deliver them. Research from leading
sociologists List and Ho (2017) shows that if you fail to come good on your promises, this will
damage your reputation more than if you make no apology and no commitment in the first place.
Unfortunately for the sake of Volkswagen’s reputation, they were unable to keep their promises
of transparency and honesty, with the EPA later revealing the installation of more defeat devices.
If this was not damaging enough, company executives were not willing to truly accept
responsibility with Winterkon denying any wrongdoing in his resignation statement and new
CEO Matthias Müller (who has also since been replaced) claiming on live radio that they did not
lie – only to later retract his comments after public outcry. While the promise of a fresh start was
welcoming to stakeholders (albeit frivolous in hindsight), their leadership’s denial of any direct
wrongdoing angered everyone – causing additional unnecessary attention and damage M. Wang,
J. Fitzpatrick (2019).
In our opinion, Volkswagen made this crisis much worse than it needed to be by not coming
clean from the start and the consequences show M. Wang, J. Fitzpatrick (2019).
During the Volkswagen (VW) Crisis the negative brand image was established because of no
active media relations team which could have managed the issue before hand. There was no
crisis management strategy devised by company. But the company supervisors acting
immediately prioritized the people safety and save the product by effectively
withdrawing/recalling nationwide Volkswagen Diesel vehicles affected. It also addressed the
public issues by actively involving all media resources and introduced new tamper resistant
packaging in interest of public. The company was successful to reintroduce themselves as most
trusted over the counter product in America. Volkswagen scandal has led to a devastating series
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of critical consequences to its direct and indirect stakeholders. This emission scandal is still
under investigation by various authorities with the purpose of identifying actual impacts and
coming out with a suitable solution to finalize the case.
The impact of the incident had on the brand: Volkswagen hit a huge drop in market shares. In the
year 2014, Volkswagen was the world’s second largest automaker in automobile industry after
Toyota Motor Corporation. In the year 2015, Volkswagen admitted rigging in diesel emission
test which caused the company to suffer from huge amount of cost burden. Volkswagen has
brought in three (3) public relations firms based in United States, Britain, and Germany to assist
the company to cope with the crisis. Moreover, Volkswagen has employed the former
communications of BMW as a consultant to work 60 hours a week with salary of $22,000 per
month Hakim (2016).
Moreover, since this case includes various countries over the world, Volkswagen is required to
deal with different international regulations. The primary consequences of this unethical
deceptive scandal are listed as follow Hakim (2016).
Threatening People’s Health
Unlike safety crises faced by other automakers, VW’s crisis did not result in immediate human
health impact that could be directly tied to the emissions scandal. However, environmental
experts weighed in on the dangers of adding additional air pollutants and the long-term costs to
human health N. Mansouri (2016)..
Selin (2015) in her article for grist.com explained the impact:
The pollutants that VW failed to effectively control are nitric oxide (NO) and nitrogen dioxide
(NO2), which are collectively known as NOx. Combined with other atmospheric pollutants, NOx
can form even more dangerous pollutants: ozone and particulate matter. The EPA regulations
for diesel engines limit the amount of NOx that can be emitted per mile travelled. VW
classified its vehicles as meeting the so called TierII/Bin 5 emission standards, which means it
was allowed to emit 0.07 grams of NOx for every mile travelled over the lifetime of the
vehicle. Actual emissions from affected cars were reported to be 10 to 40 times higher. With
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more than 480,000 cars affected, estimates have ranged from 10,000 to 40,000 tons of extra
NOx released in the United States Selin (2015).
By end of 2016, Volkswagen cars with defeat device will have produced additional toxic
pollution to directly trigger premature death of roughly sixty (60) individuals merely in the
United States. From the year 2008 to 2015, 428,000 Volkswagen and Audi diesel cars pumped
out nitrogen oxide forty (40) times more than it was allowed by the Clean Air Act. It is estimated
by the researchers that with six (6) years Volkswagen and Audi diesel produced an excess of
36.7 million kg nitrogen oxide to the environment Selin (2015b).
Nitrogen oxide is a primary element of particulate and smog matter which paves the ground for
various disease namely heart disease, premature death, bronchitis, and respiratory and
cardiovascular disease. Researchers have estimated that significant impacts of nitrogen oxide
produced by Volkswagen cars endanger 60 human lives from 10 to 20 years prematurely Selin
(2015).
It is noted that excess of pollution from Volkswagen vehicles participated directly in thirty-one
(31) and thirty-four (34) chronic bronchitis and admission of respiratory and hearth cases
respectively in the United States. Additional pollution to the environment will results in 120,000
minor restricted activity day and approximately 210,000 days of less respiratory signs. The
sickness of people over six (6) years from 2008 to 2015 will cost United States $450 million
Kalaugher (2015).
If Volkswagen declines to recall vehicles with defeat device, from 2015 onwards 140 premature
deaths will take place. In addition, health cost of $840 million will be caused by the Volkswagen
diesel cars Chue (2015). In addition, excess of nitrogen oxide to the natural environment by
Volkswagen diesel cars results in acid rains The Editorial Board (2016). The acid rains not only
have crucial impact on human health bot also have vital destruction on nature and natural
resource.
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Slump in Workforce’s Bonus
When rigging in diesel emission test was revealed to the public, sales of Volkswagen was
affected. Therefore, Volkswagen to cope with crisis, has announced that bonus of chief
management will be reduced substantially Moulson (2016). Volkswagen said a statement that
various models which establish fair and rational solution for all participated parties are being
deliberated. As a result, this leads to a considerable diminution of variable remuneration. The
reduction in bonus will include management board and a group of executive positions assisting
CEO to operate the company’s daily routine. It is said that the bonus of German equivalent of
board of directors, which is the supervisory of Volkswagen, would not be reduced except
Volkswagen chairman Hans Dieter Poetsch Moulson (2016).
In response to the scandal, Volkswagen published a video statement from then-CEO Martin
Winterkorn on 22 September. Winterkorn iterated Volkswagen’s dedication to cooperating with
the relevant organisations and authorities for any investigations undertaken, outlined the
company’s willingness to “do everything necessary in order to reverse the damage this has
caused”, and provided an apology. The statement ended with the promise to “do all this with the
greatest openness and transparency.” Winterkorn then resigned on 23 September, stating that
Volkswagen “needs a fresh start – also in terms of personnel” and reiterating that the “process of
clarification and transparency must continue.” At the end of the statement, it was also mentioned
that he was “not aware of any wrongdoing on (his) part.” Volkswagen admitted on the same day
that the number of cars fitted with defeat devices were not the previously-announced 500,000
cars – but rather an astonishing 11 million (all around the world), and it had been a global
practice for several years N. Mansouri (2016).
Internal Factors
The three main internal factors Volkswagen faces as it attempts to solve the emissions-cheating
crisis and rebuild its brand image are management structure, performance impediments, and trust
issues within the organization.
Management Structure
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The changes in management structure in Volkswagen need to be solved and maintained
immediately. Because of this crisis, dishonesty was exposed within the organization, causing the
CEO and executive board to be closely scrutinized. In effect, this pressured the CEO to step
down from his position. When management structure is not the primary function of the
organization, it causes insecurity and instability that is seen and felt both internally and
externally. Thus, the initial step in VW’s self-analysis is to emphasize accountability through
reform in the current management structure.
Performance Impediments
Employees drive performance. Accordingly, employees are responsible for the quality of VW’s
goods and services as well as the viability of the causes and ideas that VW promotes. Whether in
research and development of the product, engineering, sales and business development or
communication, Volkswagen employee performance will be an integral part in managing this
crisis and moving forward. Management should emphasize VW’s “mission statement” and
“code of conduct,” to communicate to employees the importance of conducting business with
honesty and integrity. It is necessary for employees to be educated about the crisis in maintaining
the quality of its brand.
Trust Issues Within the Organization
It is imperative that Volkswagen builds back trust and confidence within the organization as to
the uncertainty of its future. Employees of Volkswagen are not likely to perform to the best of
their ability if they do not trust in the goals of the organization. This applies to all members of
the entity and is most effectively applied by means of credible leadership. A two-step flow of
communication from management to its employees provides legitimacy to the substance of the
information. As aware and active publics, the entities within the organization are responsible for
communicating credible information as an intercessory for the public.
External Factors
The three main external factors Volkswagen faces as it attempts to solve the emissions-cheating
crisis and rebuild its brand image are: public concern for the scandal, financial impact on
shareholders and challenges from stakeholder groups.
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Public Concern for the Scandal
The most urgent task is to win back trust for the Volkswagen Group. The Volkswagen emissions
scandal has greatly diminished public trust in not only VW management, but has also caused
motorists to question the integrity of the auto industry. VW has also revealed that the number of
affected cars on UK roads are more than a 10th of the total worldwide. In effect, it is likely to
start a recall of cars affected by its emissions scandal in January. Nonetheless, the company
hopes all affected cars will be recalled and fixed by the end of 2016. In addition, Volkswagen
has offered a $1,000 goodwill package to U.S. customers whose diesel vehicles are affected by
the emissions scandal as the initial step in its effort to rebuild trust among its customers.
Financial Impact on Shareholders
The effects of such corporate crises are profound and lasting. The estimated total cost of the
scandal is projected to exceed $8 billion. Moody’s has downgraded VW’s credit rating to A3
from A2 with a negative outlook following the latest irregularities. The downgrade was a direct
result of the emissions issue that would have adverse effects on the company’s future earnings
and cash flow. In addition, the U.S. Justice Department sued Volkswagen AG on Monday,
seeking billions of dollars in penalties in the wake of the emissions-cheating crisis.
Challenges from Stakeholders
Globally, politicians, regulators and environmental groups are questioning the legitimacy of
VW's business model. Volkswagen’s blatant faults not only tarnish its reputation, but also
heighten consumers’ cynicism about VW’s ethical practices while engaging in “greenwashing”
practices. Accordingly, satisfying these stakeholders’ concerns are essential to regenerating
consumer confidence in the quality of VW’s goods and services.
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IMPACT ON THE BRAND
Definition
Is a “name, term, design, symbol, or any other feature that identifies one marketer’s product as
distinct from those of other marketers” Hult (2012:366), “brand equity” refers to “the marketing
and financial value associated with a brand’s strength in a market” Hult (2012: 369).
According to Keller (2012:270), he discusses 6 building blocks that have been developed with
customers in order to provide some structure to the building of brands.
A brand in its simplest form, a brand name is a form of a signature that gives credit to the creator
of a particular work or service and sets it apart from those created by others. Two of the main
purposes of brand names are:
 Identification: To differentiate a particular product or service from other or similar
brands.
 Verification: To authenticate that a product or service is the genuine or desired article
A brand is not the name of a product but the vision that drives the creation of products and
services under that name. That vision, the key belief of the brand, and its core values are called
identity. Kapferer (2008).
On 21 September 2015, the first day of trading after the EPA's Notice of Violation to
Volkswagen became public, share prices of Volkswagen AG fell 20 percent on the Frankfurt
Stock Exchange. On 22 September, the stock fell another 12 percent. On 23 September, the stock
quickly fell 10.5 percent, dropping below €100 to a record 4-year low before regaining some lost
ground. Share prices of other German automakers were also affected, with BMW down 4.9
percent and Daimler down 5.8%. A year later Volkswagen stock was down by 30 percent.
Qatar, one of the biggest Volkswagen shareholders with a 17 percent stake in the company, lost
nearly $5 billion as the company stock value fell.
Several executives of Volkswagen and its subsidiaries have been charged or arrested for their
involvement. The most recent is former Volkswagen CEO Martin Winterkorn, who had
aggravated fraud charges filed against him by German prosecutors N. Mansouri (2016).
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The scandal has forced Volkswagen Group to pay around USD 30 billion to settle the case, with
the sum likely to rise by several billion dollars. Volkswagen’s share prices plummeted after the
EAP informed the public about the company’s defeat devices and investors have filed a USD 10
billion lawsuit in Germany against the company to seek compensation N. Mansouri (2016).
Drop in Volkswagen Sale
Although Volkswagen diesel scandal has resulted in crucial impact on Volkswagen group brands
namely Audi and Skoda, slump in sales of Volkswagen vehicles is far substantial than group
brands. The bad reputation of Volkswagen has affected its customer loyalty; therefore, costumers
switch from Volkswagen to its competitors which lead to a noticeable drop in sales Kottasova,
(2015). Since 2002, for the first time, in 2015 sales of Volkswagen plunged world-wide
substantially in virtue of deceptive scandal. The following figure represents that Volkswagen’s
sales is continuously plunging in the United States (BBC, 2016; Sky UK, 2016; Waecsh, (2016).
The US sale of Volkswagens was 23,882 vehicles in November 2015, a 24.7 percent decline
from November 2014. In South Korea, sales in November rose 66 percent to 4,517 units from a
year ago due to the Volkswagen's aggressive marketing efforts such as a discount of up to
18,000,000 (US$15,600 at December 2015 exchange rates) for some models. In Great Britain,
the scandal did not affect sales, which increased in 2016 to an all-point high, placing
Volkswagen second in the league of best-selling cars N. Mansouri (2016).
VW sales across Europe returned to growth in April 2016 for the first time since the scandal
broke, with a group market share of 25.2 percent, compared to its previous level of 26.1 percent.
Plunge in Volkswagen Shares
Unethical practice of Volkswagen led to a dramatic slump in share value. Immediately once
Volkswagen scandal was revealed, market showed reaction thus share value of the company
dropped by one third. In other words, the emission scandal wiped billion dollars from
Volkswagen value Gomez (2016).
The following figure depicts that Volkswagen stocks price is continuously slumping dramatically
in the United States.
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Creating Hassel for Volkswagen Dealers
When deceptive emission took place, a package of specific programs with the purpose of
assisting retailers to cope with Volkswagen rigging in diesel emission test was provided to
Volkswagen dealers Ausick (2016). The program includes specific amount of money in form of
sales bonus, incentives, or subsidy injected to dealership network struggling with lower sales and
profit. The sale of Volkswagen diesel cars, which includes just above 20 percentages of total
sales, was stopped. Therefore, dealers are still suffering from thin profit and sluggish sales Beene
(2016). On first of October Volkswagen of America with the purpose of relaxing crisis gave
extra discretionary funds to Volkswagen dealers to use it in a way they wish. According to
Automotive News, the amount of loan varied base on dealer’s volume and reached to the highest
amount of ten (10) thousand dollar. Volkswagen crisis grew significantly and affected the brand
name, whilst dealers were not permitted to sell diesel vehicles. Thus, dealers were concern
whether the given fund is sufficient for survival or not. The CEO of Volkswagen America stated
that further programs will be considered for dealers with cash flow, but still specific date is not
declared for programs LaReau & Ryan (2015).
The continuous Media reporting focused on VW polluting the environment led to negative brand
image and costed company loss of million dollars. They understood that they need to have a
proactive public affairs program as VW started using media and Public relations effectively
during crisis helped them in regaining their market position eventually. They also established and
used Remediation and Rectification, as well as Forgiveness strategies, in the VW crisis to re-
establish the brand image and assist the affected people N. Mansouri (2016).
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POSITIONING STRATEGY
This section of the report will evaluate how the emission scandal(cheat) affected the positioning
of the brand in the mind of the consumer to how the brand can mitigate their issues to
strategically position themselves.
The definition: What is brand positioning - The act of designing the company's offering and
image to occupy a distinctive place in the mind of the target market. Brands need to stand out
from the crowd, to be perceived as unique and distinctive to their target audience.
"The goal is to locate the brand in the minds of the consumers to maximize the potential benefit
to the firm” Kotler & Keller (2012: 298).
According to Koelzer (2019), Brand positioning is also defined as the conceptual place you want
to own in the target consumer’s mind the benefits you want them to think of when they think of
your brand. An effective brand positioning strategy will maximize customer relevancy and
competitive distinctiveness, in maximizing brand value.
The Strategy for VW it is focusing on positioning the Volkswagen Group as a global economic
and environmental leader among automobile manufacturers. To achieve the goals the company
has defined the most important objectives that it needs to meet to be the most competitive car
manufacturer in the world and the goal is to make Volkswagen the most successful, fascinating,
and sustainable automaker in the world by Volkswagen Group.
 Volkswagen intends to deploy intelligent innovations and technologies to become a
world leader in customer satisfaction and quality. We see high customer satisfaction as
one of the key requirements for the Company’s long-term success.
 By reducing the sales price and reintroduce the brand into those countries where its
position is weak; the U.S, show more content by Volkswagen Group.
In November 2010, Volkswagen for the first time made more cars than Toyota. However, Toyota
still sells more vehicles each year, but the gap has narrowed down to less than 1.5 million cars.
Though Toyotas reputation is going down after a series of recalls, low quality for Volkswagen
20

