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Volkswagen Case Study Analysis

University: Oxford Brookes University

  • Unit No: 6
  • Level: Post Graduate/University
  • Pages: 14 / Words 3485
  • Paper Type: Assignment
  • Course Code:
  • Downloads: 280
Question :

This assessment will cover the following questions:

  1. Volkswagen is a world leading manufacturers of auto mobiles and commercial vehicles. Examine the importance of individual and organisational ethical thinking for effective decision making.
  2. How ethical principles influences the organisational culture of the Volkswagen.
Answer :
Organization Selected : Volkswagen


Business ethics can be defined as study of various business policies as well as practices related to potentially controversial problems such as discrimination, insider trading etc. Companies have to face various ethical issues daily. It is required by manager in an organisation to make business decisions considering ethical issues. Business ethics can also be defined as the system of moral principles as well as rules applied to companies (Yakovleva, 2017). It is very much crucial for companies to consider the interest of society as well as business. Manager in an enterprise must set specific standards and must ensure that all the operations are executed accordingly, as this will assist firm in eliminating ethical issues. In addition to this management also need to review codes of conduct periodically in order to suit the changing circumstances.

The present report have focus on identifying the ethical issues faced by Volkswagen due to unethical activity conducted by an enterprise.


Ethical analysis


Objective of Volkswagen is to achieve the leading position in an industry, but the emission scandal has lead to decline in market share of company. Volkswagen has to face various legal as well as ethical issues Business entity have to face these issues due to its business operations has negative effect on society as well as environment. The emission scandal of
Volkswagen have great effect on shareholders and also on the country in which firm operates. Emission scandal of Volkswagen is all about the utilization of software that is “defeat devices” installed in the four wheeler for indicating that pollution emissions have been minimized, but this was not true.

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Why it is ethical question

A sustainability supply chain as well as environmental companionable transportation solution is considered to be as an indispensable element of demonstrating that it is the responsibility of an enterprise to protect human right and prevent environment from the degradation (Kolb, Fröhlich and Schmidpeter, 2017). Volkswagen has utilized the corrupted software due to which firm has to face ethical issues. The software recognized when a car was being tested for emissions in a lab because only two of its four wheels were used, at which point it activated emissions-controlling devices that would have inhibited performance in on-road conditions. In addition to this , an organization has to face legal issues because of violating United States Clean Air Act. As per the ethical principle, it was the liabilities of software engineers to make sure safety of the product. In addition to this, Engineers should test devices. There are mainly three factors has influenced the decision taken by Volkswagen engineers these three variables are rationalization, opportunity and pressure (Pearson, 2017.). These factors have force workers to act unethically. Pressure, It was intense. Rules and regulation, on which every worker was trained in ethics, appears to be inapplicable in context of management’s autocratic leadership style as well as single-minded goal to succeed at any cost. In addition to this, Simultaneously with the encouraging the engineers to come up with a new solution. Diesel-engine-management software which can detect when a vehicle was being tested and turn on emission-controlling devices , it would be utilized for internal testing, as usage was illegal in vehicles sold to the customers. In context of given case scenario, The manager without consulting with other people in an enterprise has taken decision related to installation of default devices in car. Manager in Volkwagen has taken such decisions in order to support firm in increasing sales and profitability. Rationalization., present employees in an enterprise was aware about the fact that earlier this corrupted device was utilized by existing engineer in Volkswagen which enabled business entity to cheat on newly enforced emission standards. In addition to this, increase in cost has created pressure on engineers to make decisions related to the installation of defeat or corrupted devices in the car .

Completed matter related to the Volkswagen is considered to be as ethical issues based the fact that this issue was prior known which revealing shows not only a failure of ethical conduct by installing the “defeat devices” but also the way these issues were not communicated within an enterprise as well as to the customers. These actions were unethical and everything went against the Volkswagen rules and regulation symbolize. This specific ethical activity was executed by Volkswagen in order to increase profitability. In addition to this, the other unethical act done by an organization is that it continued utilizing the cheating software for reducing the maintenance of the cars (Miska and Mendenhall, 2018).

