A Report On The ‘lessons Learned’ For Volkswagen Post The Publication Of The Case Study

Volkswagen is a global company that supplies its products across the globe. The company purposed to use a new technology, in order to beat its competitors in the market and this was a pollution-hidden software, intended to deceive the American regulators, who purpose to measure emissions from cars that have diesel engines. The major issue was incorporating the pollution-hidden software. This report focuses on the significant lessons learned, based on the scenario, and as such, it will make recommendations that would enhance enterprise risk management activities. Overall, based on the lessons learned Volkswagen has been able to instill an effective product design, as this guarantees conformity to meet the required standard, thus avoiding the product risks. Secondly, the company has been able to establish fundamentality of conducting product testing, in order to ensure that no flow reaches the customers. Thirdly, the company has been able to enhance effective communication as it is essential in crisis management. The fourth is that Volkswagen has been able to enforce customer focus in the product development. Lastly, Volkswagen has been able t come up with management mechanisms that are fast and aid in tackling crisis easily. This report then makes recommendation that assist in supporting enterprise risk management for the Volkswagen Company, in order for the company to further support its resilience capabilities.

Introduction

Volkswagen is one of world’s known car manufacturers. It has over the years, produced cars into the market, which have attracted their consumer’s attention and it is also notable that with the advancement in technology, the company has been able to by dynamic in order to meet the demands of the present technology. Volkswagen has had competitors in the market such as Toyota, which it has always tried to compete and win over (Ewing, 2018). However, this has always come with a challenges, which the company has been trying to overcome. In this regard, it is notable that technology has shortcomings. For instance, Volkswagen used pollution-hidden software, with the intention of deceiving the American regulators, who purpose to measure emissions from cars that have diesel engines (Bundy et al., 2017). The America’s Environmental Protection Agency (EPA) later made a discovery that many Volkswagen cars were diesel-engined, and had the pollution-hidden software. As a consequence, Volkswagen faced a great crisis. The company hoped that the cars would gain popularity and as such, beat the company’s competitors and consequently generate good returns than the investment that had been put into it, but on the contrary, it incurred great losses, lost its reputation, and also faced various lawsuits (Goel, 2015). This report purposes to focus on various lessons that were learned from the case of Volkswagen. In line with this, the report will bring forth explicit recommendations that can enable the company to enhance its enterprise risk management activities, in order to develop its enterprise resilient capabilities (Christensen et al., 2016).

Background

Volkswagen has been developing its cars, which had a high demand. Owing to the fact that technological advancement resulted into increased selling, the company decided to use a pollution-hidden software, with the intention of deceiving the American regulators, who purpose to measure emissions from cars that have diesel engines (Christensen et al., 2016). Unfortunately, to the company, the America’s Environmental Protection Agency (EPA) made a discovery that there were many diesel-engined Volkswagens that were having the software, which switched the NOx-controlling technology on whenever it was facing a high predictable demand that would be seen when it was placed on test conditions (Clemente & Gabbioneta, 2017). On the other hand, Volkswagen admitted that there were a total of 11million cars worldwide, which had were having noticeable deviations that were connected to the NOx emissions that could only be seen under official testing, and those that could be seen when used in the real world. According to the provisions on The Economist (2015), it is noted that based on this discovery, it is evident that Volkswagen lost so many of its customers and having faced a lot of public pressure, the company’s CEO resigned. Moreover, the company was forced to take back the products that it had already produced to the market, when the EPA made it an order to recall almost 500,000 of its vehicles that had already been produced in the American market. The shares that the company had collapsed reduced by a third and it also faced various fines, and other forms of financial penalties (The Economist, 2015). Based on the negative rapport, the company had to stop more production immediately. Consequently, the reputation of the company was spoilt and thus, led to the following lesson learned. They are discussed below.

