The contemporary business operations have been faced by increased challenges which range from legal compliance as well as responding to ethical issues in the society. Most of these issues make up the overall nature of the business environment. This paper, therefore, focuses on the impact of unethical issues found in the case of Volkswagen.
The affected areas due to poor reputation include the managerial team, the customer, profit and revenue and share prices. On the one hand, the managerial has been affected due to reduced moral authority to lead and to make other decisions. On the other hand, revenue collected has been affected both through the reduction of customers and the fine imposed to force compliance.
The study has concluded that the situation can be reversed by restructuring the overall policies governing the organisation. Additionally, this can be reversed by increasing focus on the importance of social and environmental responsibility.
Introduction
The contemporary business world has been surrounded by issues ranging from legal compliance, competition and the changes in the technological sector. In most case, both internal and external environments of the business become the centre for the aforementioned issues. In that respect, the daily routine of the business sector entails balancing its operations to cater for these issues as well as controlling the cost of its operations. For instance, developing a competitive advantage becomes salient in increasing profits or sales but must be accompanied by legal or ethical compliances. From this line of thinking then an organisation or business enterprise becomes subjected to ethical compliances issues which may include corporate social responsibilities and compliance to the legal framework of the given business environment.
That said, therefore, the framework of all the operations of the organisation including the development of professional skills and recruitment needs to be centred in the ethical principle of the firm. However, this has not been the case as more legal issues, and compliances are being recorded in the operations of different firms. Volkswagen as one of the international car manufacturer has found itself in the centre of blames and accusation regarding the compliance to the legal requirements that are aimed at protecting the environment.
Relying on the above background, this study seeks to analyse the action of Volkswagen in environmental compliance as part of its corporate social responsibility. In the same respect, the paper seeks to analyse the impact of ethical issues on the overall performance of the business as well as the impact on its reputation. The analysis also will follow the evaluation of significant players including customers, stakeholders, managers and other external players such as the regulator, the overall sectors' responsibilities to the ethical issues of noncompliance to the set regulations.
The Analysis
Manager and Ethical issues
The managerial sector of the Volkswagen company seems to be the most affected part of the organisation as they are accused of the mastermind behind the emission cheating scandal. According to Leggett (2018) report in the BBC news, the company was reported to have supplied 600000 cars to the United States which were fitted with devices to circumvent emissions test. On a critical thought, the organisation through the managerial seems to be reluctant in responding measures put across by relevant bodies in curbing global warming. In that respect also the reputation of the then CEO Dr Winterkorn seems to degrade from both the society and the corporate point of view. In essence, both the stakeholders and the society expects managers to be responsible as a means of legitimising the positions as an agent in society (Jamnik, 2017).
The managerial part of this organisation also seems to be affected due to reduced moral authority in controlling its employees as well as representing the company’s stakeholders. Consequently, such accountability issues to ethical compliance may have an increased impact on the performance of an individual as well as the overall organisation (Amakobe, 2016). The emission scandal also seems to threaten the existence of the managerial sector of this organisation due to the cost the whole ethical issues brought to the company. In this regard, the cost from this scandal is estimated to be 29 billion dollars and additional impact to the company's reputation (Leggett, 2018).
The management of this organisation also is likely to be affected by the in terms of controlling the workforce and relevant resources. In this case, the overall productivity of the organisation seems to put in jeopardy (Bowie and Schneider, 2011). For instance, from the case presented, the Volkswagen employees had raised concerns about the emission scandal, but the manager did not respond by stopping the project but instead encouraged the engineers to make it a secret (Leggett, 2018). This, therefore, creates a declining moral authority among the workforce and in such situations loyalty is jeopardised (Bowie and Schneider, 2011). Since the employees are not encouraged to contribute in deciding on critical issues, commitment and loyalty to the job are put at stake which later affects management in terms of achieving productivity targets.
Another impact from the episodes of the emission scandal is that the management may find it difficult in attracting talents in the organisation. For instance, a study carried out by the Stanford Graduate school of Business in 2004 found that 97 per cent of research participants would instead work in the low-level company with a good reputation than a good paying organisation which does not regard ethical principles (Bowie and Schneider, 2011).
Being unethical especially in the leadership arena seems to be a critical point of concern as it may lead to the development of unethical cultures in the overall operations of the organisation. In this line of thinking, Bian and Caliyurt (2018), assert that unethical managerial behaviours in an organisation have a great impact in the establishment of unethical culture which may lead to employee unethical behaviours in the organisation. For instance, encouraging the engineers in the Volkswagen company would not stop them from doing other practices that do not comply with the overall principles of the company. In that case, the impact may come to hurt the management in future.