remains an issue in the U.S market. Volkswagen needs to strengthen its market in the United
States to expand its market share. Stefan Jacoby, VWs U.S chief persuaded the board to build a
U.S plant. The board later approved the plant and allocated $1 billion for the construction of the
plant scheduled to open in 2011. Jacoby projected to sell 150,000 cars from the plant alone. The
move is a good one as it helps overcome the American resistance for imported cars by
Volkswagen Group.
Volkswagen positioning strategy before and after the incident by Volkswagen Group:
Before the Crisis:
Volkswagen (VW) which was doing well before the crisis used media relations only for
advertising and marketing purpose. They had a good brand image but no Media Relations team.
During the crisis, an effective and proactive media relation could have saved the issue from
being sensational nationwide and could have handled the situation beforehand by Volkswagen
Group.
After the crisis by Volkswagen Group
 They need to focus on proactive Media Relations.
 They need to devise the Crisis Response Strategies.
1) Share the Testimonial of people who were affected during crisis about the assistance they
have received from the company.
2) Highlight the Triple packaging feature in advertisements.
3) Share the Forgiveness and Trust Building Notes to Public through Media
4) Highlight the Measures taken via Conferences and all media platforms to Public.
5) Company should have a Media Relations Team that is effectively communicating and
involving with Media Persons. They should ensure that they are invited to cover all small
to big measures being taken by company.
6) Media Persons should be communicated and notified throughout the year for all company
related events and relation to be maintained efficiently.
21

