Volkswagen Emission Scandal: Rebuilding Reputation Case Study Report

This case study examines the Volkswagen emission scandal, which erupted in 2015, focusing on its devastating impact on the company's brand reputation. The report analyzes how the scandal, involving the use of 'defeat devices' to cheat emission tests, eroded customer trust, damaged the company...Read More

Volkswagen case
study

Executive summary
Brand image is most important thing that organization is highly concerned about it. it is
because it reflects reputation in industry through which customer are attracted. This report will
describe about case of Volkswagen emission scandal which occurred in 2015. it will briefly
describe about how it impacted on its reputation and what actions were taken to resolve it.
moreover, there are several steps discussed which can be taken by Volkswagen to rebuild their
reputation in the market.

Table of Contents
Introduction......................................................................................................................................1
Analysis...........................................................................................................................................1
Conclusion.......................................................................................................................................4
Recommendations............................................................................................................................4
REFERENCES................................................................................................................................6

Introduction
Every company tries to build a good and reputed brand image in the market. brand image
refers to perception of people towards that particular brand. it reflects how customer views and
think of that brand when they hear or see it. reputation also benefit in generating revenue. With
this, large number of people can be attracted (Guillory and Sundar, 2014). Besides this, it
supports in gaining competitive advantage within industry. there are many other ways through
which reputation is build. It is done by marketing, maintaining string PR, etc. So, having a good
reputation in market helps an organisation to sustain for long term. But if it is found that firm is
engaged in any scandal it directly impacts on their reputation. They have to face certain
obligations and restrictions. Besides this, customer starts thinking negative abut company. they
resist in buying its products and services. Volkswagen is a multinational company which
operates in around many countries. it belongs to auto mobile sector and is having a high
reputation in industry. they produce high quality cars and provide variety of services to
customers. Automobile is a sector which is backbone of economy. they highly contribute in GDP
of nation (Crijns and et.al., 2015). This report will describe about the emission scandal case of
Volkswagen and how it affected its reputation. also, what actions should be taken to rebuild
reputation to gain satisfaction of customers is discussed. At last recommendations are explained
that be followed by Volkswagen.
Analysis
To what extent has the situation described in the case study damaged the reputation of the
organisation? What can the organisation do to rebuild their reputation?
Every enterprise makes huge efforts in advertising their goods and services in market.
this is done by applying different strategies. the main aim of this is to maintain good reputation
in market so that consumers can be retained. It is necessary to do so as it generates market value
and goodwill. In context to case study it can be analyzed that on September 2015, Volkswagen
admitted that almost 600000 cars produced in US was fitted with a defeat device. This was done
in order to pass the emission test. But at later stage it was found that devices were installed to
improve the performance of car but it resulted in consuming large quantity of diesel and high
level of smoke and rise in pollution level in different states of US (Anastakis, 2014). Soon, the
company published a statement in which they said that devices was installed in around 11
million cars. Therefore, the operational head of US, Michael Horn claimed that it was work of
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some software engineers. But in annual report of company it was clarified that organization
engineers were having difficulty in building that devices. thus, it led to emission scandal of
Volkswagen. There was a great impact on reputation of Volkswagen. there was a negative image
generated in minds of people. Moreover, the share price declined which led to decrease on their
revenue. Furthermore, Volkswagen have to recall all their cars and justify their mistake in front
of media. It resulted in rising of different questions that why company did this, who was
involved in it, etc.
It can be analyzed that getting involved in scandal impacted on Volkswagen reputation to
great extent. It is because it creates a negative image in industry. The major impact is on
stakeholders. moreover, people and media started asking several questions that how Volkswagen
can violate rules and regulation for their benefit. Hence, this results in shaping perception of
people. Therefore, it is necessary to improve it so that Volkswagen can compete. Other than this,
it helps in retaining customers and continuous growth in different markets. Also, they might get
involved in legal case or paying a high penalty (Coombs, 2015). When any organization is
involved in scandal, it does not effect on its operation but also on employees, other business
engaged with Volkswagen. in overall industry a negative image is build about how such things
can be done. In present case when issues were identified then also Volkswagen managers said
that it was fault of employees. But on contrary when report was developed, it clearly stated
management forced them to design such devices.
However, occurrence of such scandal also affects in its growth and development. For
instance, a company wants to expand in different country and such incident will create a bad
image. So, government of other country will not allow them to enter in market. similarly,
Volkswagen sales and profits get declined and customer base is reduced. The operations of big
firms are interlinked in many countries. there are certain areas through which reputation is
affected. These are as follows :-
Share price – the major impact of scandal is on share price of Volkswagen. whenever there is
occurrence of issue, there is high downfall in share price (Mitchell, 2015). Volkswagen goodwill
rises or fall with fluctuation in share price. So, it is related to stock market and trading of shares.
When share price is low investors starts selling shares. So, such situation reduces price due to
which reputation is affected.
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Revenue – it is another area in which affect can be observed. A company revenue is generated
from its reputation. If there is high and good brand image it automatically results in generating
revenue. But issue negatively affects revenue. Volkswagen have to either recall its products or
pay huge penalty. Also, due to fall in sales and share price Volkswagen market value decreases.
Customers – they are important aspect of Volkswagen. It is because reputation is in hands of
them. They can generate or damage reputation very quickly. Any happening of situation creates a
poor image in mind of customers. they start finding out faults in Volkswagen and perception is
