ABSTRACT
The Volkswagen emission scandal of 2015 exposed the unscrupulous behavior giant automotive firms, such as Volkswagen, engage in to make profits at the expense of environmental conservation. The 2015 emission scandal was brought to light after the American Environmental Protection Agency investigated the emission rates of Volkswagen’s turbocharged direct injection diesel engines. When subjected to laboratory tests, Volkswagen’s diesel engines regulated the emission of noxious fumes. However, when subjected to a driving test, the engine released dangerous levels of toxicants. Further analysis of the engine’s peculiar behavior led to the exposure of Volkswagen’s cheat device that enabled the engine to successfully pass emission tests. The 2015 scandal resulted in a massive public furor over Volkswagen’s intentional unethical practice. The revelation of the scandal was followed by a massive fall in the company’s shares worth and profits. To recover from the economic aftermath of the emission scandal, Volkswagen adopted sustainable management practices and utilized an elaborate public relations program to win back the support of its stakeholders. The Volkswagen emission scandal revealed the powerful role played by the mass media in shaping the reputation and corporate image of companies. To scientifically prove the role of the media in defining corporate image, qualitative research was conducted. The study involved the following three variables: type of newspaper, topics addressed by both the newspapers and journals, and the balanced or imbalanced nature of the literature utilized in the research. Notably, it was inferred that indeed the media plays an essential role in shaping corporate culture in the contemporary business environment. It was concluded that the media is necessary for the advancement of business practices as it ensures that companies adopt appropriate contemporary management practices, such as sustainability.
Table of Contents
INTRODUCTION.. 4
LITERATURE REVIEW… 5
RESEARCH QUESTION.. 10
METHOD. 11
RESULTS. 13
ANALYSIS/DISCUSSION.. 14
REFERENCES. 15
INTRODUCTION
In September 2015, the United States authorities shocked the world by making public Volkswagen’s emission scandal. The scandal was instigated by the uncovering of Volkswagen’s emissions-compliance defeat device by the United States Environmental protection Agency (EPA). Volkswagen’s emissions-compliance defeat device enabled the company’s turbocharged direction injection (TDI) diesel engines to activate emission controls only during laboratory testing. However, in real driving, Volkswagen’s TDI diesel engines failed to activate emission controls, thereby resulting in the issuance of high levels of toxic substances. The emission scandal resulted in the rapid deterioration of Volkswagen’s stock value and threatened to erase the profits previously recorded by the Volkswagen Group. However, within two years, Volkswagen was able to turn its emission scandal of 2015 into a massive success as it was named the largest automaker by global sales in 2017. This prompted the question of how effective Volkswagen’s public relations strategy was after its 2015 emission scandal. Another key question is what other companies can learn from Volkswagen’s successful handling of the disastrous 2015 scandal. Mass media and its various forms massively shape and inform the companies’ reputation, thereby driving change in the contemporary corporate environment.
LITERATURE REVIEW
Literature Review Article #1:
Jung and Sharon (2019), in their article, query the reasons behind the quick turnaround in Volkswagen’s sales and profits after the emissions scandal in 2015. The two researchers also question whether the increase in profitability and sales by Volkswagen, two years after the company’s emission scandal, is proof of the company’s long-term viability in the contemporary automotive industry. Jung and Sharon (2019) also question whether the public relations strategy utilized by Volkswagen can be successfully implemented by other companies globally. The principal motivation behind Jung and Sharon’s (2019) research article is to understand the importance of astute public relations strategies in the management of corporate scandals. The research article also seeks to highlight the relationship between sustainable corporate management and public relations. Specifically, Jung and Sharon (2019) seek to unearth the relationship between Volkswagen’s sustainable corporate management practices after the 2015 scandal and the company’s success in the automotive industry in 2017.
Jung and Sharon (2019) utilize qualitative content analysis to achieve the aim of their study. Using the qualitative content analysis study, Jung and Sharon (2019) review twenty-three relevant articles and literature. The year of publication and relevance of the articles and literature formed the main criteria utilized by the researchers during the study. Jung and Sharon (2019) only utilized articles published from the year 2015 to 2018. On matters of content relevance, the researchers only utilized published articles covering Volkswagen’s public relations after their 2015 scandal. A majority of the articles relied on by Jung and Sharon (2019) were publicly issued statements by Volkswagen after their emission scandal of 2015.