CURRENT SOLUTIONS FOR FINALIZING VOLKSWAGEN SCANDAL
On 21st April 2016, a judge in California United States declared that Volkswagen has offered a
concrete plan which has been supported by United States government agencies and
environmental protection agency to solve and finalize the case which Volkswagen cheated in
emission test by installing a defeat device in car’s engine to game emission standards of EPA in
the United States. Almost end of 2015 Volkswagen admitted that in eleven (11) million cars
globally the deceptive software has been installed and 600,000 of those cars are on United States
roads.
Therefore, agreement in principle will be applied to Volkswagen cars in the United States
Sorokanich (2016). Judge Charles Breyer, U.S. District Court in San Francisco, has proposed a
deal which gives options to owners of Volkswagen tow (2) litre diesel cars to fix their cars based
on emission standards of the United States or sell back their cars to Volkswagen and cancel their
loans (if the cars were purchased with loan). In accordance with the judge, the proposed deal
includes considerable compensation for car owners of 2 litre diesels and offers a fund for proper
remediation hardship for any environmental harmful effects caused by Volkswagen cars
exceeding pollutions to the environment. Still the details of compensation considered for
Volkswagen car owners are not revealed Goodman (2016).
Moreover, compensations for 3 litre diesels Volkswagen car owners are still underway. The
deliberation of Volkswagen scandal is kept confidential. In accordance with the judge, the
proposed agreement is approved and supported by California regulators, California attorney
general’s office, and the United States Department of Justice, respectively. Lawyers stated that it
is expected that the Federal Trade Commission (TFC) will accept the proposed deal. TFC
recently sued Volkswagen for gaming in clean diesel test Goodman (2016). The proposed
agreement requires more approvals and comments from Volkswagen owners. It is said by the
judge hat by July.
Volkswagen will be allowed to defend against a trial. The proposed agreement also consists of a
section describing Volkswagen commitment to give further effort to create green car technology
Sorokanich (2016). Based on Kelly Blue Book, it costs Volkswagen more than seven (7) billion
22

