Topic: What are the implications of the Volkswagen emission

scandal on the organization as a whole.

Context
Volkswagen is one of the most successful automobile companies
in the world with its headquarters in Wolfsburg, Germany.
According to Topham et al (2015), they have recently been
charged with a lawsuit for designing their cars with defeat
software, which illegally passes pollution tests. This affected 11
million cars worldwide and 8 million in Europe. The software
allowed Volkswagen to reduce the emission of nitrogen dioxide
and create the illusion that their diesel-fuelled vehicles were more
environmentally friendly than they actually were and allowing them
to emit 40 times the acceptable level of pollution.
This issue has led to a lot of controversy, primarily because VW is
a big brand name not only in Germany but worldwide. The German
car company was recently looking to expand their brand in
America, however the recent scandal might prevent this from
happening. This incident has not only distorted the organization
externally, but also cause problems within the organisation as the
CEO immediately resigned once the scandal became public. It has
also immense financial implications for organization as they have
already witnessed a significant fall in sales from 9.8% to 8.4% and
a decline in market share from 23.6% to 23.3% in such a short
period Kowelle (2015).
Research Question
What are the implications of the emission scandal on Volkswagen?
This self-inflicted corporate injury has not only damaged the brand
image of the company but is also about to cripple them financially.
It would be interesting to explore the incentives behind taking such
a risky decision and the consequence of the scandal on the
organization as a whole in the long term.
Research objective:
- To examine the effect of the scandal on brand image.

- To identify the consequence of the scandal on brand loyalty.

The objectives will define a clear pattern in which the research will
follow, and highlight the key areas, which would be discussed
further in the research.
Literature review
This section consists of a literature review on the key concepts and
theories relevant to the study.
The main theories that would be discussed in this are the
corporate social responsibility model and Brand Loyalty.
Corporate social responsibility
According to Lord Holme and Richard Watts (2010) Corporate
Social Responsibility is the continuing commitment by business to
behave ethically and contribute to economic development while
improving the quality of life of the workforce and their families as
well as of the local community and society at large". Over the
years huge scandals of big organizations (e.g. Toyota and GM)
regarding environmental degradation has made the concept of
corporate social responsibility more important as consumer
confidence has dropped in brands they formerly trust due to
questionable business ethics and decisions Leonard and McAdam
(2003). Most large businesses like Volkswagen) tend to be profit
driven and that incentive may lead them to act in ways that are not
beneficial to the society and environment.
According to Brusseau (2015), there are four obligations of CSR,
which give an insight on how corporations like Volkswagen interact
with the surroundings and their costumers (Economic, Legal,
ethical and philanthropic responsibility). They also explain how
decisions on profit maximization and community welfare are made.
This research will focus on the ethical and economic aspect and
how it affects decision-making in large corporations.
Businesses are expected to abide to the ethical norms and values
of society by adopting proper business policies regarding issues
like: environmental degradation, corruption, discrimination etc. it
provides a guideline businesses adhere to in order to gain public
acceptance Investopedia (2009).

Brand Loyalty
Brand loyalty is an aspect of relationship marketing where the
consumer has a significant psychological attachment to the brand
entity consumed Punniyamoorthy and Raj (2007). The success of
a firm depends on its ability to attract consumers who will stay
loyal towards their brand. Most large firms like Volkswagen have a
large market share due to its brand loyalty. Thus we can assume
that there is a causal relationship between brand loyalty and
market share. It is divided into three dimensions: the evaluative,
the behavioral and emotive tendency. The behavioral aspect refers
to the attitude of customers in terms of procurement activities, by
monitoring the sale and revenue values for Volkswagen we can
identify if the customers are still loyal to their brand after the
scandal Sheth and Park (N.d).
According to Trigg (2015), Volkswagen has one of the strongest
brand loyalties in the automobile industry in the UK. Thus the
model of brand loyalty will provide an understanding of costumer
behavior and how they perceive Volkswagen after the scandal. It
will also help to interpret results and explain data collected.
Methodology
The main research philosophy underlying this study would be
Interpretivism. Saunders et al (2009) suggests that it is a method
of inquiry that opposes the idea of positivism based on the
argument that the human world (social and business) is complex
and cannot be understood by pre-defined laws and theories you
would in science, rather constructionism is essential in
understanding actions.
In this research the use of interpretivism is appropriate, as it would
provide an insight into exploring the motive and enable us to
interpret the incentives behind Volkswagens unethical business
actions. This is facilitated through the use of qualitative method,
which broadens our perspective on the problem being researched
Pollard et al (N.d). In addition to this, interpretivism is subjective
and qualitative methods enable researchers to identify social views
from the perspective of different participants.

The study will adopt a mixed methodology approach where both

the qualitative and quantitative methods are used in obtaining
data. This will ensure that there is no gaps in data collected
provide an in-depth understanding of the research topic and also
enhance the validity of findings Bulsara (N.d). Data would be
obtained through primary and multiple secondary sources. The
primary source is the use of interviews and secondary data will
include deductive analysis official financial statistics and
government reports of Volkswagen over the years. Documents
such as the Volkswagen annual and sustainability report would be
analyzed based on specific variables e.g. sales, annual revenue
and market share and how they have been affected as a result of
the scandal.
Qualitative data will be obtained through face-to-face interviews.
The questions will consist of 5 close-ended questions and 5 openended questions. For example would you still purchase a
Volkswagen car after their scandal is dissolved?
The sample will consist of 20 participants and sample collection
method would be random based and on a sample frame of car
owners over the age of 18. This will ensure that data collected is
representative of the population.
The quantitative aspect of the research will involve analysis of
statistical data and using deductive methods to find a causal
relationship between brand loyalty and sales in Volkswagen. The
independent variable will be brand loyalty based on data from
sales and the dependent variable being the emission scandal.
Ethical issues such, as informed consent, debriefing and ensuring
confidentiality will be properly addressed prior to the research to
ensure participants are comfortable.
Appendix Gantt chart

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