Reference no: EM131264941

Problem Scenario - What went wrong with VW?  The key facts

Refer to Volkswagen's CSR report:

https://www.volkswagenag.com/content/vwcorp/content/en/sustainability_and_responsibility/Sustainability_Report_2014.html

This will provide context of the problem and linkages between the different bodies of knowledge in your management major.

1) VW engineers programmed their 2009-generation TDI diesel (EA189) to operate within lab conditions. The sensors would easily recognise the emissions within this condition, however, would be able to when operating in real time. The engine management software (EMS) affected is an easy and permanent fix, as it reprogrammable.

2) There is much oratory about "defeat devices" and "rigged software" making it confusing to the public and misunderstood by news media. A car's engine is controlled by algorithmic software.  VW's engineers put in some additional lines of code in that software that would make their diesels perform better in emissions tests. 

3) The engines in question (EA189) are being replaced by a new generation diesel (EA288). The stand-in is being phased-in over numerous model years; however, had the EA189 been introduced, Diesel Gate would have had less impact VW's prospective production and earnings.

4) VW CEO Martin Winterkorn is the key mover behind VW's successful globalization strategy and to his credit with the regeneration of the Audi brand. However, he resigns 11 November 2015.

5) The €6.5 billion provision VW announced in relation to the recall equates to €590 per engine affected.  The remedy-reprogramming the EMS-is not an arduous one.  However, the recall process in the U.S. alone is a notoriously expensive.  Additionally, the EPA could possibly impose fines of up to $3,750 per affected vehicle.  VW will have to pay a large fines (i.e., the US) and faces the threat of recalls of EA189 models in other global markets.

6) The damage to VW's brand parity in the U.S. market alone will be extensive and enduring. The image of the "foreign" company cheating governments around the globe is going to stick with VW.

7) Diesel engines consume less fuel per given journey than do gas engines and therefore emit less carbon, because of their greater mechanical efficiency (20% on average). The tests that VW contrived were for the oxides within nitrogen (NOx,) not CO/CO2 emissions. The number 1 issue within the globe with regard to carbon footprint, diesel vehicles are still the more ideal types of engines to run.

8)  VW shares have been thrashed by more than 35% and there will be more downside in the near-term from the current level of €127/share.

Also refer to other relevant information in the media and via peer-reviewed scholarly sources. For example, you should review the critical perspectives on this case that are offered by Prof. Carl Rhodes, UTS. He writes in The Conversation, comments in the media, and writes extensively on business ethics in high quality peer-reviewed journals and books.

The purpose of the report is to deliver a strategy that outlines a solution for Volkswagen.

From your review and evaluation of this case study you critically analyse the management problem that Volkswagen has, by applying one of the four theoretical lenses/pathways/approaches below:

Once you have chosen a pathway for your analysis and discussion of the problem you should continue with it.

The pathways are as follows:

• Strategy - The highest level strategy. Strategy is setting the direction for the organisation and asking people in the corporation to come up with a plan. In this part of the scenario you'll be asked to set the concept for the business you'll have 5 to 6 sessions where which will be released on L@G. In these sessions you will be given problems to solve. Your report will discuss what problems you solved and what the direction is for the future for Volkswagen.
• Processes - Processes are the structure of the organisation. Should you choose this pathway you'll come across many complicated process problems. As in the example above in strategy, processes will give you 5 to 6 different problems to solve. You will solve those problems and you will discuss a way forward for the Volkswagen in Australia.
• Organisational Behaviour - organisational behaviour rules and processes and psychology of organisational workflow. This organisation may have a people problem. If the organisation has a people problem, your job will be to go through each one of the scenarios as presented each week and to solve that problem you will analyse the people problem and your present away forward for the Volkswagen in Australia.
• CSR/Ethics - corporate and social responsibility and ethics. In this scenario you'll be given 5 to 6 different problems to solve involving corporate social responsibility and ethics. We will ask you to solve those problems, analyse them and look for the root cause. Then we will ask you to present a CSR/ethical strategy moving forward for Volkswagen.

The purpose of this learning experience is to give you an overall understanding of the practice of problem-solving applied to a significant business issue.  In this learning experience you should get as much feedback as possible from your peers - this is a collegial process. Engage in role play - think of yourself as a management consultant hired by Volkswagen, and your peers as your client (VW senior executives).

Report format

• Executive summary
• Introduction
• Review of the Problem
• Analysis of the Problem
• Recommendations for Volkswagen and your Conclusions