dollar to buy back the affected vehicles. Therefore, it is estimated that Volkswagen scandal
might impose further cost to the company from approximately 6.7million euros to twofold or
even more than the amount Goodman (2016). Although Volkswagen and Porsche
representatives, the Department of Justice, and others have given great efforts to work fourteen
(14) hours a day to finalize an appropriate deal to solve Volkswagen deception, yet this case is
not finalized yet. The judged announced that June 21st is the due date for all the involved parties
to lodge their proposals before delivering the deal to public Goodman (2016). There is a proposal
for Volkswagen emission scandal explained as follow.
It is estimated that a giant amount of money is about to be spent in seeking to penalize
Volkswagen for its deception. It is proposed that instead of imposing additional financial burden
to punish Volkswagen, there are other ways such as green way to penalize Volkswagen rigging
in emission test Schlanger (2015). It has been recommended rather than squandering huge
amount of money on penalties, it is more favorable to spend this amount of penalty to advance
traditional technology. This is a great opportunity to bring out significant changes to automobile
industry by requiring Volkswagen to concentrate on electric vehicles.
In addition, there is no guaranty that Volkswagen will be able to repair the defeat device. On the
other hand, the car owners might prevent to bring their car for fixing compromising performance
Yadigaroglu (2015). It is rational that EPA releases Volkswagen accountability to recall existing
vehicles with defeat device to fix them. Subsequently, EPA has a crucial role to enforce
Volkswagen to speed up its roll-out of zero emission cars which emit zero pollutant to the
environment. Therefore, zero-emission cars tighten opportunities for cheating in emission tests.
Moreover, EPA benefits greatly from zero-emission cars since it is not required to create new
complicated and expensive emission test for zero-emission cars. This type of cars has an ample
of advantage not only to the EPA and automakers but also to the environment Yadigaroglu
(2015). Over few years, Zero-emission cars significantly diminish emission which is ten (10)
times greater than Volkswagen producing with deceptive device.
In practical terms, increasing number of Volkswagen electronic vehicles on roads compensates
the emission of Volkswagen cars with deceptive device. Besides, zero-emission cars privilege
economy as well by increasing the needs of batteries. To fulfil the needs of battery in zero-
23

emission cars, more battery manufacturers are required to be established over the world. High
demand for battery manufacturing leads to an investment in lands and creating jobs for locals in
the United States and other regions. Advanced technology will be significantly reducing
environment pollution, alleviating regulation of complicated emission standard, and creating
substantial domestic jobs.
This is in facet an opportunity for Volkswagen to invest specific amount of money not only to
compensate its scandal but also to strengthen its position. The proposed electronic cars have a
dramatic role to repurpose the penalized money. According to the recommended proposal, it is
evident that this is an ideal solution to finalize case of Volkswagen cheating in emission test
Yadigaroglu (2015).
24

PUBLIC RELATIONS CRISIS MANAGEMENT
In this segment will discuss the Public Relations steps/ approach to be approached to culm the
consumers.
One of the earliest definitions of PR was coined by Edward Bernays. According to him, "Public
Relations is a management function which tabulates public attitudes, defines the policies,
procedures and interest of an organization followed by executing a program of action to earn
public understanding and acceptance. public relations responsibility is crisis management is to,
handle situations in which public awareness of a particular issue may dramatically and
negatively impact the company’s ability to achieve its goals. For example, when it was
discovered that VW Journawiki (2021).
Hakin, D., Joshi,P. (2016) wrote for years, Volkswagen successfully communicated an image of
itself to the world: Our cars are green, and our engineers are the best. In September that fell apart
when the automaker admitted it had engineered millions of vehicles to cheat on pollution tests.
Since then, the company known for its insular culture and a carefully scripted messaging
machine has stumbled repeatedly in explaining itself.
Hans-Gerd Bode, Volkswagen’s communications chief since September, said in an interview.
“Thousands of calls and emails coming in at the same time” Hakin. D (2016).
“A crisis like this, the company was not prepared for,” he said. With the company continuing to
negotiate with foreign governments, “We don’t know the right way out” Hakin. D (2016).
In the months since it admitted it designed its diesel cars to cheat on tailpipe-emissions tests, the
company has struggled with its messaging. A low point came last month when Matthias Müller,
the new chief executive, visited the United States and told NPR, “We didn’t lie,” when VW
clearly did. The outcry forced Mr. Müller to call NPR back and revise his statement Hakin, D
(2016).
But Volkswagen, which includes the Audi, Porsche and Lamborghini brands, faces a crisis that
traverses the globe, complicating the response across borders and cultures. For instance, the
company has argued that German privacy laws prevent it from fully cooperating with American
25

investigators. On the other side of the world, prosecutors in South Korea are threatening to bring
criminal charges against executives there Hakin. D (2016).
At the same time, Volkswagen is an insular company based in a country that prefers to tightly
manage and script press interactions. It is Mr. Bode’s job to clean up the mess. Before the
scandal, he was top spokesman for VW’s Porsche division, hosting media events featuring
vintage sports cars and the glamorous tennis star Maria Sharapova. Now he is leading the
damage control in a globe-spanning public relations crisis Hakin. D (2016).
VW should have known it was headed for a disaster. For more than a year, the company told
American regulators that its diesels simply had a technical problem that was causing tailpipe
emissions to soar on the road. Then last September, Volkswagen admitted it had created software
to detect and thwart laboratory tests for pollutants that pose health hazards. Its chief executive,
Martin Winterkorn, chalked it up to “the mistakes of a few people.” Few believed that was true,
however, considering that the scandal involves 11 million vehicles and engines developed over
several years. When he resigned a few days later, Mr. Winterkorn said, “I am not aware of any
wrongdoing on my part.” Recently, internal documents suggested he may have been aware of the
issue as far back as May 2014. Since then, the company’s approach has often faltered. While
VW has admitted cheating in the United States and is making good-will payments to customers,
it has claimed that the same behaviour was not illegal under European rules. So, VW is not
paying European customers, even though it is recalling its cars in both markets Hakin. D (2016).
In an interview, Mr. Bode offered a more contrite message. “There’s no doubt that we built up
things within the cars which were completely wrong, and which worked against the laws,” he
said, when asked about VW’s posture in Europe.While there have been many past automotive
crises, this one is fundamentally different. Consumers are used to automotive safety recalls big
and small. There was General Motors’ crisis involving defective ignition switches and Toyota’s
scandal related to sudden vehicle acceleration. Honda was recently fined $70 million for not
reporting safety problems Hakin. D (2016).
But Volkswagen is seen as particularly brazen. The public tends to show “a little more tolerance”
for recalls and labour issues, said Wendy Salomon, a vice president at Nielsen, which conducted
the recent Harris Poll. But the polling, she said, showed respondents were “least tolerant” of
“lying and misrepresentation and intentional wrongdoing. Hakin. D (2016)”
26

