- The internal causes of the problem that Volkswagen is facing encompass the desired by the company to remain competitive as well as attain success in the car manufacturing industry. The fact that the company has never made the significant impact in the development of the fuel guzzlers makes it a challenge for the company to use the different means accessible to them to make a mark in the industry. Even though the company makes a significantly amount of car sales annually, the diminutive industry shares they possess makes them desire to improve their sales by selling more cars. The strict external environment that is the character but the tough EPA laws complicates their desire to sell their cars in the American market. The main factors, in this case, are the fact that even though diesel is common in the European market, it is a factor that is abhorred in the American market (Boston, 2016). In their attempts to increase their sales in the American market, the company resulted to cheating in the emission tests for their diesel powered vehicles.
- The contemporary information that is accessible to the general population on the emission, as well as the growth in the number of bodies supporting the protection of the environment via the reduction in car emission, implies that there are significant ramifications for the company. These ramifications are both general as well as customized to the company itself in that their behavior impacts the entire car manufacturing industry. The case has resulted in the renewed quest for improvements to the subject of corporate governance. The case is an illustration that there is the overall falling significance of the good corporate governance as a result of the disruptions to the industry. In this case, it highlights the greedy nature that the companies are depicting in that they are losing the focus on the comprehension of the standing as well as well established social concerns along with the expectations (CHOE, 2015). The issues present a highlight of the manner in which companies are abandoning the quest for the enhancement of CSR as they try to promote their profits. In this case, the fact that the company would rather destroy the environment and consequently make better profits implies that these organizations are putting preference to the making of profits rather than the protection of the stakeholders. Additionally, the case raises issue of the enforcement of the regulations practices that are in place as the fact that the company sold numerous vehicles before their discovery highlights a disjoint in the enforcement strategies.
The specific ramifications that the company suffers include the fact that these recalls are going to be a costs affair as they will have to compensate the owners for the inconvenience they caused. The additional fines that the company is going to pay additionally make it very expensive for them because of the cheating. The damage to their reputation is the most defined ramification that they are going to suffer as the company will be identified as a serial cheater. The growing desire by the consumer to protect the environment implies that they feel violated by the company and thus the preference for their vehicles goes down as no one wants to be associated with a liar and environmental destroyer. The business other than losing as a result of the fines and sales additionally suffers the rapid reduction in the price of their shares.
The stakeholders, on the other hand, lose the support they had for the company in light of the harmful reputation that the company has earned. The most significant impact will be the investors pulling out as they do not want to be associated with a company that is not keen on the protection of the environment. The management suffers the most as the company will fire most of them as it tries to safe face. It is additionally clear that some of the management team is going to be prosecuted for the violations. The fact that the company loses most of their experienced management members will be felt in the reduction of their subsequent productions. The consequent recruiting is going to suffer as a result of the inability to attract the necessary talent to promote their recovery as most of the qualified parties do not want to be associated with a company that has a bad reputation.
- Some of the steps that the company has made following the scandal include the acceptance of liability and admitting that they did the wrong thing. The company has apologized to the customers for breaking their trust along with the resignation of Volkswagen’s American boss. The company has additionally begun the implementation of an internal inquiry into the issue hoping to clean the entire organization. They have additionally set aside over $4.8 billion to cover the costs of the recalls along with paying a fine of $37,500 for every car that breaches the standards (Boston, 2016). I believe that the measures are adequate at the moment, with the advice for continued assessment of the status of implementation. In fixing the problem, I would ensure that the company issues an apology to every customer by making a call to them directly. I would change the entire engineering by making them go on early retirement. I would additionally ensure that there is the adoption of the green culture in the company, starting with the investment in the green technologies in the organization to promote the acceptance of our changes. The company will additionally be developing an office for the EPA officials who will be involved in all our engineering processes to guarantee compliance.
Boston, W. (2016, January 29). Volkswagen Begins Recall of Diesel Cars in Europe. Wall Street Journal – Online Edition. p. 1.
CHOE, S. (2015, November 27). South Korea Fines VW and Orders Recall Over Emissions Scandal. New York Times. p. B3.
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