In their findings, Jung and Sharon (2019) realized that Volkswagen’s astute public relations practices were the cornerstone of the company’s success after the 2015 emission incident. According to Jung and Sharon (2019), to tame the rapid deterioration of its share value, Volkswagen opted to adopt transparency in its public relations strategy. Through utilizing both its top executives and public statements, the company offered public apologies to its customers and other stakeholders and promised to immediately address the issue of emission in their TDI diesel engines. Moreover, the company openly suspended various top executives implicated in the 2015 emission scandal. For example, the suspension of Volkswagen Group CEO Martin Winterkorn and the company’s head of research and development Wolfgang Hatz was publicly announced a few days after the unearthing of the scandal by EPA (Jung & Sharon, 2019). This proved Volkswagen’s desire to make changes in its organizational culture. Researchers Jung and Sharon (2019) also hold in their findings that the high returns registered by Volkswagen in 2017 are proof of the company’s long-term viability. According to Jung and Sharon (2019), the massive profits and sales recorded by Volkswagen in 2017 are a manifestation of the company’s dedication to sustainable corporate management based on the values of integrity and transparency in its operations. Volkswagen’s sustainable corporate management model enabled the company to adopt transparency in its public relations framework, which enabled it to win back the trust of its customers.
Literature Review Article #2:
Painter and Martins (2017) investigate the role of organizational crisis management in Volkswagen’s public relations strategy after their 2015 emission incident. The research questions the reasoning behind the intensive production of public information statements, such as press releases, statements to shareholders and stakeholders, and transcripts of oral evidence by Volkswagen in the aftermath of the emission scandal. Painter and Martins (2017) also query Volkswagen’s public response to mitigate the effects of its 2015 emission crisis. The research article analyzes the various crisis management theories utilized by Volkswagen during the 2015 crisis. By utilizing several of Volkswagen’s publicly-released information, the researchers analyze the organizational communication strategies employed by the firm to reverse the economic impacts of its 2015 scandal. The principal aim of the research article is to integrate the principles of attribution, crisis management, and information orientation to show the effectiveness of Volkswagen’s public relations strategy. The research article also aims to show the interactive relationship between the principles of attribution, crisis management, and information orientation, as well as their practical application.
In the research article Painter and Martins relied on a qualitative content analysis methodology to achieve the objectives of their study. To query the various literature collected for the study the two researchers utilized an interpretivist, hermeneutic approach. Due to the wide range of public information released by Volkswagen after its 2015 emission scandal, the researchers narrowed down their sources of information into three categories: press releases by Volkswagen to the general public, statements to shareholders and stakeholders, and transcripts of oral evidence presented to the UK Parliament Transport Select Committee. The researchers settled on 40 relevant articles after using the above selection criteria to narrow down their search. Painter and Martins (2017) analyzed the data collected from these sources using a hermeneutic methodology of analysis and interpretation. According to Painter and Martins (2017), the hermeneutic methodology provides for a deeper understanding of both whole and partial texts due to its analysis of both facts and opinions. The hermeneutic methodology used by the researchers creates a dialectic between understanding of collected sources as a whole, as well as the interpretation of their divergent parts.
Pieter and Martins (2017) hold that Volkswagen utilized divergent approaches of organizational crisis management to successfully deal with the 2015 emission scandal. Volkswagen’s crisis management strategies were based on the concept of attribution and information orientation, which enabled the company’s public relations activities to convince its stakeholders of its resolution to make constructive wholesome changes to its operations. According to Pieter and Martins (2017), a majority of Volkswagen’s public documents utilized the information orientation approach to minimize negative outcomes by outlining corrections made to the company’s operations. This enabled Volkswagen to bolster the confidence of its customers and investors for future operations. Volkswagen also employed image restoration strategies in its general public relations framework to provide an insight into the company’s future actions. The company’s image restoration strategies enabled the company’s stakeholders to comprehend its restorative and preventative reparations after the 2015 emission scandal. The research article also shows the interactive relationship that binds the public relations approaches of attribution, crisis management, and information orientation, particularly in addressing corporate-related scandals.