Lessons learnt

It is evident that the Volkswagen saga is not in any way exceptional, owing to the fact that any other company could experience the same. However, it should be noted that this particular scenario is unique, owing to the fact that it gave the company ground to be careful on its delivery, and to improve its overall production (Christensen et al., 2016). In this regard, the most common lessons that were learnt on the recall of almost 500,000 of Volkswagen vehicles are as follows:

Sensitivity to product design

According to Boin et al. (2016), technology provides companies with the opportunity of displaying their development in their field of specialization. In this regard, Volkswagen grabbed this opportunity, with the aim of displaying the manner in which technology could control NOx release. The company enhanced sensitivity towards product design (Brand, 2016). Initially, Volkswagen paid little to no attention with regards to its product designs and this poses as the primary cause of the dilemma, which the company faced. For this reason, Volkswagen saw it wise to come up with the pollution-hidden software. Van Der Vegt et al. (2015) noted that the company experienced a crisis, which later made the company to focus much on product design. Volkswagen learnt that product design should be a critical concern in the production process, and also in assembling. Presently, the company has looked for and is still on the verge of still looking for better ways of fighting the release of NOx into the atmosphere, and for this reason, the latest vehicles that it has been producing in the market have not been having defects (Ewing, 2018). Factually, the incorporation of the pollution-hidden software was the major issue. However, with much sensitivity on product design, the company has been using alternative ways of reducing the production of NOx into the atmosphere. According to Oswald AJ Mascarenhas et al. (2019), for this reason, Volkswagen has been having a management overhaul, in enhancing the company’s product management system to enhance the product quality control purposes, in order to discover various hitches prior to the product being released in the market. By the use of Advanced Product Quality Planning, the process aids in offering an effective approach towards vetting the viability of the product, and also discovering the design problems in the process of the design phase (Mittal et al., 2012)

Product testing

Manufacturing of a merchandise poses as a vital process. However, it is importance for organizations to test the product, prior to seeking conformity of the quality of the product, as well as the expected operational mode (Sabatino, 2016). In this regard, a responsible company has to ensure that its products undergo rigorous testing. It is evident that owing to the crisis, Volkswagen had failed to conduct a rigorous testing, as its vehicles were already defective in the global market. It is evident that product testing guarantees a reduction of the aftermath issues (Knechel et al., 2016). As such, it is notable that the scenario of the Volkswagen was owing to the fact that the company conducted less testing, it used a more complex technology that was coupled up with significant pressure to produce a new market to the global market (Herrera, 2013). Crisis often has three elements, which include a threat to an organization, the surprise elements, as well as the short decision time. As a result of the lesson that the company faced, it is evident that currently, Volkswagen ensures that it conducts product testing, in order to improve the quality of its products, as well as their operational modes. As such, Dahles & Susilowati (2015) point out that the company has been producing quality vehicles in the market, which as a consequence, has enabled the company to have a better rapport, and as such, has been able to regain the confidence of its customers. Moreover, the reputation of the company has been improving since it started improvising on product testing.

Communication

Ulmer et al. (2017) point out that businesses often rely on communication with their partners, as well as other stakeholders. The essence of communicating is to ensure seamless organizational operation. When a product immediately reaches the market, obviously, consumers would spread issues regarding the technological advancement that may be incorporated. However, it is evident that Volkswagen was in no communication with its customers (Booth, 2015). As such, when the EPA discovered the pollution-hidden software, the information had to spread, in order for the consumers of Volkswagen vehicles to be aware of its defects. In this regard, the company had to apologize to its customers, and as such, assure the customers that the same would not repeat itself (Van Der Vegt et al., 2015). In this regard, the company apologized to the public and was ready to recall more than 500,000 vehicles that it had already produced to the American market. Moreover, the company had the obligation of assuring its clients of its commitment towards producing quality and safe vehicles (Brand, 2016). Notably, the disadvantage that resulted due to lack of communication is that the company lost its customers; it lost its reputation; had financial penalties; faced several lawsuits; and also recalled more than 500,000 of its vehicles from the American market. As a lesson learned, Oswald AJ Mascarenhas et al. (2019) makes it clear that Volkswagen presently ensures productive and effective communication in all its operations, both internally and externally. Effective communication with its partners, stakeholders, and customers has been efficient, owing to the fact that the company has been able to avoid future damages. Additionally, William et al. (2017) note that effective communication has enabled the company to regain its lost customers and it has enhanced its ability to produce quality and safe vehicles.