The key stakeholders those who are held responsible for this scandal are leaders and engineers, as they should not have designed such devices. In given case study, concealment of the devices is considered to be as unethical act, as there was no communication of the issue (Schwartz, 2017).

Key stakeholders those who are affected

Stakeholders are those people who are directly or indirectly associated with the company or business activities. Some of internal stakeholders are employees, board of directors, investors, shareholders etc. Customers and government get effected as they were not informed about the defeated devices in the car (Wheelen, Hunger and Bamford, 2017.). Company has given customer an false information about the quality of diesel engines. Many of the workers in an enterprise have lost their job, as huge amount of investment has been made by an organization on rectifying the mistake. In addition to this, manager has given resignatExternal stakeholders are customers, competitors etc. Both internal as well as external stakeholders are greatly effected by organizational policies, actions, objectives etc. In context of Volkswagen emission scandal stakeholders those who are greatly effected by the unethical act of an enterprise are dealers, employees , customers, shareholders, manufacturers etc. All these people are effected in several ways such some engineers and managers have lost their jobs. Both internal and external stakeholders are greatly effected by organizational policies, actions, objectives etc. In context of Volkswagen emission scandal stakeholders those who are greatly effected by the unethical act of an enterprise are dealers, employees, customers, shareholders, manufacturers etc. All these people are effected in several ways such some engineers and managers have lost their jobs. In addition to this, revelations of the deception led to the resignation of chief executive officer in Volkswagen. Engineers has to face criminal charges stemming from the American investigation into the automaker’s emissions deception.

Due to ethical issues business entity might have to face the difficulty in maintaining the relationship with customers. These issues also have direct as well as significant negative effect on the productivity, profitability and also on the working efficiency of firm. Overall ethical issues has adverse impact on business performance. Continuance of unethical practices by an organization often leads top high level of dissatisfaction in workers. It also gives rise to high employee turnover rate which has been analyzed in the case of Volkswagen. In addition to this, business entity might have to face legal issues (Millar and Koning, 2018). Decline in sales, market shares are some consequences of unethical issues. In addition to the major ethical issues can lead to increase in the threat of sustainability of business. A lack of business ethics endangers the future of an enterprise.

It is very much important for Volkswagen to formulate, implements business ethics within an enterprise. Management in an organization need to apply ethical principles in its business culture as this will help in making appropriate decision. In addition to this, leaders in an organization is required to formulate standards as well as need to communicate the same to all employees at workplace. In addition to this, it is the duty of leader to ensure that all the business operations are executed according to the prescribed standards. Manager in business entity should conduct integrity audit at regular interval of time, as this will assist them in addressing the issues. An organization should arrange the resources as well as must prepare with the strategies, as this tactics will support an enterprise in dealing with ethical issues. In addition to this, leader in an organization need to create an effective culture for encouraging people share problem. The other strategy which are required to be implemented is, workers should be provided with open communication system, as this tactic will provide management an ease in addressing those issues which might have great influence on business performance (Brown, Gordon and Rose, 2018).

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Analysing the way ethical choices have effect on company

Individualism or theory of Egoism: The theory Individualism is related to the relationship of an individual to the collective.

As per this theory, an individual make decisions according to their interest. Individualism theory is related to the ethical decision making as well as justifications for such judgements. The main objective of establishing any business is to earn high profits. In context of Volkswagen , main purpose of an enterprise is to provide high return to its shareholders. Therefore, It has been analysed from the given case scenario that, an organisation in order to accomplish desired business objectives has adopted individualistic por egoism approach for making decisions (Yawar and Seuring, 2017). This statement has been made considering the various facts in case study, one of them is business entity has provided customers as well as government with incorrect information related to the quality of diesel engine, this unethical act was conducted by the firm for increasing sale. In addition to this, this statement that business entity has adopted egoism approach is supported by the fact that Volkswagen in one of the press release accepted that there is additional suspect software in its 2016 diesel models that would potentially help to manipulate the results of the exhaust tests. Volkswagen has to face both legal and ethical issues due to failure to fulfil its responsibilities towards society and environment. Emission scandal has significant, long-lasting as well as adverse impact on the reputation of the firm.