Revenue Collection and Ethical Concerns
Although maximisation of profit is among the most effective way to increase revenue in the organisation, Lluka (2010) indicates that return maximisation should strictly follow the ethical principles in the business world. In this case, the operations of the business need to balance profitability and compliances to an organisation's social responsibilities. The development of environmentally friendly cars is one of the advantages the company used to generate more sales and to gain a global market share. However, as seen in the case study the emission filters were only fitted to pass the regulator’s test, thus, being a threat to the environment. This ethical issue is familiar where the organisation puts production measures that are the threat to ethical compliance with the intention of increasing overall revenue collection. However, the revenue for this organisation was somewhat affected as the company lost about 29 billion dollars in the course of the emission test scandal. Ideally, failure to adhere to essential moral and ethical compliance brings consequences that range from costly fines as the one imposed in the case of Volkswagen and a negative impact to the overall reputation (Lluka, 2010).
Customers and Ethical Issues in Volkswagen Case
Customers are the most critical stakeholders in the operations of the business since they determine sales as well as the acceptance of the brand in the market. Although the case study has not singled out the impact of unethical behaviours by the Volkswagen Company to its consumers, the issue has an impact on the overall market. Firstly, it has been noted that the ethical issues isolated in this case are market manipulation which in essence, means that customer satisfaction is at stake. This form of market manipulation has a direct impact on the overall organisation image and reputations which are critical parts in determining the brand's performance in the market. In essence firm's reputation is centred on the ability of the organisation to produce quality goods and services (Leiva et al., 2016).
Quality of goods and services produced by the organisation together with the overall social responsibility of the organisation has been found to affect the purchase intentions of the consumer (Huang et al., 2014).On a critical view of the Volkswagen case, therefore, we can conclude that quality and compliance with social responsibility have not been achieved. Firstly, the quality of vehicles that the consumer expects from the organisation is not delivered in the market instead what the company delivered is a manipulated model of goods. On its own, this can be regarded as an unethical practice by the organisation which might reduce consumer confidence regarding organisations goods. Consequently, this seems to affect the overall sales which might later affect organisation's returns.
On another account, the move by the Volkswagen seems to affect customer satisfaction as they are not able to get value from their purchase. In essence, buying a Volkswagen vehicle had important expectation from the customers. For instance, knowing that the vehicles were somewhat efficient in fuel consumption would guarantee fuel saving which was not the case. Therefore, the overall emission test scandal did affect not only the company's reputation but also the overall consumers' satisfaction regarding the brand.
Another insight regarding unethical practices represented by the Volkswagen case is a possible reduction in the number of customers purchasing their brand. In essence, the customer uses their purchasing power or capabilities to reward ethical companies while punishing unethical ones (Bowie and Schneider, 2011). This may be accomplished by boycotting from buying the organisation’s brands or by intensively buying from the potential competitors of this organisation’s goods and services. Additionally, the organisation's reputation may be affected further through the social media which would cause more damage in terms of reducing the number of customers buying the Volkswagen Company.
Share Price
The fluctuation of the company's share prices is another critical area that bad reputation can hurt. In essence, the fluctuations depend on the performance of the brand in the market as well as the issues in that market which have a direct impact on the brand (Bowie and Schneider, 2011). In most cases, investors lack confidence in an organisation with a tainted reputation which makes them withdraw support that may negatively influence the performance of the organisation.
Conclusion
Organisations engage themselves in activities that are aimed at improving or maximising returns. However, such activities seem to have an impact on other significant areas such as customer retentions, share prices, stakeholders as well as the overall revenue collection. The Volkswagen case has been seen to a critical reference of an organisation which have ignored critical issues that later affect the workability of the firm. In essence, most of the activities are done to keep the brand in the market while increasing returns, but they fail in responding to ethical compliances. That way, the organisation fails to be both social and environmentally responsible. It is therefore crucial that most of these organisations realise the essence of stakeholders notions which allows the company to focus on the impacts its decisions have in the surrounding. In this regard, the paper has recommended, restructuring of firm's policies that are salient in appraising moral responsibility with the organisation.
Recommendations
In changing issues that have been isolated in the case of Volkswagen Company the managerial part needs to incorporate several insights that are relevant in improving ethics. In this case, managers need to put more focus on the overall stakeholders of the business in any decision that the company makes. For instance, there is a need to identify potential stakeholders who can be affected by the actions of the firm and those who can, in turn, affect the activities of the firm (Yen, 2016). Such stakeholders include financiers, customers, communities, employees, and suppliers. Additionally being responsible for the protection of the environment forms a critical basis for the protection of stakeholders interests (Yen, 2016). In this respect, the managerial of Volkswagen company should acknowledge that being responsible to environmental protections do not only appraise the image of the firm's products but also can be a salient measure in saving operational cost by saving fuel.
Amending the issues isolated in the case of Volkswagen company case can be reversed by assessing possible criteria that can reverse the situations. In this case, this might entail establishing appropriate measures and policies that are salient in responding to the ethical issues (Airmic, 2015). One of the critical measure that the company can engage in is the restructuring its policies regarding the moral responsibility of the organisation as well as compliances to the set regulations. Additionally, the organisation needs to emphasise on moral obligation and environmental responsibility as a critical part in rebuilding its reputations.
Although it would not be practical in recalling vehicles that have been sold to consumers, the company may formulate recovery measures with regards to those vehicles that have not yet reached the customer.
References
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