Volkswagen has been scrambling to enlist help. The company has brought in three public
relations firms based in three different countries, Kekst in the United States, Finsbury in Britain,
and Hering Schuppener in Germany — to join Edelman, an American firm already on retainer.
VW has been paying Richard Gaul, the former communications chief of BMW, 20,000 euros a
month, about $22,000, to work as a part-time, 60-hour-a-month consultant, according to a
contract reviewed by The New York Times. Mr. Bode, however, said Mr. Gaul had been
advising the company on other matters Hakin. D (2016).
VW also hired Jones Day, a law firm, to conduct an internal investigation, though the firm’s own
website said it helps clients determine “whether and how to voluntarily disclose criminal conduct
to the government,” suggesting disclosing criminal conduct is not a foregone conclusion. The top
executive at VW’s Porsche division has already said he is hoping to reinstate Wolfgang Hatz, the
suspended engineering chief who is seen as a central figure in the scandal Hakin. D (2016).
Mr. Bode himself was part of a broad reshuffle of management from within the company’s
ranks. He said VW had revived a “newsroom” for rapid response to inquiries on the scandal from
the news media and others, made up of 15 to 20 employees from the communications and sales
teams and people with technical expertise. VW had such a newsroom during a prostitution
scandal in 2007 and 2008 involving the company and its trade unions Hakin. D (2016).
Mr. Bode accompanied Mr. Müller on his trip to the United States where he made the
controversial statement. “It was my failure,” Mr. Bode said. He said the questioning, around the
Detroit auto show, was too chaotic, with many reporters asking questions. He said he should
have organized more individual interviews to forestall confusion. The company is also
overhauling its advertising message. “Das Auto,” the chest-thumping old slogan, is out. The
simpler tagline “Volkswagen” is in. Since apologizing in newspapers after the scandal broke, the
company has been keeping a relatively low profile Hakin. D (2016).
Mr. Bode said Volkswagen was awaiting a resolution to its continuing talks with American
regulators before settling on a new marketing strategy in the United States. Discussions have
been contentious. The Environmental Protection Agency and regulators in California and Canada
have accused the company of installing defeat device software in a set of larger vehicles that
were not among those included in Volkswagen’s admissions Hakin. D (2016).
27

“We have to start with this campaign when we have agreed to a solution with the authorities.”
Mr. Bode said. “Then we have to see the overall picture.”
Irving Schenkler, a professor, and crisis management expert at New York University, said there
have been few parallels in history. “It’s unprecedented in terms of the cross-national scope of it,
the degree of the problems,” he said. “There are so many different fronts.”
Even in Germany, the news media has hardly given the company a free pass. “VW is
overwhelmed,” said Kayhan Özgenc, a reporter at Bild am Sonntag, a newspaper that has been
particularly aggressive, adding, “It was a change from paradise directly into hell, from the most
profitable carmaker to an emergency situation Hakin. D (2016).”
Mr. Bode, for his part, has been critical. “What the German press did was call everything wrong
which is and was done by the company,” he said.
Managing the crisis, he added, has been “a step-by-step thing, learning by doing.” Someday, he
said, he could become a university professor and give speeches on how to manage a crisis.
“Hundreds of speeches,” he said. “That’s a joke. We are far away from joking about this. It’s a
deep, deep thing for the company Hakin. D (2016).”
VW’s communications to customers throughout the crisis followed an arc that began with its
public pledge to first cooperate with the investigation and “to fixing the issue as soon as
possible” Volkswagen: News & Updates (2015) and several statements about its “shock” related
to the findings. The company established a website to keep customers informed,
www.vwdieselinfo.com, and regularly posted news about its activities related to Dieselgate. In
its very first posting to the site on Sept. 23, 2015, VW signalled that it understood the road ahead
to rebuild its reputation, saying “the executive committee is aware that coming to terms with the
crisis of trust will be a long-term task the requires a high degree of consistency and
thoroughness” Volkswagen: News & Updates (2015, September).
Finally, in January of 2016, the company announced what it called its attempt to “restore the
invaluable trust” of its customers by offering them a “goodwill package” of two $500 gift cards
(one which could be redeemed anywhere, another that could be used for products and services at
VW dealerships and free access to roadside assistance) Volkswagen: News & Updates
(2016).The package was estimated to cost VW nearly $250 million. The company conducted
28

several outreach initiatives to customers to promote the compensation package, and
approximately 125,000customers signed on to receive the gift cards in the first ten days after it
was offered Volkswagen CEO admits. Accepting the gift cards did not affect customers’ right to
pursue other legal action in the future Ewing & Mouawad (2015).
Media coverage of the goodwill package focused on customer reaction and recorded comments
from customers who said they felt insulted. These customers expressed anger and characterized
the action as an empty gesture. A Kansas City Star editorial called the package a “half-‐hearted
attempt to compensate the people they had lied to, offering them a paltry $1,000” VW scandal a
case study, (2016). Prominent voices weighed in on the adequacy of the goodwill package. Two
United States senators, Richard Blumethal and Edward Markey, called the offer “grossly
inadequate” and “a fig leaf attempting to hide the true depths of Volkswagen’s deception”
Leinert & Cremer (2015). They called for further investigation and urged VW to offer all owners
a buy-‐back option for their TDI models. The goodwill package was the company’s only
compensation outreach to consumers until June of 2016, when it finally reached an ultimate
settlement of more than $10 billion with the United States government. The settlement offered
owners either a buy back or fix for all affected vehicles, as well as restitution payments of
several thousand dollars to each owner.
In total, The New York Times said that consumers could expect to get between $12,500 to
$44,000 depending on the age of the vehicle Gates (2017). Owners received individual notices
about their buyback or fix offer with terms dependent on the age of vehicle and other
benchmarks. The final settlement was easily the largest in the history of the auto industry and
surpassed recent settlements from other crises faced by GM and Toyota by several billion
dollars.
29

ETHICS
In this section, we will analyze the importance of ethics and the importance of business and
advertising.
Definition: business ethics is defined as the principles and standards that determine acceptable
conduct in business organizations. Personal ethics, on the other hand, relates to an individual’s
values, principles, and standards of conduct. The acceptability of behavior in business is
determined by not only the organization but also stakeholders such as customers, competitors,
government regulators, interest groups, and the public as well as everyone’s personal principles
and values.
The Volkswagen case highlights the failures of ethical compliance Warford (2016). The ethics
scandal is about Volkswagen engineers altering engine operations to meet U.S. emissions testing
standards Rogerson (2017). Volkswagen used ̳ defeat devices ‘which ensured that emissions
control would only be activated during regulatory tests Trope & Ressler (2016). Under normal
driving conditions, exhaust emissions were forty times higher than the legal limit VanSandt,
(2016). This cheating continued for ten years until detected Shepardson (2017).
The scandal started when Volkswagen was issued a notice by the U.S. Environmental Protection
Agency (EPA) in 2015 for violating the Clean Air Act Shepardson (2017). The investigation
found that 482,000 cars were using defeat devices Plungis (2016). Volkswagen initially lied to
the EPA and cited̳ technical problems ‘Stoklosa (2016). Eventually, Volkswagen pleaded
guilty in 2017 and settled to a $4.3 billion agreement, the highest ever criminal fine imposed on a
carmaker in America Shepardson (2017). Subsequently, Volkswagen issued a public apology
and arranged to pay $22 billion to claimants including car owners, dealers, and regulators Hotten
(2015). Volkswagen lost more than one-third of its stock value, 500,000 cars were recalled, sales
were stopped, six executives were charged and the chief executive officer for North America and
other directors resigned Singer (2015). Volkswagen ‘s actions are legal under European Union
emissions regulations and only American customers are being compensated O ‘Dwyer (2016).
Volkswagen ‘s U.S. boss knew about the misconduct since early 2014, engineers rigged the tests
due to pressure from management and executives kept all stakeholders in the dark Rogerson,
30