entirely changed. They start spreading wrong messages and reviews. Also, a feeling of negativity
is developed among them. The satisfaction level decreases. It results in losing of customers.
Shareholders- they are the people or businesses who have invested in Volkswagen. Happening
of issue impacts them as well. It results in losing satisfaction (Brammer and et.al., 2015). Due
to decline in share price they start selling their shares in market. moreover, they start investing
less in Volkswagen as they think it will be useless to do so. The decrease in shareholder reduces
market value of Volkswagen.
There are many ways through which reputation can be rebuild. With help of it, correct
message can be delivered to public. The poor image set in their minds can be cleared and trust
can be built. Volkswagen needs to improve reputation in market so that it can retain their
customers. it will be beneficial to maintain loyal consumers. By doing this, it will help
Volkswagen to regain customer satisfaction and trust of stakeholders. also, it will benefit them in
creating a positive and good brand value in market (Tips to rebuild organisation reputation,
2018). Volkswagen can rebuild their reputation by following ways :-
Apologize for mistake- this is the first and most important thing that Volkswagen can do. They
can immediately apologize for the mistake that they have committed. No matter how big or small
issue is, apologizing is best way. This will help them to maintain reputation in market. moreover,
by taking responsibility firm can release a press conference and apologize publicly (Gardberg,
2017). By doing this, it will enable Volkswagen to develop a positive image. In addition, they
can take responsibility to ensure that in future it will not happen again.
Take immediate action – this is essential step which can be taken after occurring of issue. here,
Volkswagen can take immediate action to resolve issue. if action is not taken in specific time, it
can lead to more crises and shaping up perception about company. Therefore, involving in
response towards issue reflects organization concern towards it. it shows how much they care
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about stakeholders. Volkswagen can immediate action to recall all cars and fix problem. It can
also take action to contribute more towards society and protecting environment.
Fix the problem- in this Volkswagen can take action to fix problem which has occurred. They
can follow a proactive approach to fix it. it can be done after apologizing and ensuring that
problem will be solved as soon as possible (Anastakis, 2014). Through this, trust of stakeholders
can be gained back. Alongside it, necessary steps and strict measures can be taken avoid
reoccurrence of issue in the future. In context to case customer who have got care with that
device can be given a new one. Also, reimbursement should be paid to them. It will be easy for
Volkswagen to retain them.
Communicating issue and action – here, Volkswagen should communicate to public about
issue and what action will be taken by them to solve it. it can be done through press conference
or releasing a statement or report (Guillory and Sundar, 2014). When people or stakeholders
knows about what action are being taken, they remain satisfied. Moreover, with it customer
assurance can be gained.
Thus, it can be concluded that by taking all these steps it will be easy for Volkswagen to
regain customer trust. They will be able to communicate what actions are being to overcome
issue. apart from it, Volkswagen can develop strategy on how to rebuild their brand image in
industry. It can be done by maintaining public relations. The frim can use internet in order to
improve their PR.
Conclusion
Hereby, it can be concluded that a little mistake in products or services can lead to huge
scandal. This impacts on brand image of organisation to a great extent. it led to fall in sales and
creating a negative image in minds of people. also, it affects its growth and development. the
major impact is on stakeholders of company. it is important for business to improve its reputation
in market so that it can regain trust and satisfaction of customers. there are different method or
strategy through which it can be done such as taking immediate action, fixing problem, etc. it is
concluded that with help of these methods Volkswagen can create a positive brand image in
minds of customers. it will enable them to generate value by resolving issue. They can maintain
goodwill in industry.
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Recommendations
From above it is stated that due to fault in device, Volkswagen was involved in scandal.
Due to this, they had to recall 600000 cars produced from US and all over the world. Thus, their
reputation was high damaged. Therefore, in order to rebuild brand image and to avoid such
mistakes in the future, there are several recommendations which can be followed by
Volkswagen. these are as follows :-
 Volkswagen can reform their policies and develop new one to ensure that such situation
does not occur in the future (Crijns and et.al., 2015). Moreover, the evaluation of rules
and regulations must be done in particular time period. It will enable in effective
monitoring of policies.
 Organisation can develop a proper strategy on how to deal with any issue or event. This
will enable them to analyse issue in systematic way and solving it. having a strategy will
give an insight on what further steps has to be taken. moreover, it will ensure that in
future it does not occur.
 The company can improve its public relations by delivering good message in media about
how they are dealing with issue and what actions will be taken to solve them. it will help
in maintaining reputation and gaining trust and satisfaction of customers.
 In happening of any event, the top management must take responsibility to apologise for
it. they can release a statement on what went wrong and who was involved in it. then,
accordingly strict action can be taken against those persons who are involved in it. this
will help in delivering a good image in minds of people.
 Volkswagen should form a committee who will investigate issue and look after it. they
must include some members of management in it so that reasons are identified and
improvements in that areas can be done.
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REFERENCES
Books and journals
Anastakis, D.J., 2014. The anatomy of reputation: an Association for Surgical Education
priority. The American Journal of Surgery, 207(2), pp.159-164.
Brammer, S. and et.al., 2015. Corporate Reputation and Financial Performance: The
Interaction between Capability and Character. In European Financial Management Association.
2015 Annual Meeting: The Netherlands.
Coombs, W.T., 2015. The value of communication during a crisis: Insights from strategic
communication research. Business Horizons, 58(2), pp.141-148.
Crijns, H. and et.al., 2015. More than words: the impact of gender similarity between the
spokesperson of an organization in crisis and the public on organizational reputation.
Gardberg, N.A., 2017. Corporate Reputation: Fashion, Fad, or Phenomenon?. Corporate
Reputation Review, 20(3-4), pp.177-180.
Guillory, J.E. and Sundar, S.S., 2014. How does web site interactivity affect our perceptions
of an organization?. Journal of public relations research, 26(1), pp.44-61.
Mitchell, G.E., 2015. The attributes of effective NGOs and the leadership values associated
with a reputation for organizational effectiveness. Nonprofit Management and Leadership, 26(1),
pp.39-57.
Online
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