Literature Review Article #3:
Markowitz et al. (2017) question the impact of the 2015 Volkswagen emission scandal on the owners of the vehicles fitted with Volkswagen’s TDI engine. The research study queries the role of Volkswagen’s public relations activities in placating owners of the affected vehicles. Markowitz et al. (2017) also examine Volkswagen’s vehicle owners’ behavioral and attitudinal responses to the company’s acceptance of blame after the scandal. In studying the behavioral and attitudinal responses by vehicle owners towards Volkswagen, the researchers analyze the various efforts the company has undertaken to win back their trust and support. The research further examines whether Volkswagen has put in place a long-term strategy for preventing future occurrences of such types of crises. The research by Markowitz et al. (2017) aims at measuring the effectiveness of Volkswagen’s public relations programs aimed at placating its customers affected by the 2015 emission scandal.
To achieve the aim of their research study, Markowitz et al. (2017) relied on a qualitative study of two surveys. The two surveys were directed towards Volkswagen’s vehicle owners directly affected by the scandal. The criteria for determining the participants was proof of ownership of a Volkswagen vehicle fitted with the contentious TDI diesel engine. The first survey was conducted from February to March 2016 after the revelation of the Volkswagen emission scandal. The second survey was done from July to August 2016 immediately after a settlement agreement was reached by both Volkswagen and EPA. The last survey focused on re-examining the affected vehicle owners’ behavioral and attitudinal responses towards Volkswagen after the signing of the settlement deal, which provided buyback and repair programs to affected vehicle owners. The first survey involved 300 participants, while only 257 individuals were involved in the second survey. The collected data was organized, tabulated, and analyzed using the Likert packages and ggplot2.
In their findings, Markowitz et al. (2017) hold that affected vehicle owners had strong engagement not only among themselves but also with the company. The publication of the Volkswagen emission scandal in 2015 resulted in the development of distrust and dissonance between the affected vehicle owners and the company. The vehicle owners felt cheated and this reduced their trust in Volkswagen products. According to the results of the second survey, mitigation measures fostered by Volkswagen’s public relations department aimed at winning back the trust of affected vehicle owners helped shore up their relationship and attitude towards the company. The repair and buyback programs rolled out by Volkswagen, after the company signed the settlement agreement with EPA, enabled the company to win back the trust and loyalty of most of the vehicle owners directly affected by the emission scandal.
RESEARCH QUESTION
Reading through relevant articles and literature on the Volkswagen emission scandal, it is evident that mass media plays a significant role in shaping and defining corporate image in the contemporary business environment. Various forms of mass media ranging from print and broadcast to social media highlighted the Volkswagen emission scandal of 2015. The intensive analysis of the emission scandal by the media resulted in heightened public discourse on Volkswagen’s role in promoting pollution in America and Europe. The massive media attention given to the Volkswagen emission scandal resulted in the massive deterioration of the company’s share value. To save the company’s dwindling fortunes Volkswagens instituted several reforms and completely adopted the concept of sustainable management in its operations. Therefore, mass media, through its various sources, plays a huge role in the regulation of the company’s corporate image as they influence business performance (Agnihotri, 2014). The observation of the mass media and corporate image nexus informed our decision to perform a research study to analyze the role of mass media in shaping companies’ corporate image. For our research study, the research question is: to what extent does mass media influence corporate reputation?
METHOD
To conduct our study, we relied on the qualitative content analysis methodology of research. We settled on utilizing the qualitative content analysis methodology as it is not only widely used in the social sciences, but is also essential in qualifying social phenomena, such as a company’s reputation. The materials we analyzed to answer our research question above were limited to new articles and empirical evidence from peer-reviewed journals. To make our research more concise, all the materials analyzed for the study covered the Volkswagen 2015 emission crisis, the resulting changes enacted by Volkswagen after the revelation of the scandal, and the role the media played in not only unearthing the emission incident but also in shaping the company’s current image. The materials analyzed included news feed gathered from reputable newsrooms and broadcasting companies, such as the New York Times, the BBC, Financial Times, The Washington Post, and The Wall Street Journal, among others. The peer-reviewed journals were obtained from reputable databases, such as Proquest and Ebsco.
We utilized three variables to conduct our research study. The first variable was the name of the newspaper that published each article. The values were: 1= The New York Times, 2= The BBC, 3= Financial Times, and 4= The Wall Street Journal. The second variable was each article’s topic, and the values were distributed as; 1= Volkswagen’s emission scandal, 2= Volkswagen’s corporate image; 3= Change of Volkswagen corporate image and operations. The 1 value covered all articles that analyzed the 2015 Volkswagen emission scandal only. The 2 values covered all articles canvassing Volkswagen’s corporate image. The 3-value dealt with all articles that addressed the changes enacted by Volkswagen in its image and operations after the 2015 scandal. The third variable was that of article balance, which covered both newsfeed and peer-reviewed journals, and had the values of 1=Balance, 2= Imbalance.
