Analysis of Volkswagen's Emissions Scandal: Ethics and Business Impact

This report presents an analysis of the Volkswagen emissions scandal, examining its impact on various aspects of the business. The executive summary highlights the ethical failures of the company, specifically the use of defeat devices to manipulate emissions tests, and the resulting consequences. The report delves into the impact on stakeholders, including shareholders, public relations, and the automotive industry, detailing the decline in share price, damage to brand image, and loss of customer trust. It also provides recommendations for Volkswagen to regain its market share, rebuild its reputation, and operate in a more ethical and legal manner. The analysis covers the importance of ethical practices, adherence to rules and regulations, and the introduction of new features to regain customer trust. The conclusion emphasizes the importance of ethical conduct in business operations and the need for companies to learn from the Volkswagen scandal to ensure long-term success and sustainability.

Academic and
Professional Skills

EXECUTIVE SUMMARY
For every company it is necessary to follow ethics because by it they able to conduct their
work in effective and legal manner. Ethics is consider as moral philosophy that will include
systematizing, defending and depict. There are various ethical practices which are followed by
company in order to conduct work in legal manner. Volkswagen is founded in 1937 and its
headquarter is situated at Wolfsburg, Germany. Report is based on case study i.e. respective
company fix defeat device in their vehicles which shows that they produce less carbon emission
but it is not true due to which they face various issues and decrease in business. For which they
conduct analysis on various factors like stakeholder, industry, employees and so on which help in
developing strategies. Along with this according to respective case study there are some
recommendation which help them in improving their service and market value.