Customer focus

According to Hagen et al. (2015), it is significant to note that business that does not have a good customer base has no change of growing and gaining its profitability. As aforementioned, Volkswagen did not conduct a rigorous testing, and as such, when the EPA made its discovery, Volkswagen’s customers were already making lawsuits against the company (Seijts, 2017). Evidently, the company learnt of the need to focus on its customers. Most significantly, it should be noted that customer focus is vital in the enhancement of business continuity. This poses as a lesson that Volkswagen appreciated since the happening of the scenario. Business continuity engages the measures of planning, as well as preparations that an enterprise takes, in order to guarantee operational continuity, despite having faced serious incidents (Paton & Johnston, 2017). The Volkswagen recall happened to be a recovery element in the entire business continuity. Notably, the recalling process of Volkswagen vehicles may also call within the category of risk elimination, based on the risk control 4Ts processes (Herrera, 2013). Essentially, the elimination of threat whenever it happens need to be preferable. As such, Volkswagen took a significant step to adhere to the order of the EPA to recall its vehicles, whilst taking into considerations, the concern of the customers. Overall, Annarelli & Nonino (2016) point out that presently, in its operations, Volkswagen has incorporate the needs of the customers whilst developing its merchandise, as well as services. In this regard, the company has purposed to include the needs of its customers whilst developing its recent vehicles, in addition to adhering to significant safety measures.

Risk management mechanism

According to Linnenluecke (2017), in every organization, there should be operations that follow a specific procedure. However, at times everything might fall out of place and as such, crisis or disaster might occur. The defect of the pollution-hidden software was an unforeseen event, which resulted into an emergency (Dahles & Susilowati, 2015). In this regard, enterprises should be obligated to have effective mechanisms ready when there is need to solve certain business failures. It is worth noting that Volkswagen issuing the recall could not solve the problem that it was already facing (Sadiq and Governatori, 2015). Based on Volkswagen’s present management objectives, especially enterprise risk management, the company has purposed to have alternative action whilst deciding the feasible measures that can aid in minimizing or even eliminating risks. In addition to this, Volkswagen conducts risk analysis and as such, it regards it as a matter of utmost priority (Dahles & Susilowati, 2015). Initially, Volkswagen failed in incorporating risk management mechanisms. However, later on, upon conducting the root-cause analysis of the problem, and thus offering a significant response, the company has been able to save the reputation of the company (Oldenkamp et al., 2016). Volkswagen has been able to adopt efficient and effective risk management mechanisms in order for them to understand vital causes.

Overview of the lesson learnt

The lesson that was learned from the Volkswagen recall aided Volkswagen in enhancing risk treatment. As it had been stated above, the company presently checks the designs of its products, and also conduct product testing. Notably, these two processes go hand in hand. This is owing to the fact that checking the product design, as well as subsequent testing purposes to eliminate unanticipated crisis in the future (Sadiq and Governatori, 2015). Factually, they provide a blueprint on whatever needs improvement that poses as an avoidance of risk, and also assists in the monitoring of performance, bring part of the organizational internal control. Evidently, incorporating effective communication and enforcing customer focus has aided the company in reducing risk (Sabatino, 2016). This is owing to the fact that whatever the customer communicates aids in improving goods, as well as services. Moreover, it purposes to inform when there is need to lower risk that might minimize the satisfaction of the customer, just the same way the product affected the purchasing order for the customers.

Conclusion

In conclusion, it should be noted that when a situation happens, they leave behind a lesson, which aids a company to make better decisions in the future. The Volkswagen case is a perfect example. As aforementioned, it is evident that the company learned the need to have a significant and appropriate product design, as well as testing, in order to control risks. Moreover, through this situation, the company learned that there is need to have emergency risk management mechanism, established through effective communication, as well as consumer focus.

Recommendations

This report brings forth the recommendations that aid in enhancing enterprise risk management activities for Volkswagen, in order for the organization to develop its enterprise resilient capabilities. Notably, based on the case study of the pollution-hidden software, the following need to be taken into consideration:

• Organization should purpose to undertake full product testing, in order to identify future inconsistencies or variance with expectation. With this, it is evident that Volkswagen would reduce the failure of its products (Sabatino, 2016).
• Organizations should ensure fast response to communication in order to avoid bad publicity that may affect a company’s customer base, as well as its overall output
• Organizations should develop effective, and well-structured response mechanisms, as well as teams that establish measures, aiding in the prevention of incidences, prior to them escalating into crises (Paton & Johnston, 2017).

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