When it comes to the types of fuel, the automobile preferences in the United States and Europe differ majorly. The cars powered by diesel fuel that produces the emissions of CO2 (carbon dioxide) are more popular in Europe, while the Americans prefer the vehicles running on gasoline that releases NOx (nitrogen oxide) (. Both of the pollutants are harmful; however, CO2 is also one of the primary contributors to the greenhouse effect and the global warming. As a result, the use of diesel-powered cars in the USA is limited by the EPA regulations. However, the car manufacturing company Volkswagen managed to sell millions of their vehicles to the United States and Europe (La Monica, 2015).
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The company’s determination to earn the top rank in their industry has cost VW its brand reputation. Having failed to find a way to manufacture an engine with higher combustion efficiency, the company came up with a so-called defeat device, software installed in each VW car designed to cheat and show false emission results every time the vehicles were tested (Hakim, Kessler, & Ewing, 2015). As the truth about this unethical maneuver surfaced, VW faced significant damage to its brand image, reputation, and revenue – now the company is obliged to fix all the vehicles covered in the scandal (Farrell, 2015).
VW’s Brand Equity and Reputation
The brand reputation of VW was hurt significantly as millions of its customers discovered that their vehicles were compromised. Of course, the wrongdoing of VW is not the question of safety, but an ethical issue; however, regardless of its nature the cheating took place and caused a scandal (La Monica, 2015). The company’s brand reputation is damaged due to their unethical choice of a larger income and higher sales rates over sustainability and environmental awareness. As a result, the company’s positioning as the top car manufacturer and seller became inadequate and made a negative impact on its brand equity.
VW’s determination to outsell its main competitor Toyota and take over the top spot in the market was associated with the brand’s compliance with the quality and environmental responsibility of the manufacturer. The scandal has revealed that the priorities were different in reality, and VW neglected the ethics striving to achieve higher revenues. This attitude is inequitable to the position the company pursued in the industry as putting their brand name on their products the manufacturers of the top seller make the consumer believe they are purchasing the high-quality vehicle that meets all the ethical requirements (Keller, 1993). As brand equity is directly connected to the brand reputation, both of these aspects were damaged by the scandal and resulted in the rapid loss of income and the decrease of sales rates (Ewing, 2015).
Handling the Scandal
The response of the VW authorities to the scandal involved the statement that only a small group of employees was responsible for the cheating software (Ewing, 2015). Also, the company has claimed to investigate the source of the problem. As a result, several of VW senior engineers were fired within a few months (Boston & Houston-Waesch, 2015). However, approaching the issue critically, one may logically assume that such a massive fraud could not have been done quietly without the authorities knowing about it. That way, the public is concerned with the question how high up the executive hierarchy this conspiracy could go.
At the same time, the consumers who bought the scandalous vehicles are one of the parties who require immediate answers from the manufacturer. Attempting to minimize the ethical impact of the scandal, the leaders of VW have agreed to provide recall of the compromised vehicles as ordered by the country’s Ministry for Transport (Boston & Houston-Waesch, 2015).
In terms of the ethics of the company’s actions, VW’s first response to the crisis – open admittance – was the right decision in terms of honesty and willingness to make changes. Secondly, VW never named the people responsible for the faulty technology but fired those associated with it refusing to put the entire blame on separate individuals. Thirdly, the company claimed that the owners of the cheating vehicles had a right to decide whether or not they wanted the remedy for their cars (Boston & Houston-Waesch, 2015).
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From the consumer’s perspective, the company betrayed their trust selling unsustainable cars masked as environmentally safe vehicles. The unethical actions from the brand manager’s perspective lie in the distortion of the ethical standards the brand represents for the sake of the material good.
The VW scandal is an example of a major ethical misconduct becoming public. Its outcomes have produced a massive negative effect on the company – loss of revenue, the obligation to recall millions of orders, injured trust of the consumers, damaged brand equity and reputation. The top management of VW is to throw all its effort to win the consumers’ trust back with their new vehicles.
The company is to invest in the development of responsible technologies and advertisement campaigns covering the massive fallback due to the crisis and honestly admitting their fault, but emphasizing the new approaches. Overall, the leadership of the company is to reevaluate the previous ethical norms and priorities of the company. In the modern world focused on the environmental concerns, being sustainable is the only way to the top, while focusing on the material gain and neglecting higher values is the path towards failure.
Boston, W., & Houston-Waesch, M. (2015). Volkswagen suspends another top engineer; berlin orders recall; transport minister says recall of tainted diesel cars is mandatory. Web.
Ewing, J. (2015). Diesel scandal at VW spreads to core market. Web.
Farrell, S. (2015). Volkswagen loses sales top spot to Toyota after emissions scandal. Web.
Hakim, D., Kessler, A. M., & Ewing, J. (2015). As VW pushed to be no. 1, ambitions fueled a scandal. Web.
Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57(1), 1-22. Web.
La Monica, P. R. (2015). Volkswagen has plunged 50%. will it ever recover? Web.