We defined balanced articles as those that discussed Volkswagen’s emission scandal and eventual corporate changes impartially without leaning to any particular side. On the other hand, we defined imbalanced articles as those that discussed Volkswagen’s 2015 scandal and future corporate changes while blatantly favoring one side of the argument. For example, a journal or news article could be deemed imbalanced if it continuously and partially supported Volkswagen throughout the scandal and during its aftermath. The third variable was only utilized in the coding stage when we deemed an article to be imbalanced. If we valuated an article to be balanced, then we did not impute the third variable. To collect the data required for the study we read the articles and unanimously decided on which values to assign each article. We assigned our research a margin of error of 2% as people’s perception of what constitutes balanced and imbalanced publishing is contradictory. For example, a balanced news article for us may seem imbalanced to another group of individuals.
We utilized the inter-coder reliability test separately after gathering all the requisite data we needed for the research. The inter-coder reliability test exposed several shortcomings of our initial research study and made us enact several changes to our coding scheme and variable definitions. The inter-coder reliability test prompted us to expand our definition of the terms ‘balance’ and ‘imbalance.’ We expanded our previously limited definition of the term balance to mean articles that were not only impartial but also presented practical changes Volkswagen could implement in the aftermath of the 2015 scandal. Moreover, we redefined the term ‘imbalance’ to mean articles that were not only partial but also failed to provide practical strategies Volkswagen could adopt. Based on the results of our study’s inter-coder reliability test we decided to widely use the third variable in our coding scheme. Introducing the third variable in our coding scheme enabled us to achieve more accurate results as it introduced the balanced and imbalanced factor in our article search.
RESULTS
After jointly reading through a collection of thirty news articles and ten peer-reviewed journals, we made inferences pertinent to our research question. Notably, 90% of the peer-reviewed journals revealed an interactive relationship between mass media and companies’ corporate image in the modern-day business environment. Moreover, 83.3% of the news articles analyzed revealed the intricate role played by the mass media in shaping and defining corporate culture, management, and operations. An additional 66.7% of all news articles shaped contemporary corporate culture by presenting alternative business management strategies. Besides, 70% of the peer-reviewed journals analyzed shape companies’ corporate image by publishing data proven contemporary management trends such as sustainability. Further, 90% of the news articles investigated during the research study directly pressurized Volkswagen to change its corporate image and practices with both the New York Times and Wall Street Journal being at the forefront in demanding change at the company.
ANALYSIS/DISCUSSION
The results of the study we conducted gave us a good understanding of the significant role mass media plays in influencing corporate reputation in the contemporary business world. The modern-day business environment is characterized by the quick spread of information through various internet platforms, such as social media. Therefore, company scandals, such as Volkswagen’s emission incident of 2015, quickly spread throughout the world resulting in massive criticism of the company’s operations. The criticism and negative public perception of the company results in massive deterioration in the company’s share value, revenues, and profitability. To salvage its remaining resources, a company is prompted to change its business operations and corporate image. Luckily, several reputable peer-reviewed journals and news articles offer solutions to companies beleaguered by scandals on how best they can change their operations to transform their operations for the better. Thus, a nexus between mass media and corporate image exists, which is essential in prompting companies to adapt to modern ways of engaging in business.
REFERENCES
Agnihotri, A. (2014). Mass-media-based corporate reputation and firms’ market valuation–evidence from emerging markets. Corporate Reputation Review, 17(3), 206-218. https://doi.org/10.1057/crr.2014.10
Jung, J. C., & Sharon, E. (2019). The Volkswagen emissions scandal and its aftermath. Global Business and Organizational Excellence, 38(4), 6-15. https://doi.org/10.1002/joe.21930
Markowitz, E. M., Chapman, D. A., Guckian, M. L., & Lickel, B. (2017). A corporate scandal that hits close to home: Examining owners’ responses to the Volkswagen diesel emissions scandal. Environmental Communication, 11(6), 740-755. https://doi.org/10.1080/17524032.2017.1363071
Painter, C., & Martins, J. T. (2017). Organizational communication management during the Volkswagen diesel emissions scandal: A hermeneutic study in attribution, crisis management, and information orientation. Knowledge and Process Management, 24(3), 204-218. https://doi.org/10.1002/kpm.1544