Table of Contents
INTRODUCTION...........................................................................................................................2
ANALYSIS......................................................................................................................................2
RECOMMENDATION...................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
Ethics is defining as a moral philosophy which includes defending, systematizing as well
as also depicts what is right or wrong. Along with this, it also includes values such as equal
rights to both men and women, concern for health and safety and many more (Cottrell, 2017).
Ethics are mainly based on well-founded structure of right and wrong which describe human
personality in terms of their rights, obligation and many more. If an organisation performs their
activities in effective manner, then they will able to create positive and healthy environment in
the company. Through this, they can create abilities to attain their goals as well as objectives in
better manner. This report is based on Volkswagen company which belongs to automotive
industry. This company was founded in Berlin, Germany in the year 1937 whose headquarter is
situated in Wolfsburg, Germany. Respective company deals in products such as commercial
vehicles, automobiles, internal combustion, motorcycles and many more. It also provides
services like banking, financing, insurance and many more. Volkswagen organisation serve their
goods and services to their customers across the world. This report is mainly based on the case of
Volkswagen which occurred in United States. Respective used to minimise their pollution rate
with the help of defeat devices which reduces pollution to the normal rate. In this case, company
admitted that in approximately 600000 cars they have fitted defeat devices because these devices
used to enable the vehicles to pass emissions test. In addition to this, they have adopted the same
procedure in nearly 11 million cars at global level. Therefore, this report also explains about
impact on shareholders, share price, public relation as well as in the industry at the time of the
scandal.
ANALYSIS
Shareholders
These are those individuals or group who invest their money in the form of share in a
well reputed organisation where they find their investment is safe. The shareholders who owns
more than one share in an organisation are issued with share certification. It is important for a
company to have shareholders in their organisation. In respect of Volkswagen organisation who
operate their business worldwide have large number of shareholders who invest in their
organisation. This lead the company in increase their market shares due to which they were able
to attract new investors for their company (VW investors sue for billions of dollars over diesel
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scandal, 2019). But in September 2015, company did the scandal of nearly 600000 cars by fitting
defeat devices which used to enable the vehicle to pass from emission test. These devices they
have also fitted in approx. 11 million cars across the world. Due to this, Volkswagen face
damages of billions of dollars. After listening such scenario, shareholders of respective company
represented 1670 claims in order to seek 9.2 billion euros that they have caused during the
scandal. Along with this, Volkswagen also filed penalties of 27.4 billion of euros. There were
large number of shareholders who sued the car manufacturer in the German court in order to get
their compensation for fall in its share that has caused during emission test cheating scandal.
During the scandal, Volkswagen lost its share of about 22 billion euros (Volkswagen faces
shareholder claims over emissions scandal, 2019). In addition to this, US justice Department has
filed Volkswagen for up-to $46 billion under Clear Air Act. Due to this, new investors did not
purchase shares of respective organisation in order to avoid their loss. This scandal has decreased
the market share of Volkswagen due to which it has decrease it goodwill and ruined its brand
image which has affected its growth and development.
Public relation
It is define as a practice in which information of data is is spreaded between individuals,
organisation and public. With the help of public relation, company is build positive as well as
healthy relationship with the public through communication, social media, face to face
interaction and many more (Du Preez and Fossey, 2012). An organisation having effective public
relation will grow and develop at faster rate as well as it will also increase their sales and
profitability ratio. In addition to this, it also enhances their brand image due to which they are
able to give tough competition to their competitors. Before the scandal of Volkswagen, company
has good terms with their public due to which it became one of the top most car manufacturing
company of United States as well as the most trusted global brand worldwide. After the scandal
which occurred in September 2015, there was a great impact on customer base of the respective
company. There were situation where respective company was not responding to the public
which made their condition more worse. This scandal does not affect much loyal customers of
the company but it greatly build impact on their new customers and on those who were going to
buy their products. Due to this scandal Volkswagen lost its market value which had created a
negative image of the company in the mind of public. Volkswagen was not able to build their
customer and was not able to develop relation with them even after modifying their products
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with new features and design. Due to this, it bough a great fall in their sales as well as
profitability ratio. Along with this, it also lost its investors which lead them in financial issues.
Due to such scandal, respective company was not able to acquire customers and lose their
existing customers which brought a great fall in their market share as well as their goodwill.
Share price
It is define as a price of single share of numerous saleable stock of an organisation or
other financial assets. Investors of company buy the stock price at highest amount and sell them
at the lowest price. In terms of Volkswagen company, they have huge number of investors who
made investment in their company which increased their share price of stock. This lead the
company to develop their brand image and make their customers aware about their products.
Along with this, having a great increase in the market share, respective company gets an
opportunity to expand their business at international level. But in September 2015, scandal occur
about fitting defeat devices in the cars so that their products may does not get track in emission
test. This had bough a great downfall in their market share. At the initial stage of scandal,
respective company faced a great fall in share price and suffered about €32bn to €35bn of hit
(What Impact Has The VW Scandal Had On Share Prices?, 2019). Along with this, they have
also gone through a pre tax profit €14.8bn at global sales of €202m in previous year. During the
time of scandal, investors of the company had stopped buying shares which brought a great fall
of €165 to €92bn in their share price. Due to loss in market share, company was not able to
maintain it financial performance effectively. In addition to this, it also affected sales of the
company due to which they were loosing their position at marketplace. Due to this scandal,
Volkswagen has lost its market value which greatly impacted their relation with their customers
and also their investors or shareholders. Therefore, fall in the market share, investors and
shareholder had sold their share and new investors were not ready to buy their shares due to
which they were not able to enhance their market price.
The industry or sector
Due to the scandal that has been caused in United States on Volkswagen by US
Environmental Protection Agency for going against Clean air Act, company has to suffer a great
reputational damage at an industry level. This was because Volkswagen diesel engines along
with its software has enabled cars to develop their emission performance at the time of test from
2009 to 2015 (How will the VW emissions scandal impact the auto industry?, 2019). The
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respective company have admitted the issue and decided to cover compensation cost of €6.5
billion. This scandal had bought a great impact on the auto-mobile industry operation as well as
performance. Due to such situation auto mobile industry was appearing as a death knell of diesel
which only represent approx 1% of the US market. Along with this, automobile industry was
greatly affected by their shareholders, investors and customers. It is because in one hand
shareholders as well as investors were asking for detail information about the company before
investing or buying their shares. On the other hand, customers were not easily trusting the
company services and their products (Dada and Jagboro, 2012). These bought a great fall in the
sales, profits as well as market value on the industry of respective company. In addition to this,
even after adding new features in their products, they were not able to sell it. Due to this, it
bought a great decrease in their sales, profitability ratio as well as their market share. Along with
this, survival of auto mobile industry and their customer base was being unstable.
RECOMMENDATION
By examining the case of Volkswagen, there are some recommendation that an
organisation must apply in order to regain their brand image, goodwill and their market share.
The recommendation which the respective company must adopt is explained as follows:
 Apply rules and regulation:It is important for the respective company to conduct
effective market analysis so that they can apply rules and regulation in effective manner.
This will help them to run their business legally. Along with this, manager of
Volkswagen must make sure that there staff must apply these policies in order to
perform their day to day activities in effective manner.
 Introduce new features:By adding new features in the products, Volkswagen will able
to gain their customer trust and attract new consumers in their store. With the help of this
strategy will be able to attract investors in their company which will increase their
market share as well as will also improve performance of their business. This will
enhance company goodwill and will also improve their brand image.
 After sales service and price: In order to enhance position at marketplace, respective
company should apply the strategy for providing cost effective price on new vehicles.
This will help them in providing more effective after sales service. In addition to this,
they will also able to acquire new customers and convince them to but their products. In
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order to perform such activities effectively they have consider all the legal practices and
maintain transparency with their staff, shareholders as well as investors.
Therefore, by adopting above mentioned recommendation, Volkswagen will be able to
run their business in legal manner. Along with this, they will be perform their functions and
operation in effectively. This will help the respective company to regain their goodwill and build
their customer base.
CONCLUSION
Hence from the above report it is concluded that in order to run business in legal and
ethical manner, company has to adopt themselves as per the laws and regulation framed by the
government of the country. In addition to this, if business go against the rules of government
then have to face obstacles which can ruin their company's image as well as their goodwill.
Along with this, to sustain in the market for long duration, organisation has to make their
strategies and decision as per policies. This will lead the company in their growth and
development as well as it will also help them to make their brand stronger. Due to this, they will
able to strengthen their customer base which will lead them to increase their sales and well earn
high margin of profits. In addition to this, it will enhance their goodwill which will aid them to
give tough competition to their rivals.
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Online
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