Analyzing Volkswagen's Ethical Lapse: A Case Study in Business Ethics

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Executive summary
Present study refers the corporate violation of a reputed automaker of Germany, Volkswagen
and analyses the damage of their practice towards their loyal customers, investors and also on
the environment. This incident seriously damaged the name and fame of the renowned
company that is a trusted global brand. The study counted the violation of the company
against public, environment and social norms and also covers its reputational recovery.
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Table of contents
Introduction................................................................................................................................3
Analysis......................................................................................................................................4
Conclusion..................................................................................................................................7
Recommendations......................................................................................................................8
References..................................................................................................................................9
Appendices...............................................................................................................................10
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Introduction
Definition of ethics
Ethics means a set of regulations or propositions that the corporation should maintain (Ferrell
and Fraedrich, 2015). While in case of business ethics it describes to a code which might be
followed by corporations while running a business. Through ethics a standard is placed for
the corporation for the regulation of their activities and it may help the organisation to make
difference between the right and wrong part of the business.
Brief summary of the case study
In this regard this current study deals with the ethical violation of car emission rules by
Volkswagen. In 2015, on the month of September it was found Volkswagen, the reputed
German automaker has been overstepping the rate of emission allowed as long as 2009 by the
deception laboratories in a way of programming a release control was activated only in
laboratory trial but it was not happened when the cars were in driving mode. This excess
release of NOx has been bothered the health of public in US as well as the public of Europe.
Several financial penalties have already been made on the reputed company and probable
alternatives for environmental solutions were also prescribed.
Comparative examples of similar situations
This kind of same event took place in recent time by the reputed car company, Mercedes
Benz. In this case software, Slip guard is awfully being used on many model of Mercedes
Benz for helping them to pass the release test (Bachmann, 2017). This slipguard reduces the
release by detecting when the release by the cars is being trialled on a road driving.
Significance of reputation to an organisation within the sector
An organization all over reputation is defined as a function of the organization's reputation
among their several stakeholders, such as employees, customers, investors, suppliers,
regulators, the communities within which the organization is being operated, in specific
divisions (Johnson and Zinkhan, 2015).
Aim of the report
Hence, the report deals with corporate violation by a reputed automaker in regard to release
of greenhouse gas pollutant.
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Analysis
Introductory paragraph
This section includes the analytical approach of the case study that incorporates four
important factors, such as revenue of the organisation, managers of the organisation,
customer and public relationship the organisation. Revenue of an organisation is the probable
amount of money that a company obtains for the trading of their products and services. It is
the foremost important sector rather than any other of a company (Pauwels and Neslin,
2015.). The revenue obtained by a company is generally noted on the first section of the
income statement as revenue, net sales, and sales net revenue. There is a traditional way that
most of the companies evaluate their revenue.
A manager is an individual personal who is in position of a charge of a group of duties or sub
division of a organisation. A manger usually has a set of employees who report to the person.
Manager primarily do the managerial function in a organisation (Block,2016) They have the
power of hiring, firing, attendance monitoring, strategy developing of business, maintaining
discipline of the organisation.
A customer is counted as an individual or a business which procure the services or goods of
another organisation. Most public related business tries to attract more customer than their
rival companies (Kang, 2015). This is done either by lowering the prices of the goods or
services or by aggressively advertising the services and product value. But the customers
differ from the purchasing delegates who provide corporate capital to procure products at
wholesale as industrial and commercial purposes.
Public relationship is a kind of practice of consciously handling the spread of news between
an organisation and public (Wilson, 2017). It includes several modes of a organization to
disperse the information regarding their product or services or their overall images to their
consumers stockholders, employees suppliers or others related personas of the community. It
makes the positive thinking of the customers towards organisation.
Identification and selection of four distinct aspects
Revenue
Volkswagen group followed the continuation of growing in the primary nine months of the
budgetary year and they were good on track to gain their sales revenue and the target profit.
Regardless of the switching to the current WLTP examine process, which results in the
anticipated short term third quarter rejection in case of unit sales specifically in Europe. The
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key figure of this company was to be on above than the past year figure in primary nine
months. They enhances its productivity to customer by 4.2 percent on the basis of year on
year in the primary nine months though challenges delivered by the WLTP test procedure.
They have won the revenue of group sales by a percentage of 2.7 to EUR 174.6 billion due to
the factors related to volume. In the primary nine months the issue of diesel gave rise to
special piece of a EUR 2.4 billion. Profit increased before the tax was increase from EUR 2.2
to 12.5 billion. Hence the grosses liquidity in the division of automation amounted as EUR
24.8 billion. The positive activity of the primary three quaters is carried by the all over
growing improvement n the sector of vehicle sales. In the primary nine months the company
provided a number of 8.1 million vehicles to the customers across the world by a percentage
of 4.2 over the previous year. An effective growth in the primary half of the year and also in
at the time of summer was quite able to make up for the reduction of September n deliveries
that was only occurred by transition of WLTP. The dispute of trading between United States
and china hampered the customer confidence as well as the business environment and
conducted a serious market reduction in third quarter. Despite the current challenging
business environment the company confirmed their target to meet for the current budgetary
year. They have expectations to surpass the revenue of the past by total year of successful
delivery on 2018. The revenues of sales and its related business area are involved to be
increase by a percentage of 5 with the passage of time (Appendix 1).