(2017); Zhou (2016). Aggressive goals for the U.S. market, technical loopholes, fraudulent
marketing, unethical governance and management ‘s justification of ethical violations have led to
the cheating Lynch (2016). The ethics failure can be traced to Volkswagen ‘s organizational
culture, underlining the importance of proper board and management structure Elson, Ferrere &
Goossen (2015). However, it is beyond the scope of this paper to justify that made the decision;
the fact is that an unethical choice was made VanSandt (2016). The Volkswagen emissions
scandal represents the antithesis of ethical business conduct, having negative repercussions for
both direct and indirect stakeholders Mansouri (2016). The case is cautionary because the
legendary German automaker was considered a globally dependable brand, having self-
proclaimed to be ethical and ecological Adams (2015). Human resource policies, codes and
employee training were questioned as the world was shocked by Volkswagen ‘s brazen disregard
for business ethics and environmental regulations Halfond (2016). Consequently, Volkswagen ‘s
ambitions of becoming the world ‘s leading car manufacturer came crashing with its decades of
reputation Singer (2015). Compliance-based ethics and regulations often have the reverse
outcome Mansouri (2016). Accordingly, many authors propose a reformulation of U.S.
emissions standards to coordinate with automakers Mansouri (2016).
How Volkswagen handled the crisis and recommendations to improve consumer confidence?
The Volkswagen Group is now faced with a problem of establishing credibility to its consumers
and stakeholders. There are no set guidelines on what to do when a company’s reputation is
damaged. However, three possible solutions include having Volkswagen restart under a new
name, join an independent verification agency, and/or set up a bond. Volkswagen should
implement as many measures as possible to restore credibility to its company. The worst-case
scenario would be a lack of action that may spark a consumer boycott. This would lead to a
decrease in sales and the eventual collapse of this company.
31

RE-BRANDING
In the last 60 years, Volkswagen has become a global brand and it is the biggest car company in
the world. While some believe that the scandal will be forgotten soon, other Volkswagen
directors have discussed the possibility of restarting the company under a new name. If the
company restarts under a new name, this may improve brand image to have a company that is
smaller and more efficient than the current Volkswagen Group Zhou, A. (2016).̳ .
Re-branding will make it easier for the company to speed up efficiency programs and potentially
save the company. Rebranding can be expensive and risky, but it may reduce the negative
publicity that was caused by the scandal. It is important that the rebranding not only focuses on
exterior changes, but also changes in other aspects of the company. The Volkswagen group is
headed by the group chief executive Matthias Mueller Zhou, A. (2016).̳ .
The management board includes 9 bosses led by Herbert Diess, the Volkswagen car chief. The
management board oversees the supervisory board which is composed of 20 members, including
key investors, led by Berthold Huber, interim chairman. Most shockingly, Martin Wintercorn is
likely to receive two years pay and a pension of more than £22 million. This is the same man
who first tried to cover up the scandal by claiming the company did not lie but faced a “technical
problem. “Bernd Osterloh, the Chairman of the General and Groups Works Council of
Volkswagen AG, has suggested a new CEO who has a deep knowledge of technology needs to
be appointed. He stated, “We need changes in our corporate culture. For the future we need a
climate in which problems are not concealed, but rather are openly communicated to
management. “A new CEO will bring a new lease of life into the organization and lead to a
change in business strategy, competitive position, and business environment. A change in the
governance process such as shareholder process, open election of directors, and wide inclusion
of membership may also prove to be beneficial to the new company Zhou, A. (2016).
32

RECOMMENDATION
 Firstly, VW should have not done that as it violates their code of conduct and the trust .
 Secondly, after the discovery, they should have communicated to all the stakeholders
and come clean not what they did by denying the issue.
Now, Volkswagen should dedicate all efforts and resources into re-establishing credibility with
the company. Volkswagen may choose to re-brand, although this option is unlikely. It can also
join independent verification agencies, which is more feasible and easier to accomplish. Finally,
the costliest option would be to sell one of its brands and post a bond. This is the most expensive
option and probably a method of last resort, however it would also restore the most faith in the
Volkswagen brand. A combination of the second and third option would be the best
recommendation Zhou, A. (2016).
As consumers slowly regain trust in the brand, then sales will most likely gradually increase.
Consumers are currently debating on purchasing the cheap Volkswagen stock because many
have faith that the company will take the necessary steps towards mediating the scandal. Itis
doubtful that the stock prices will return to previous levels anytime soon, but if Volkswagen
shows consumers that it regrets deceiving consumers and is dedicated towards better corporate
social responsibility practices, then perhaps it can regain its status in the global auto industry
Zhou, A. (2016).
33

REVISED MARKETING STRATEGY
In order for organizations to build strong brands, strategic brand management is necessary.
Strategic brand management “combines the design and implementation of marketing activities
and programs to build, measure and manage brands to maximize their value" Kotler & Keller,
(2012: 263).
What is the marketing mix strategy? The marketing mix strategy can be defined as a theoretical
framework designed to help businesses plan and put into action effective launch and sell
strategies for their products DK publishing (2014). It is also a list of important elements and
forces that make up marketing programs for a company Borden (1984).
Volkswagen AG (2021) says Volkswagen has always made individual and affordable mobility
possible for millions of people. Under the vision "Shaping mobility - for generations to come.”
we are providing answers to the challenges of today and tomorrow with our sharpened
TOGETHER 2025+ Group strategy. Our goal: We aim to shape the future of mobility while
safeguarding it sustainably – more actively for present and future generations. is to make
mobility sustainable for us and for future generations. Our promise: With electric drives, digital
connectivity, and autonomous driving, we want to make the automobile cleaner, quieter, more
intelligent and safer. With an appealing product portfolio of impressive vehicles and forward-
looking, tailor-made mobility solutions we have set ourselves the goal of continuing to excite our
customers and to meet their diverse needs. In this way, the car can continue to be a cornerstone
of contemporary, individual, and affordable mobility in the future.
Four target dimensions:
34