In addition to this, Business entity has disregarded its responsibility towards society and environment. In context of Volkswagen, the procedure of achieving leadership position as well as for retaining market share business entity pursued self interest at the cost of customer. An organisation for increasing sales of car and earning high profit lied government and public about the quality of service engine. Consequences of unethical act is that an organisation to make huge investment on rectifying mistake and has to suffer huge production losses which further have negative impact on the financial performance of an enterprise. An organisation has taken the responsibility for an emission cheating scandal.

All the actions taken by the Volkswagen in such situation are less justifiable. Company has given justification that due to intense competition business entity has failed to concentrate on business operations which is considered to be as less justifiable. Such types of ethical issues would not have been occurred if company might have spent some time on developing or manufacturing a quality diesel engine. But business entity had focus on increasing sale rather than delivering quality products or proper services to their customers. An organisation has sacrifice image as well as integrity just for earning profit. Due to one unethical act, Volkswagen has lose the trust of investors as well as government (Charter, 2017).

Individualism is considered to be as economic theory which dictates that the obligations of Volkswagen company is to maximise profits by adopting a legal ways or techniques. It also states the business entity is responsible for its own act. According to this hypotheses, Volkswagen has not conducted any illegal act. As in present world, people are able to communicate to each other very easily and tend to influence others future purchase decisions. These recalls are very bad publicity for Volkswagen and have a counter effect on the satisfaction levels for their shareholders . Unethical act conducted by an organisation also have advese impact on the behaviour of customers towards company. It has also resulted into great decline in sales as well as profitability of firm.

Utilitarianism : It has focus on producing the greatest amount of good for the greatest number of people. As per this ethical theory, decision or an action is morally right if its produces positive outcomes. This hypothesis states that the effectiveness or accuracy related to the actions taken is completely based on the consequences. In context of Volkswagen , it was totally wrong action was taken by an enterprise for earning profit. In other words, it can be stated that unethical path was chosen by an organisation for accomplishing desired business objectives, due to which firm has to face severe consequences that furtherer have effect on reputation of company. The only good thing which has been there in scandal is that Volkswagen has realised the significance of business ethics. In addition,this Volkswagen has utilised the corrupted software for reducing the cost of maintenance in order to increase sale of cars, as a result of which customers have to pay high maintenance cost. Utilitarianism states that he results of cheating are usually bad, and therefore cheating should be condemned. As per this hypothesis , it is very much important for leaders or manager in an organisation to consider the effect or consequences of their decision on employees before making nay decision.According to the theory of Utilitarianism, if manager in Volkswagen company had considered the interest ass well as opinion of their shareholders, this could have helped them in eliminating such types of legal as well as ethical issues. The biggest consequence that comes from this for the Volkswagen is customer dissatisfaction. As the possibility which is associated with the incident is possibility of an accident being caused by a failure within these cars that are being recalled. An accident can greatly hurt not only those who are involved within the accident, but the Volkswagen as well. Due to the death of person company might have to face more harmful consequences. In addition to this, as a results of unethical decision by manager the company has to incurred big losses which have direct as well as significant effect on the financial performance of an organisation. It is very much important for manager in companies to determiner both positive as well as negative aspects of implementing specific decisions,. As this strategy will aid them in eliminating ethical as well as legal issues (Packard, 2017).


