Volkswagen Emission Scandal: Impact and Recommendations Case Study

This case study examines the Volkswagen emission scandal, focusing on the unethical practices employed to pass diesel emission tests. The report analyzes the ethical failures of Volkswagen, detailing the impact of these practices on revenue, share price, shareholders, managers, and customers. It explores how the company's actions, including the illegal installation of defective devices, led to significant financial and reputational damage. The analysis highlights the role of ethics in the success and demise of an organization, emphasizing the consequences of unethical behavior. The study also provides recommendations for Volkswagen, such as establishing ethical policies, improving communication, and implementing regular audits to rebuild trust and improve its brand image. The overall conclusion emphasizes the crucial role of ethics in fostering a positive working culture and ensuring long-term success for the firm.

Volkswagen Case Study

EXECUTIVE SUMMARY
Ethics can be defined as the moral standard through which people's behaviour are judged
by other individuals. It includes analysis and evaluation of concepts such as right or wrong. Case
study which is discussed under this report is Volkswagen's and related with unethical practices
that are performed by its employees so as to passing the diesel emission test. Report is divided in
two parts in which first one includes analysis of unethical practices which are performed by
employees of Volkswagen. Whereas, second one covers the impact of these practices on the
revenue, share-price, shareholders or managers. Some recommendation are also provided at the
end of this report.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
ANALYSIS......................................................................................................................................4
CONCLUSION................................................................................................................................7
RECOMMENDATION...................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Ethics can be defined as the combination of all principles and values which govern
behaviour and other morale of organisation in a systematic way. In addition, Ethics are also
known as moral beliefs or values that are related with individual or group which guides them
about the right or wrong practices. Therefore, It is very important for the organisation to make
the working structure in ethical manner so that morale support from stakeholders can be taken in
easy manner. If framework of firm is not ethical then it will become problem for the organisation
so as to taking support from the stakeholders. Stakeholders of firm may be its customers,
employees or other jury members which are related with working of organisation. In previous
years, concern with adoption of practices related with ethics has been increased because each
firm wants to survive in market for a long time period. Chosen company for this report is
Volkswagen which is a German multinational automotive manufacturing firm along with
headquarters in Lower Saxony, Germany. Present case study is overall based on emission
scandal which was done within the Volkswagen for passing the emission test and Because of
this, company have faced different barriers and difficulties which are related with revenue and
prosperity of organisation. An analysis is also executed under this report so that impact of
unethical practices can be known in easy manner. At last, some recommendations such as setting
up policies, regular audit will also provided to the firm so that their brand image or productivity
can be improved in marketplace.
ANALYSIS
Role of ethics in success and demise of organisation
Ethics are related with moral judgement of individuals about wrong or right. Decisions
which are taken in an organisation are either taken by group or individuals but these decision
makes influences on the working culture of organisation. There are several benefits which can be
gained by Volkswagen through following business ethics. Good ethics at workplace can provide
benefits of attracting large number of customers towards offering of firm so that profitability or
sales figures of firm would be enhanced. Appropriate business ethics also increases employee
retention because of which organisational productivity will also increase. Some other benefits are
also related with business ethics such as attracting investors for investment, reducing employee
turnover rate etc. Whereas, unethical behaviour can harm the brand reputation of firm in negative