Excited customers
This target dimension focuses on the diverse needs of our customers and on tailor-made mobility
solutions. We aspire to exceed our customers’ expectations, thus generating maximum customer
benefit. This requires not only the best products, the most efficient solutions, and the best
service, but also flawless quality and an outstanding image. We want to excite our existing
customers, win over new ones, and retain their loyalty in the long term – because only loyal and
faithful customers will recommend us to others. The strategic KPIs consist of the conquest rate
and KPIs pertaining to loyalty, customer satisfaction and quality Volkswagen AG (2021).
Excellent employer
To achieve sustainable success, we need skilled and dedicated employees. We aim to foster their
satisfaction and motivation by means of equal opportunities, an attractive and modern working
environment, and a forward-looking organization of work. An exemplary leadership and
corporate culture form the basis for this, allowing us to retain our core workforce and attract new
talents. The strategic KPIs of this target dimension cover internal employer attractiveness
determined by means of the opinion survey, external employer attractiveness, an external
employer ranking as well as the diversity index Volkswagen AG (2021).
Role for the environment, safety, and integrity
Every day, we at the Volkswagen Group assume and exercise responsibility in issues relating to
the environment, safety, and society. This commitment should be reflected both in our thoughts
and actions and in all our decisions. We pay particular attention to the use of resources and the
emissions of our product portfolio as well as those of our sites and plants, with the goal of
continuously improving our carbon footprint and lowering pollutant emissions. Through
innovations and outstanding quality, we aim for maximum product safety. Our primary
objectives in this process include complying with laws and regulations, establishing secure
processes and dealing openly with mistakes so that they can be avoided or rectified in the future.
In terms of integrity, Volkswagen aims to become a role model for a modern, transparent, and
successful enterprise. The strategic KPIs of this target dimension consist of the decarbonization
35

index and fleet CO2 emissions figures, compliance, a culture of dealing openly with mistakes,
and integrity Volkswagen AG (2021).
Competitive profitability
Investors judge us by whether we can meet our obligations as regards interest payments and debt
repayments. As equity holders, they expect appropriate dividends and a long-term increase in the
value of their shares. We make investments with a view to achieving profitable growth and
strengthening our competitiveness, thus keeping the Volkswagen Group on a firm footing in the
future and ensuring it remains an attractive investment option. The goals we have set ourselves
are operational excellence in all business processes and becoming the benchmark for the entire
industry. The strategic KPIs are operationalized for internal management purposes: target and
actual data are derived from Volkswagen AG (2021).
Our values - the foundation of our strategy
We want Volkswagen to be a company with integrity through and through and to be respected in
the best sense of the word.
Volkswagen AG (2021) says To meet this requirement, we have created the Group-wide
integrity and compliance program Together4Integrity (T4I for short). It bundles all the activities
for integrity, compliance, culture, risk management and HR and thus creates the basis for our
success. T4I is our common path towards a corporate culture that enables every manager and
every employee to act with integrity and in accordance with the rules at all times and
everywhere.
We have summarized our promises to our customers, shareholders, business partners and
ourselves in seven key principles. They describe what the Group stands for in all its brands,
companies, and countries:
We take on responsibility for the environment and society.
We are honest and speak up when something is wrong.
We break new ground.
We live diversity.
36

We are proud of the work we do.
WE not me.
We keep our word.
Strategy building blocks – the elements in brief.
To exploit the full potential of our Group, the strategies of the brands, regions and functional
areas must be optimally aligned with one another. Under the umbrella of TOGETHER 2025+,
we have defined five modules as central work packages that ensure the success of our further
developed strategy. Under the motto Focus & Speed, we are sharpening our activities and
accelerating our actions Volkswagen AG (2021).
Our main areas of action in five modules Volkswagen AG (2021)
Best Governance
Focused, lean, trustworthy
The Volkswagen Group has already taken important steps to streamline its structures and make
decision-making processes more decentralized. But we still have potential - and want to
constantly improve. In the "Best Governance" module, we address deficits in a structured and
consistent manner: We streamline our committees, reduce bureaucracy, and streamline Group
administration considerably. We are systematically checking whether we are still the best owner
for the various divisions. We are using a decarbonisation index to make our CO2 targets
measurable and our progress transparent. And we are intensifying the dialogue with all key
stakeholders to regain and further build trust Volkswagen AG (2021).
Our goal: We form a focused, lean Group holding company that optimally manages its brands
and continuously leverages synergies within the Group. Our stakeholders perceive Volkswagen
as an efficiently managed, trustworthy, sustainable, and transparent Group. As a company that
creates value in every aspect and powerfully shapes mobility for us – and for future generations
Volkswagen AG (2021).
37

Best Performance Efficient, profitable, sustainable
Volkswagen can only assume its responsibility towards all stakeholders, society, and the
environment in the long term if we are economically even more successful. In the “Best
Performance” module, we set ourselves ambitious financial targets, work even harder than before
on its implementation and make our progress transparent with a comprehensive set of KPIs
Volkswagen AG (2021).
We are substantially improving our Group-wide financial performance to achieve our target of a
7-8 percent return on sales (ROS) by 2025. We are working to sustainably increase the value of
the company with a stronger focus on return on investment (ROI). By 2025, we aim to achieve a
return on investment of over 15 percent for the Automotive Division. In addition to the key
factor CO2, we also base our management of vehicle projects on the return on investment.
Our claim: Volkswagen will set standards in efficiency, productivity, and profitability by 2025.
We meet our forecasts and continually challenge the targets we have set ourselves. In this way,
we strengthen the confidence of investors and the capital market in the Group. And in this way,
we create the basis for making powerful investments in our company, our employees and in
mobility for future generations Volkswagen AG (2021).
Best Brand Equity
Sharpened brands, full potential
The Volkswagen Group’s brand portfolio has grown strongly in recent decades. This has led to a
high degree of complexity in brand and product management Volkswagen AG (2021).
In the “Best Brand Equity” module, we are working on realigning and sharpening the brand
portfolio. Based on the major future trends and changing customer needs, we aim to define the
ideal brand portfolio for 2030. For each brand, we define the profile, brand mission and core
competitors in a clear-cut manner. On this basis, we decide on the future design, products,
services, and appearance of each Group brand – based on the wishes and lifestyles of our
customers. We intend to increase our regional profit pools in Europe, China, and North America
38