Managers
Volkswagen group is managed by the Board of Management of Volkswagen AG’s in relation
with the Volkswagen AG’s Association article and the regulations of process for Volkswagen
AG’s managerial board developed by the Supervisory Board. The management strategy of
the company is conducted by group manner at several committees. The representative of both
the related departments and the relevant works in the organizations business sector includes
the following basic functions that are investment, products, risk management, management
issue, digital transformation and monitorship. Each brand of this group is handled by a core
board of management that enables its independent growth as well as its business activity. The
group requirement and targets put downwards by the managerial board of the company
should be arranged with to the stretch allowed by law. This entertains group interest to be
executed while at that time reinforcing and safeguarding the traits of each brand. The
responsibilities and the rights of the statutory bodies of the related brand companies remain
safe( Mačaitytė and Virbašiūtė, 2018) The companies of the group are handled separately by
perspective managers.th managerial board focuses on the growth of the Volkswagen group.
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The efforts to handle the diesel issue were another sector to emphasis. The management
board is always supported by the supervisory board. The management board promptly and
comprehensively report the supervisory board regularly.
Customer
Since last 50 years Volkswagen finance department has been working on customer services.
They are involved in providing the good quality services to their customer. They launch new
product in market for their customer and so turn themselves from a car manufacturer to a
mobility supplier. This allowed them to provide services across the world. They also provide
finance products to each automotive brand of the group (Zhang et al., 2016). They offer
precise solutions to leasing, financing, sale services and their vehicle insurance. They just
believe in their moving so that their customer never stops. But, the latest events of emission
scandal have hurt the belief of their customers a lot.
Public relation
The latest scandal by Volkswagen hugely crippled the growth of company, hearted the belief
of consumer and also investors as the article posts, leaving the brand under threat. These were
the darkest period of the company but this also creates a path for rebranding of the company
with a new green opportunity. A huge disheartened loyal VW dealers and consumers feel
betrayed. Four public relation firms have already been remained to work on the project led
by German firm Hering Schuppener performing as lead Public relation council, with Edelman
and kekst handling North America.
Analysis of each aspect
A good reputation matter when it comes to the sector of business. The release scandal that
has been entangled with the fame of Volkswagen following their dirty scheme on diesel has
valued those billions and effectively damages the fame of the globally trusted brand.
Volkswagen was the; largest manufacturer as well as owner of the reputed brands bentley,
bugatti and lamborghini. The incident causes a crash of their share price within 48 hours by a
amount of EUR 60 billion. This showcases the negative impact on their image of coming
several year. Volkswagen top man apologised primarily after the scandal finding themselves
wrong before the public. There was a need of full transparency in relation with showing the
problem and describing sorrow. However they are still under the media spotlight.
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Conclusion
From the overall study it can be concluded that the business strategy which was followed by
the Volkswagen group supposed to be very cheap as this might because serious health hazard
tom the public by emitting the pollutant NOx. The scandal disobeys the environmental
quality act describing that everyone in the environment has the right to have healthy
environment. Importantly, activities that are effectively harmful to the environment are
forbidden by law, making the event an unethical mover by the group of Volkswagen. The
engineers who were involved in this scandal must primarily respect their responsibilities
towards the society and keep in mind the consequences of the performance of their task on
the environment as well as on the health life of living beings. This corporate misconduct is
not acceptable under any circumstances. This event of 2015 still haunts the fame of the
reputed automakers.
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Recommendations
It is necessary to overcome the negative publicity of the Volkswagen coming from all the
sectors that were hampered due to their activities. They need to sponsor a set of corporate
duty seminars in several business universities and schools. Seminars should cover the topics
of crime like regulations of relevant areas, class covering the knowledge of good corporate
employee. Small campaigns and admissions might help this company regain the customer
trust and also rebound after scandal. Going green could also be included in their social and
environmental duties. Their sponsored initiatives and activities may help to reframe their
image.thy can offer online knowledge program on the real stories of carbon releases and gren
house gasses or on the cleaning of dumpsites, making Greenery Park in the location of
underprivileged neighbourhoods. They can also offer to buy gas guzzlers that are older n
exchange of low valued on the real 50 miles/gallon diesel (clean). A promise to recollect the
faith of public should keep in mind of the every employee so that they can implement this on
their work in a positive manner. The company should promote many out-of-the-boxes
campaigning to make up the lost ground creatively. The company should walk forward with
new operations encouraging more oversight into each part of the procedure and the make plan
for coming manufacturing to be greener. Before this scandal this company own the award of
top greener automotive company and more green approaches may reframe the company as a
leading progressive car maker. They need to take a oath to provide sustainability that means a
continuous strive for economic, environment and social goals in a process that provide them
equal priority.
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References
Bachmann, R., Ehrlich, G. and Ruzic, D., 2017. Firms and collective reputation: the
volkswagen emissions scandal as a case study.
Block, P., 2016. The empowered manager: Positive political skills at work. John Wiley &
Sons.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases.
Nelson Education.
Johnson, M. and Zinkhan, G.M., 2015. Defining and measuring company image. In
Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference(pp. 346-
350). Springer, Cham.
Kang, J., Alejandro, T.B. and Groza, M.D., 2015. Customer–company identification and the
effectiveness of loyalty programs. Journal of Business Research, 68(2), pp.464-471.
Mačaitytė, I. and Virbašiūtė, G., 2018. Volkswagen emission scandal and corporate social
responsibility–a case study.
Pauwels, K. and Neslin, S.A., 2015. Building with bricks and mortar: The revenue impact of
opening physical stores in a multichannel environment. Journal of Retailing, 91(2), pp.182-
197.
Wilson, F., 2017. A theory of public opinion. Routledge.
Zhang, B., Veijalainen, J. and Kotkov, D., 2016. Volkswagen Emission Crisis: Managing
Stakeholder Relations on the Web. In WEBIST 2016: Proceedings of the 12th International
conference on web information systems and technologies. Volume 1, ISBN 978-989-758-186-
1. SCITEPRESS.
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Appendices
Appendix 1:
Figure 1: Revenue graph of Volkswagen
(Source: Volkswagen.co.uk, 2019)
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