Volkswagen’s Emissions Scandal Research Assignment (Essay Sample)

Volkswagen’s Emissions Scandal
Student:
Professor:
Course title:
Date:
Volkswagen’s Emissions Scandal
In 2015, Volkswagen’s dieselgate scandal erupted as the car maker was accused of installing software in millions of its diesel automobiles which cheated on emissions tests. Volkswagen is facing a big challenge as it continues to respond to the emissions scandal (Preston, 2015). This report provides a detailed description of Volkswagen’s emissions scandal and discusses whether the brand reputation of this German car-maker was damaged severely by the scandal and how its brand equity would be impacted. The report also discusses the way that Volkswagen should ethically handle the emissions scandal. Lastly, this report describes what can be learned from this case and important suggestions are offered to the top management of Volkswagen.
Volkswagen’s emissions scandal
Volkswagen AG (VW) is a car maker based in Germany that operates under several brands including MAN, Scania, Ducati, Porsche, Bugatti, Bentley, Skoda, Seat, Audi, Volkswagen, and Volkswagen Commercial Vehicles (Reuters, 2016). Companies in the automobile industry are required to comply with emissions requirements and produce cars that have minimal environmental impact. Volkswagen’s emissions scandal arose when VW produced cars from 2008 to 2015 that emitted deadly pollutants than legally permitted. This car manufacturer admitted to have installed software in eleven million diesel vehicles which cheated on emissions tests. This cheating allowed the cars to emit a lot more deadly pollutants than permitted by the regulations (Hakim, Kessler & Ewig, 2015). The special cheating software in the company’s diesel automobiles instructed the cars to release less pollution when the cars are tested (Ewig, 2016). Nonetheless, while on the open roads, the vehicles produced up to forty times the nitrogen oxide lawfully permitted (Fung, 2015).
Volkswagen’s brand reputation
The brand reputation of Volkswagen was severely damaged by the emissions scandal in that fewer customers would purchase cars made by VW; VW would suffer from reduced customer loyalty and unfavourable corporate image. According to La Monica (2015), the main concern for this carmaker is the reputational damage to the Volkswagen brand, a likely hit to the profits of Volkswagen. Since the news of VW’s infringements of Clean Air Act initially surfaced, the company’s shares dropped by about 30 percent (La Monica, 2015). The deceptions that VW perpetrated greatly tarnished the company’s reputation, which is founded upon reliability and trust (Helm & Tolsdorf, 2013).
Brand equity is understood as a value premium that a business organization generates from its product with a recognizable name, when that product is compared to generic equivalents. A business organization may create brand equity for its product simply by making that product reliable, superior in quality, easily recognizable and memorable (Keller, 2013). There are 3 crucial components of brand equity: perception of consumers, positive or negative effects, and the resultant value. Firstly, brand equity is built by the perception of consumers that consists of knowledge as well as experience with a particular brand and the products made by that brand. The perception held by a consumer segment as regards a particular brand will directly lead to either negative or positive effects. If there is positive brand equity, the company, its product range, and its financials would be able to benefit. The opposite is true if there is negative brand equity (Keller, 2013). Lastly, these effects could turn into intangible or tangible value. If there is a positive effect, the company would realize tangible value as increases in profits and revenues, and intangible value as goodwill. If there are negative effects, there would also be negative intangible and tangible values. VW’s brand equity would be impacted in that its brand equity would be negative since consumers would perceive VW as a dishonest company and its products would be perceived as cars that are harmful to the environment. This would hurt the company, its various car products, and its financials.
Ethical handling of the scandal
VW should handle the scandal ethically by admitting guilt, issuing an apology, being committed to a transparent and full investigation, and rectifying the situation. They should recall those cars and correct the problem. It is notable that a company that admits its problems can be able to resolve those problems (Helm & Tolsdorf, 2013). Ethical issues from the consumer perspective include the fact that many VW customers are upset and feel utterly deceived and angry about VW’s dishonesty. Many customers purchased the VW diesel vehicles because they thought the vehicles were very good on fuel economy and emissions as shown by the emissions tests. However, when they realized that VW had cheated on those emission tests to make the cars appear greener than they were, they felt cheated and betrayed by the company since the cars are not as fuel efficient as they thought. The cars actually emitted far more deadly gases than allowed by the regulatory bodies.
Ethical issues from the perspective of the brand manager include making an apology on behalf of the company, taking full responsibility, and resolving the problem. The company’s brand manager should also investigate the issue internally by conducting internal investigations and take necessary steps aimed at preventing the issue from happening again in future. The culture that allowed the scandal to happen should be changed (Fung, 2015).
Lessons learned and suggestions
What can be learned from VW’s emissions scandal is how business organizations should and should not approach social responsibility and sustainability. In the case of VW, this automaker had done a lot to promote its images particularly in the United States as a green company. Volkswagen had run clean diesel adverts dispelling myths regarding diesel fuel, that they were loud and dirty. In its sustainability report, VW pledged to become the most environmentally compatible carmaker in the world by 2018. The report showed how much VW cares about the environment and how much the company is actually doing for the environment (Preston, 2015). In its green push, deceiving stakeholders that VW was doing much for the environment and treating sustainability as a faзade as demonstrated by the VW emissions scandal cannot deliver true value for a company or for the society. It is, in fact, very costly as VW would have to pay heavy fines.
Business value can only be created when sustainability and social responsibility are entrenched in the organization’s core business strategies and corporate culture (Helm & Tolsdorf, 2013). When done in the right way, business organizations can benefit from greater customer loyalty, a more favourable corporate image, higher employee morale, as well as enhanced core competence. In turn, the society benefits as it harnesses the resources and power of business organizations to...