even more systematically based on clear brand territories and orders. With consistent brand
management, we are working to further increase our individual brand values.
We are convinced that even in the electric and digital age, strong and independent brands will be
a key factor in purchasing decisions. Our Group brands will convince and inspire with a coherent
portfolio of vehicles and mobility services. In this way, we create added value for our customers
and for the company Volkswagen AG (2021).
Software-Enabled Car Company
On the way to becoming a Tech-Company
Our brands have long set standards in technology, design, and quality with their vehicles. They
inspire customers and achieve economic success. That alone will not be enough in the future.
Digitalization is fundamentally changing the car; the automobile is becoming a software product.
In the "Software-Enabled Car Company" module, we are therefore working to make software the
new core competence of the Volkswagen Group. To this end, we are pooling our existing
strengths and strengthening our position massively. We were the first automobile manufacturer
to separate hardware and software development organizationally. We are developing a cross-
brand software platform for vehicles and the Volkswagen Automotive Cloud. By 2025, all new
vehicle models throughout the Group will run on our own software platform. It has the potential
to set standards in the industry Volkswagen AG (2021).
Our goal: By 2025, the Volkswagen Group and its brands will not only stand for the best
vehicles, but also for exciting and superior digital products and services. With our hardware and
software platforms, which we are opening to third parties, we are the global scale champions in
the automotive industry. With our digital ecosystem, we bring our customers’ world into the car
– with the best user experience and mobility services that make everyday life easier and more
enjoyable Volkswagen AG (2021).
Excellent Leadership
Versatile, integrity, strong leader
To be successful in the new world of mobility, we must make rapid progress towards an open,
cooperative, and integrated management culture.
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In the “Excellent Leadership” module, we are creating the prerequisites for this: we are
fundamentally restructuring our management development and qualifications. We systematize
succession planning to have the right talents in the right positions at the right time. We want to
significantly increase the diversity of our management team. That is why we are setting
ourselves clear, measurable goals for more female and international managers.
The common goal: By 2025, Volkswagen will set an example for others with open, partnership-
based, value-based leadership. Our management development sets standards. We live and reward
entrepreneurship and future-oriented thinking every day. We live diversity at all levels
Volkswagen AG (2021).
Functional areas – Ideas from the heart of the company
K-B Procurement
Volkswagen Group Procurement sources products and services for the Group that provide
optimum customer value using the best possible cost structures. The Procurement functional area
aspires to be the world’s most efficient and attractive organization of its kind. Specific aims
include gaining access to supplier innovations, leveraging Group-wide synergies, and ensuring a
supply chain that excels in all dimensions. A key element of this strategy is the active role played
in the early stage of the project – the only way to actively manage costs, achieve price leadership
in new technologies and ensure market-driven concepts. Volkswagen Group Procurement’s
strategy is based on very highly qualified and motivated employees as well as a state-of-the-art,
future-oriented organizational structure Volkswagen AG (2021).
K-GV Sales
Customer Delight is the driving goal for Group Sales. It is the Sales’ mission to aim at creating
unique and strong positions for Volkswagen’s brands, conquering new markets, and addressing a
broad segment of various customers. Key cornerstones of the Strategy are: Excellent Sales
40

Organization, Effective Brand Portfolio Management, Outstanding Sales Performance, and a
Sustainable Growth. The Sales and distribution of innovative mobility – for customers globally –
secures profitability long term and enables sustainable growth Volkswagen AG (2021).
K-F Finance
Acting as the financial navigator for sustainable growth, the Finance and Controlling functional
area intends to contribute to the Volkswagen Group of the future. To ensure competitive
profitability, liquidity and financial stability for the Group, this area counts on a strong team as
well as reliable compliance and an effective risk management system. These elements are
accompanied by partnerships with stakeholders based on trust, loyalty, and openness.
Stakeholders in turn can bank on neutrality, reliable standards and a focus on targets that
invariably considers what is best for the Group Volkswagen AG (2021).
K-I Integrity and Legal Affairs
The trust our customers continue to place in us and the perception of Volkswagen as an excellent
employer are crucial for the Group’s success. The strategic objective of the Integrity and Legal
Affairs functional area is therefore to anchor these factors as the basis for daily activities in the
Group, thereby making a vital contribution to Volkswagen’s sustainable growth. This
specifically entails safeguarding customers and staff against compliance risks and positioning the
functional area as a competence centre for integrity and legal affairs, data protection,
compliance, and risk management Volkswagen AG (2021).
K-AE Research and Development
Technological innovations play a pivotal role in the design of pioneering mobility solutions with
inspiring products and services that define the brands. Staff in the Research and Development
functional area are aware of this huge responsibility. To generate sustainable growth while
serving as an example in relation to the environment, safety, integrity and resource efficiency at
the same time, Volkswagen relies here on an exceedingly efficient cross-brand development
alliance. Characteristic features of this alliance are close networking among experts,
collaborative working relationships on equal terms, an innovative working environment and
selective pooling of development activities to leverage synergies and efficiencies throughout the
Group Volkswagen AG (2021).
41

K-PP Production
Intelligent networking of people, brands and machines in global manufacturing and logistics is
the vision of the Production functional area. Intelligently networked means that the strengths and
potential of Group-wide production are combined, and the resulting synergies are leveraged to
make Volkswagen competitive and fit for the future. The strategic objective is to organize
production as sustainably and productively as possible. This will be achieved through future-
proof work structures, greater efficiency, intelligent processes, and a versatile production
network that anticipates future developments in the markets as well as in relation to competition,
products, environmental issues, and innovation. The strong alliance in the Volkswagen Group
and the open, cross-brand exchange of ideas and information between all parties involved in the
production process provides the basis for this continuous development Volkswagen AG (2021).
K-GQ Quality
Delivering outstanding quality and reliable mobility to customers worldwide is the strategic
objective of the Quality Assurance department. As the “voice of the customer” the principle of
dual control is relied on in critical company processes; products that are superior to those of the
competition are developed within budget requirements. The department’s commitment to quality
runs the gamut of current and future mobility solutions – vehicles as well as services. Finally, all
markets will pay close attention to differing regional needs to make a substantial contribution to
the Volkswagen Group’s sustainable growth Volkswagen AG (2021).
K-S Human Resources
Positioning the Volkswagen Group as an excellent employer of the future is the strategic
objective of the Human Resources and Organization functional area. Expert, enterprising staff
form the basis for Volkswagen’s success, both today and tomorrow. To give all employees
optimum conditions for delivering supreme performance, the human resources activities support
individual development paths, diverse training opportunities and the organization of modern
working environments. Increasing diversity, integrity, appreciation, and respect is a key
objective of the Volkswagen Group’s human resources strategy. The unifying framework for
implementing this strategy is provided by an exemplary leadership and corporate culture that is
shaped by team spirit and ingenuity Volkswagen AG (2021).
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K-FI Group Information Systems
Best-in-class IT solutions, enthusiastic users, progressive data protection and, not least, an
extremely attractive working environment are the strategic objectives of the IT functional area in
the Volkswagen Group. Mobility will be turned into an exciting experience at a digital level as
well. The IT department also aims to add value in the future, thereby contributing to the Group’s
sustainable growth. Through open, straightforward partnerships, the Group’s global IT expertise
will be harnessed to advance innovation and ensure reliability. Effective protection of digital
information has top priority at all levels Volkswagen AG (2021).
Volkswagen AG (2021) says brands and regions – For innovation, sustainability, and
profitability.
 Volkswagen
 Audi
 SEAT
 Porsche
 ŠKODA
 Commercial Vehicles
Volkswagen AG (2021) says Volkswagen Group Components
 TRATON SE
 Volkswagen Financial Services
 Volkswagen Group China
43

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