manner and because of which company can't achieve its desired success in market (Oldenkamp,
2016). In context with this, If Volkswagen will follow business ethics in effective manner then it
will leads the firm towards growth and success whereas, if managers of firm will use unethical
practices at workplace then it will impact on the working performance or morale of employees in
negative manner.
Ethical issue faced by Volkswagen
Volkswagen is well known organisation because of providing luxurious services in
market. For surviving with a strong presence in market, it is very important for the organisation
to manufacture the automotive products as per the expectations of customers. In order to
achieving better outcomes, Volkswagen have to perform its duties in well manner so that any
difficulty wouldn't be faced by them but in 2015 an emission scandal have took place within
their workplace which was not favourable for their brand image. This scandal was occurred due
to illegal installation of defected devices in their vehicles so that emission test can be passed
easily. Performing of this act was illegal and unethical due to which company had faced lots of
criticisms and faces various issues like higher employee turnover, decrement of revenue and
sales figures etc. According to case, a software was installed by the employees of Volkswagen in
their 11 million vehicles because of which expectations of customers were shattered this case
was largely influenced reputation and brand image of organisation in adverse manner. An
example for this, company have paid approx. 26 billion euros as a fine for installation of defected
devices in vehicles.
Key stakeholders and impact on them Revenues: Volkswagen is large sized organisation but because of the recent emission
case revenues of firm were affected in negative manner. Company is operating its
functions in several locations due to which it is very essential for them to follow ethical
standards and norms in effective manner so that brand image and market position can be
maintained at marketplace. The issue was occurred due to installation of defected devices
in vehicles for avoiding pollution check which was not an ethical practice that influenced
the brand image of firm in adverse manner. As brand image of firm is damaged then as a
result of it customers have also started to moving towards other brands which have
impacted the sales and revenues of firm in negative manner. Because of installation of
defected devices in vehicles, company have withdraw its vehicles from market which

were not produced as per the expectations of customers. Revenue of organisation is very
much based on sales figures of firm which are negatively affected due to unfollowing of
ethical practices and standards in providing vehicles to its customers. Whereas, if
company have performed its designing and manufacturing process as per the ethical
standards then this scam were not taken place within the firm. So that, it can be said that
revenues of firm are too much depends on sales and revenues of firm therefore, it is very
essential for Volkswagen to perform its duties in an ethical manner so as to survive in
market. Managers: Managers were the persons who were the main defaulter because they were
involved in scam of installation of wrong devices for pollution test. However, managers
of Volkswagen have provided their statement that they are not involve in the scam, but it
is known by everyone that these kind of activity can't be performed by engineers at their
own level or without taking support from the higher authorities. Yet, managers of
Volkswagen have tried very much for separating themselves from the scam and said
strong actions would be taken against the guilty who were involved in this scam. It is the
prior responsibility of managers of each organisation to perform their work in an ethical
way so that brand image of organisation can be maintained at marketplace (Jung, 2017).
But management of Volkswagen have followed unethical practices due to which
customers, employees or distributors all have faced various issues which are related with
installation of wrong devices in the vehicles. This work was executed for passing the
pollution test but it have provided unbearable losses to the firm. Employees of
organisation were also get affected due to this scam which increases dissatisfaction
among them regarding firm and its working structure. Share-price: When scandal was broken out and notice related with Clear air act was
came out and become public. Due to this scam, the company have faced a steep low in its
share-prices as it were decreased of around 20%. On second day of scam i.e. 22
September 2015 share prices of company were reduced up to 12% and after second day
another reduction was occurred in the share prices that was around of 10.5% due to which
net profit figures of Volkswagen were decreased up-to 2.28 billion from the previous
year. Due to this, CEO of firm Matthias Muller have faced heavy pressure in repairing of
reduced reputation of firm. Share-price of firm was closed at 132.2 euros which was

