A Profile of the Organisation at the Time That the Crisis Occurred
Before 205, the VW Company was among the market leaders in the automobile industry, despite the high competition in the industry. The company outperformed all other firms in the industry as evidenced by the high profits it realised in the period before the scandal, as shown in the Appendix section. In the mentioned period, the company supplied over 9.7 million vehicles annually to different countries around the globe. Hakim and Bradsher reveal how VWs profits were also high, owing to the premium pricing strategy, which it had adopted for its products that apparently matched the quality of its vehicles.3 Passat, a brand launched by the firm in 200, specifically pushed the company ahead of the rivals, owing to its innovative features.
However, according to Burki, the companys turnover started to exhibit a downward trend in 205 following the exposure of the emission scandal.4 Typically, as Elson, Ferrere, and Goossen confirm, the quality of a companys products and the overall customer satisfaction are the key determinants of brand equity.5 However, in the contemporary world, customers are also considering th
e environmental impact of the products and services when making purchase decisions as Waddell posit.6 The confirmation of the negative impacts that VWs automobiles posed on the environment damaged its brand equity to the extent of causing the companys rivals to outsmart it in terms of the turnover as Fleckner and Hopt observe.7 The profitability of the company was also adversely impacted by the revelation of the scandal. The company recorded the first-ever losses in the first quarter of 206.
The Circumstances and Contributing Factors leading up to the Case Crisis
According to Patra, the fixing of the software in the vehicles followed a requirement by the EPA for the automobile industry to regulate the number of carbon emissions.8 Under the requirement, EPA would conduct carbon emissions tests before approving any newly designed vehicle. To pass the test, Boston and Houston-Waesch reveal how Volkswagen fraudulently fixed a gadget that would reduce the number of carbon emissions during such tests.9 The software could robotically sense when such tests were being carried out. As a result, it could regulate the operations of the engine accordingly to cut the carbon emissions.