Qualities or characteristics of an ethical leader

Ethics is concerned with the kinds of values and morals an individual or a society finds desirable or appropriate. Ethical leader is a person those who have respect for ethical values, beliefs, rights as well as dignity of other people (Blyton and Morris, 2017.). They also have charismatic quality which makes them different from other people at workplace. In addition to this, ethical leaders also have an effective communication skills which enables them to encourage people to follow standards. Ethical leaders judge other people on the way of doing their work. In addition to this, these people has understanding about importance of developing trust. It is the unique quality of ethical leaders that they facilitate two way communication and ethical leaders engage themselves directly with colleagues, customers and other stakeholders. Ethical leaders does not utilities followers as a medium of achieving goals. They have respect for decisions, or values of other people. Other characteristics or qualities of an individual which makes them ethical leader are :

Honesty: An ethical leader are always loyal towards their work , followers and also an organization in which they are working. They have respect for their followers. It is the quality of ethical leader that they provide complete as well as reliable information about the circumstances without being concerned about the effect of such act on their performance. They do not make any kind of misrepresentation to company or their followers. Ethical leaders given proper justification for the decision taken by them (Jeanes, 2017).

Dignity and respectfulness: It is the characteristics of ethical leader that they have an effective listening skills. Ethical leaders respects the opinions or ideas shared by other people.

Justice: It is the quality of ethical leaders that they always make fair decisions.

Community building:Before making any final decision they consider their ans well as followers and also company interest. They treat their all followers equally

Serving other: It is considered to be as an effective quality of ethical leader that they place their followers or an organization interest at top priority.

Selflessness : This is trait of ethical leader that they are strong on selfless service in the interests of the greater good (Spencer-Cooke and van Dijk, 2017.). .

Sense of responsibility: It is considered to be an effective quality of ethical leaders that they have sense of responsibility. They take the responsibilities of their own as well as followers actions (Waddock and Bodwell, 2017).

The another company is facing minor ethical issue is ford. An organization has design fault car, as there are high chances of catching fire, if in case car is hit from the behind. The several people died in accident as well as then sum burn victims has taken ford to the court.


Analysing the way ethical manager manages business and high ethical standards

Manager is a person who is responsible for managing business and various activities within a company. It is the duty of manager in an organization to develop and bring changes in the business ethical codes. I will organize ethical program me for assisting the decision making and for guiding the behavior of workers. As a manager I regularly monitor and ensure that all the norms are being followed as I perceive that this is very crucial activity for eliminating ethical issues and for protecting the long-term prosperity of an enterprise ((Jamali, Lund-Thomsen and Jeppesen, 2017.). I takes high initiative by conducting regular meeting with stakeholders for addressing the issues which might have negative influence on business performance. As a manager i also organize training for my followers which purpose is to assist employees in identifying the moral dimension of business decisions. I have depth understanding about my roles in context of shaping business ethics. I plan such training programs which also includes the detail about techniques or resources which are available for assisting employees to develop the skills which are required for handling ethical dilemmas The other objective of providing training is to clarify as well as inform workers about the ethical code of company which are required to be followed by them when executing the task assigned to them (Sunley and Leigh, 2017.)..

Role of business in society is to produce as well as distribute goods or services to satisfy a public need or demand. Function of business is to create resources which helps in social development. Role of business is to build and maintain the conditions of well-being.

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It has been concluded from the assignment that ethical issues have direct as well as significant effect on the business. Study has also concluded that unethical activities conducted by company can have adverse impact on business performance. It has successfully demonstrated the way ethical issues might have effect on different stakeholders. Positive ethical can provide various such as growth opportunity to organizations. It has been concluded from the assignment that ethical leaders have some unique qualities such as sense of honesty, honesty, etc. which makes them different from other leaders. Study has also concluded that fulfilling corporate social responsibility is very much important in context of long term sustainability of business.

There are some strategies has been recommended in the report which can be adopted by business entity , as this will assist an organization in eliminating the ethical issues.

You may also like to read:-

Role of Business In Society and Implications of Ethical Theories


Books and Journals:

Haski-Leventhal, D., Pournader, M. and McKinnon, A., 2017. The role of gender and age in business students’ values, CSR attitudes, and responsible management education: Learnings from the PRME International Survey. Journal of Business Ethics, 146(1), pp.219-239.

Yakovleva, N., 2017. Corporate social responsibility in the mining industries. Routle

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