lowest in previous three years. As per their financial reports, Total 37% of loss in
revenues were faced by company. Whereas, if management of Volkswagen have given
proper focus in designing and manufacturing of vehicles and produced them in ethical
manner then share prices of firm wouldn't have fallen. So that, it can be said that business
ethics plays very crucial role in stabling the share prices of firm.
 Customers: It can be considered as the main stakeholder of organisation who were
mainly influenced due to emission scandal in negative manner. They were face the issue
because of buying those cars which were not manufactured as per the legal requirements
(Nelson, 2016). Because of which, customer feel unsatisfied with the offerings of firm
and shifted their preferences towards other brand. Due to this incident, customer base and
revenue of firm were decreased in considerable manner. In reference with this, company
have compensated approx. 9.2 billion euros to customers so that their issues can be
resolved in easy manner. Whereas, if management have produced vehicles as per the
expectations of customers then there is no need to solving grievances of customers and
customer base will be maintained in effective manner. Therefore, it can be said that ethics
plays very important role in maintaining strong customer base of organisation.
CONCLUSION
It has been concluded from the above discussed report that ethics plays very essential role
in formulation of positive working culture within the firm. Those firms who does not perform
their activities in ethical manner they have to face heavy loss of revenues and sales figures
because of which brand image of firm are also decreased at market. Unfollowing of ethical ways
within the workplace leads the firm towards high employee turnover and reduced customer base.
Whereas, if company will follow all legal and ethical compliances effectively then it will impact
on different stakeholders due to which investment opportunities and support will not be grabbed
by organisation. Therefore, it can be said that ethics plays a vital role in growth and success of
firm and if these are not followed by firm effectively then it can negatively impact on sales
figures and revenues of firm.
RECOMMENDATION
From the above discussed case study of Volkswagen different conclusion are made which
have defined that there is a requirement of organised framework and ethical thinking within the

firm. Due to which some recommendations are given to the management of Volkswagen so that
their lost brand image and reputation can be attained in a small period of time. Some of these are
as following: Setting up policies: It has been recommended to the Volkswagen to formulate effective
policies and adopt ethical framework in designing and manufacturing process. These
policies should be consider by the management along with allocation of each resources so
that all operational functions would be executed in systematic manner. In addition,
through formulating effective policies at workplace management have responsibility to
allot roles and responsibilities to the employees as per their capabilities so that any
difficulty wouldn't be faced by company (Bruijl, 2017). Communication: It has been recommended to the Managers of Volkswagen to formulate
an effective communication structure at workplace and increase interaction with their
stakeholders so that functions of workplace would be performed in ethical manner. In
order to re-establish trust among the employees management should provide rewards or
incentives on the basis of their performance so that they get motivated and perform their
functions in more effective manner. With the help of it, impact of issues will be
overcome which leads the firm towards retaining their strong brand image in market.
 Regular Audits: Another recommendation which is provided to firm is to make auditing
of performance of several functions on a specific interval of time. This is an important
practice that will ensures the consistency of ethics at workplace. External audit will
assure that all limitations and impacts can be overcome through effective organisational
structure which will help the firm in removing other barriers in ethical way for achieving
success.

REFERENCES
Books and Journals
Benlemlih, M. and Girerd‐Potin, I., 2017. Corporate social responsibility and firm financial risk
reduction: On the moderating role of the legal environment. Journal of Business
Finance & Accounting. 44(7-8). pp.1137-1166.
Blackwelder, and et. al., 2016. The Volkswagen Scandal.
Bruijl, G. H. T., 2017. The Value of Stakeholder Theory: The Volkswagen Emission Debacle.
Gemünden, H.G., 2015. Foundations of project management research: Stakeholders and
agile. Project Management Journal. 46(6). pp.3-5.
Jung, J.C. and “Alison” Park, S.B., 2017. Case study: Volkswagen's diesel emissions
scandal. Thunderbird International Business Review. 59(1). pp.127-137.
Jung, K., Chilton, K. and Valero, J.N., 2017. Uncovering stakeholders in public–private relations
on social media: a case study of the 2015 Volkswagen scandal. Quality &
Quantity.51(3). pp.1113-1131.
Nelson, J.S., 2016. The Criminal Bug: Volkswagen's Middle Management. Available at SSRN
2767255.
Oldenkamp, R., van Zelm, R. and Huijbregts, M.A., 2016. Valuing the human health damage
caused by the fraud of Volkswagen. Environmental Pollution, 212, pp.121-127.
Online
Volkswagen emissions cheating caused $100 million in health costs, according to analysis. 2015.
[Online]. Available Through: <https://grist.org/climate-energy/volkswagen-emissions-
cheating-caused-100-million-in-health-costs-according-to-analysis/>.
US Volkswagen Dealers Want VW to Pay. 2018. [Online]. Available Through:
<https://247wallst.com/autos/2016/03/22/us-volkswagen-dealers-want-vw-to-pay/>.