Ethical and Business Analysis of the Volkswagen Emission Scandal

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ACADEMIC AND PROFESSIONAL SKILLS

Table of Contents
EXECUTIVE SUMMARY............................................................................................................. 2
INTRODUCTION........................................................................................................................3
ANALYSIS.................................................................................................................................. 4
REVENUE.............................................................................................................................. 5
BOARD.................................................................................................................................. 6
CUSTOMERS OR PATIENTS...................................................................................................7
PUBLIC RELATION AND MEDIA COVERAGE..........................................................................8
CONCLUSION.......................................................................................................................... 10
RECOMMENDATIONS.............................................................................................................11
REFERENCES........................................................................................................................... 12
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EXECUTIVE SUMMARY
Volkswagen is an automotive company established in 1937 by Adolf Hitler and serves
worldwide. In 2015 the company admitted defeat devices for the carbon emission test in
around 600,000 cars and according to the tests the device has defected which influenced all
the major factors of the company. This assignment includes all the factors like the impact of
the issues on revenue, board customers and media and what measures the company need
to take to overcome the problem (Volkswagen, 2019).
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INTRODUCTION
Ethics is considered as a system of moral, behaviour and philosophy that help an individual’s
choices and behaviour. Ethics relates to the rights, language, responsibility and behaviour to
choose what is right or wrong. The moral, culture and religion varies from person to person
and thus the behaviour of the person changes along with ethics. All people have their own
ethics and values that they follow for living a better life. Volkswagen is an automotive
company based in the UK. The company admitted a carbon emission defeat devices in
600,000 cars in 2015. After that, the company decided to fit the devices in 11 Million cars
worldwide. As a result, the devices affected the company many factors of the company such
as revenue, board, media and customers. The use of defected devices affected the
environment of the country and thus increased the carbon ratio worldwide. Similar issues
faced worldwide that impacted the lives of the people and also affected the company
reputation. The reputation of the company plays an important role in the development and
growth of the organisation as well as in earning profit and in gaining the faith of customers.
Having a good reputation in the market helps the company in increasing the productivity of
the products and also reduces the competition with the small companies. In this
assignment, the learner comes to know about the importance of ethics in the success and
growth of the organisation and the actions the company needs to take to overcome the
issues. The learner also comes to know about the factors that impacted the issues such as
customer, company revenue, media and the board of the company. The assignment also
includes the recommendation that the company needs to follow for overcoming the issues.
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ANALYSIS
Volkswagen Company is a Marques type company and provides automotive services
worldwide. The company was founded in 1937 by Adolf Hitler and has approximately 650
thousands employee worldwide. In 2015 September the company decided to secure the
worlds and customer from the carbon emission for the vehicles and so the company fitted
the cars with defeat devices in around 600,000 cars for testing purpose and after announced
to use the device in 11 million cars (Volkswagen, 2019). The devices used in the car by the
company are defected and thus impacted many factors of the company like shares, revenue,
customer behaviour and media. According to the documentation, the engineers of the
Volkswagen Company are failed to build a diesel engine that reduces the carbon emission
and as a result, the devices impacted the reputation of the company in the world. There are
many factors that get affected due to the incidence and that the company trying to
overcome that is somehow difficult. The company needs to create trust and faith in the
customer that will help in making a good reputation in the market (Peters, 2015).
Figure 1: Volkswagen Company
Source: Volkswagen, 2019
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REVENUE
The Volkswagen Company is one of a biggest automotive company in the world and having a
good reputation in the market but due to the toxic emission on about 11 million cars
decreased the reputation of the company and also impacted the revenue of the company.
According to the survey, the revenue of the company is decreased by 12 per cent and thus
the company is still trying to rebuild the reputation in the market and to earn billions of
dollars after admitting the incidence. The profit margin of the company in the first quarter is
2.9 per cent in 2015 but in the second quarter, the profits drop by 3.3 per cent in the same
period due to the impact of emission scandal (Board and Skrzypacz, 2016).
Figure 2: Revenue
Source: IH, 2019
In the starting 6 months, the company sold around 200.000 vehicles but after the emission
scandal, the percentage is slightly falling off 0.5% in sales. The fraud done by the company is
against the laws and thus impacted the reputation of the company. The revenue of the
company before 2015 is highest in the world but after the cheating made by the company
that impacted 11 million cars worldwide and decreased the revenue by 0.3 % that still
affecting the reputation and profit of the company. The company is putting efforts into
making a reputation in the market but is not an easy task to convert the mindset of the
world with respect to the emission scandal (Board and Skrzypacz, 2016).
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BOARD
Board of the Volkswagen Company is highly impacted by the emission scandal. One of the
major impacts is on the reputation of the company and board. The scandal is against the
laws and legislation and so the board of the company needs to face many investigations and
lawsuits for that. The board paid legal fees that run into billions and many other charges.
