The Volks Wagen’s Scandal
Introduction
It is no industry secret that stakeholders play an integral part in determining the business organization’s outcomes. Besides, the stakeholder relationship is often considered as a representation of the company’s net value. Because human beings are sentient beings by nature, there is a need to create a relationship built on trust and goodwill. This principle extends to the market space. Hence, international corporations must evaluate not only understand how human relationships work to the benefit of the organization, but also in expanding the base of prospective stakeholders, maintaining reputable relationships, and enhance the mutually beneficial engagements for a lengthy period.
Background
Volkswagen’s emission scandal allows a closer examination of the role of stakeholder relationships in business. The Volkswagen Group, A German-based auto manufacturer, is the second-largest vehicle manufacturer with operations across the globe. Its superiority in the global context, encompassing superior social and cultural aspects, attracts a large pool of stakeholder interests. However, despite its reputable position, Volkswagen’s emission scandal that was publicized in 2015 has taken over the headlines years after the announcement (Peltz & Masunaga, 2016). This scandal continues to shock the many corporate management specialists, industry layers, and observers alike. Why would such a reputable organization like VW reach such extents to deceive their crucial stakeholders, including consumers and shareholders blatantly?
Before the scandal, the company deviated from the practice of demonstrating their green credentials, making public their development a major milestone in curtailing the nitrogen oxide emissions in compliance with environmental management standards. The presenting scandal not only put the reputation of the company at stake globally as well as the reputation of other German brands altogether (Dörner et al., 2016). Hence, it is vital to conduct a critical analysis of the reasons behind such decisions and the subsequent consequences of such
Mapping Volkswagen Stakeholders
Considering that Volkswagen Group is an international company comprising diverse stakeholders, it is not surprising to witness the massive interest the scandal earned among the fleet of experts, regulatory agencies, competing firms, dealers, environmental advocates, and other interested groups. The scandal left all stakeholders in disbelief and dismay. One systematic way of assessing the various degrees of stakeholder groups is by broadly categorizing the types of stakeholders to identify those that contribute to organizational growth and those affected by the company’s actions. Another way is grouping them depending on the proximity to the daily operations of the company.
The Mendelow’s Matrix tool allows for evaluating the type of relationships between the VW Company and its diverse pool of stakeholders. It facilitates categorizing stakeholders depending on their contribution to organizational growth and power to influence a company’s strategy (Bernstein et al., 2020). The Volkswagen stakeholders’ groups fall into two broad categories: internal stakeholders and internal stakeholders. Internal stakeholders comprise of automotive services and financial services. The external stakeholder category comprises of customers, society, capital markets, and partners. The partner category comprises of trade unions, work counsel, suppliers, employees, and trade partners. The customer group includes fleet operators, dealers, and consumers. The capital market is made up of shareholders, investors, financial analysts, and banking institutions.
Using Mendelow’s Matrix, the most influential stakeholders comprise of shareholders and customers. This is attributed to the high interest and high level of influence on VW Company’s operations. The stakeholder relationships with these parties require concerted efforts to keep them engaged, satisfied, and updated with the company’s development and plans. These stakeholders possess a high degree of influence on the direction of the company and are mostly the drivers of the Company’s strategy. When these groups are disgruntled about the direction of the organization or identify weakening relationships, they possess the power and stake on the company’s operations and the long-term outlook. Their position allows them to pressure the management for strategic changes and reviews of the corporate structure.
On the other side, less influential stakeholders are characterized by low interest and low power even though they require minimal input, fewer resources, and overall effort than other categories; however, they require dynamic monitoring. This group mostly comprises of competitors. If a company ignores its competitors, it can suffer adversely in competitive markets. These stakeholders require constant monitoring, as they are also likely to keep a keen eye on VW Company to exploit any chance to expose any weakness or copy from the organization’s strategies.
Shareholders
Soon after the emission scandal entered the public domain, the VW Group’s stock value began to decline. Consequently, the company shocked the portfolios of numerous shareholders and investors of the implications of the Dieselgate scandal on the blue-chip investment on a company that boasted a moderate and lengthy growth spell. Besides, the reputation of the company suffered severely (Dörner et al., 2016). Globally, many shareholders registered legal actions against VW Company claiming to suffer adverse outcomes due to the company’s administration strategies that resulted in the scandal and betraying their trust, besides causing massive financial losses, consequently.
Customers
Undoubtedly, customers who unknowingly bought the highlighted models endured huge financial implications because the resale value depreciated drastically following the Dieselgate. Nonetheless, because there were legal proceedings on course by the federal government on behalf of its citizenry, the settlement deal included 85000 car buybacks that allow the customer to sell the vehicle back to the company and receive monetary compensation for the loss suffered (Brannon, 2016). The agreement reached upon inclined on the consumer side both as a means of punishing VW for intentional deceptive practices and as a means of deterrence for other auto manufacturers against tampering with emission regulations.
Crisis Communication with Stakeholders
Because the company betrayed its customers’ confidence by cutting corners and deceiving them when they should have worked the extra mile to make up for the wrong, an effective communication strategy would encompass a range of tactics to restart rebuilding the public trust. It would be appropriate if the VW Group would release as much information as possible through clear and accessible means (Painter & Martins, 2017). This would be the initial step to ensure that all parties with interests with the case are adequately informed about the developments and the appropriate interventions the company would undertake. Besides, regularly updating politicians and journalists with the appropriate insights would work to avert possible events of misrepresentation. Nonetheless, responding appropriately to portray openness, which encompasses releasing substantial information, and public education programs about the development of the crisis would be crucial steps towards reconstructing VW Company’s integrity. This communication approach is vital to enhance positive public participation.