The Environmental Protection Agency fines the company with $18 billion and recalls to cure
the 11 million cars that are affected by the emission. The board is still working for removing
the software from the cars as it is not possible to do at once. The shares of the company
board are about $180 but after the investigation and charges by the Environmental
Protection Agency, there is a drop on 30% in the shares rate and $26 billion in shareholders’
value. The board of the company started working on overcoming the issues by giving an
emphasis on the 11 million cars that are impacted by the scandal rather than innovating
something new. The Board faced many issues due to the fraud and that also impacted the
ethics. The faith of the board and the citizens of the UK are disappeared and that impacted
the reputation of the company. The shares and the shareholder of the company decreased
and also broken the ethics and legislation of the company. The company is trying to build
the image again in the eyes of the world as well as to the board by maintaining the affected
cars in the emission scandal (Akan et al., 2015).
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CUSTOMERS OR PATIENTS
The registration rate of cars in the first quarter of the year 2015 is 8.2% but due to the
impact of emission scandal, the percentage is dropped by 0.8% in the second quarter. The
company is losing market shares as a result of the fraud and thus the faith of the customers
decreased on the company. The emission scandal highly influenced the trust and ethics of
the customer towards the company and impacted the sales and revenue. The customer
moves towards the different brand that is more trustworthy than the Volkswagen Company
that slow down the sales and thus impacted the manufacturing of the company. Many of
the customers get health issues due to the device as the device is unable to control the
problem of carbon emission. The customer and the patients get problems in breathing that
influenced their mind with respect to the company. The environment of the world is also
impacted by the scandal as the manufacturing and use of a defeat device increased the
amount of carbon in the air. The Environment Protection Agency fined the company with a
huge amount of charges to control the fraud done by the company. Also, the number of
patients having breathing problem increased that leads to adverse effect. The company is
trying to overcome the issue with the maintenance of the cars that are influenced by the
device. The fraud influenced the ethics and behaviour of the customers towards the
company. Now the customer has less trust in the company and searches better option for
purchasing the vehicles rather than Volkswagen. Due to the scandal impact, the death rate
in the world increased rapidly. The average death rate leads to 12000 every month in the UK
due to breathing issues (Withers and Ebrahimpour, 2018).
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PUBLIC RELATION AND MEDIA COVERAGE
The scandal has a great impact on social media and public relations. In September after the
occurrence of the scandal, the media became more active towards the Volkswagen
Company rather than other companies. The company is searched three times more than the
normal search by the activists. According to Google, there is a huge difference in search
ration before and after the scandal. Also, the media spread the negativity about the
company in all overall worlds that affected the sales and profit of the company. Google’s
first page showed the damaged caused by the scandal that created a negative impact on the
company all around the world. The social media, news and Google became more active
than ever to reflect the cheat done by the company to the world. The media played an
important role in defining the black area of the company and in securing the people from
the fraud (Tsetsura and Kruckeberg, 2017).
Figure 3: Media Impact
Source: RT, 2019
The scandal also impacted the public relation of the company. Most of the companies and
agencies denied working with the company and many of the organisations broken the
partnerships with the company. The customers of the company move towards other brands
that are more faithful and trustworthy. The scandal impacted all the minor and major
factors of the company. The media denied advertising the company or any other kind of
help the company needed. The company has broken the trust and faith of every person in
the world by adopting such an unfair operation that affected the life of the people. The
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media played an important role in waking the customer about the fraud and in bringing the
reality of the company towards the world (Tsetsura and Kruckeberg, 2017).
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CONCLUSION
Ethics helps the individual in judging what is right or wrong. The ethics include the
behaviour, moral and rituals that an individual follows for living a better life. The ethics
changes with change in person and country as every person are from different religion and
rituals. The ethics play an important role in the development of the firm as well as in
attracting the customers towards the firm along with increment in profit and productivity.
The Volkswagen Company impacted the ethics of the individual and also the rules and
regulation of the laws that affected the profit, revenue, customers, media and other factors
that are directly or indirectly connected with the company. The scandal has a huge impact
on all factors and created a negative image of the company in front of everyone. The
company is trying to emerge out from the problem by improving the service and by healing
the impacts.
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RECOMMENDATIONS
The emission scandal done by the Volkswagen Company is one of the biggest frauds ever
done in the automotive industry. Overcoming the issues and gaining the trust of the world is
a little bit difficult but not impossible. There are many ways through which the company
increase the profit and gain the trust of the world. The company needs to proper analysis
and examination of the market that will help in improving the company’s performance and
revenue (Herschel and Miori, 2017).
Problem-solving
Resolving the problem generated by the company is one of the biggest positive factors that
will help in gaining the trust of the world. Solving the problem ensures that customer that
the problem is never going to be occurring in the existing vehicle. Also, it improves the
environment which is important for a better and healthy life (Herschel and Miori, 2017).
Rebranding
Rebranding refers to the establishment of the company with new aims and objectives that
will help in gaining the trust of the world. The rebranding will help the company is
disappearing the past problems that affected the business. Establishing the company from
the new end will help in creating interest in the customer that leads the company towards
progress (Herschel and Miori, 2017).
Posting a bond
A certificate of quality and trust will help the company in increasing the productivity of the
company as well as in maintaining the trust and reputation of the company in between
customers. The certificate will secure the customer from any kind of fraud and thus ensures
the trust of the company towards customers (Herschel and Miori, 2017).
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