The Volkswagen Scandal

The Volkswagen Scandal

It is common knowledge that making a profit is one of the top priorities of many companies all around the world, big or small. However, this priority causes some companies to operate in a way that is socially irresponsible and goes against best practices in corporate governance. The Volkswagen Group emission scandal has shown that, making socially responsible decisions in the long run can actually outweigh the consequences of making decisions in pursuit of profitability.

In the year of 2015, Volkswagen Group was found to have installed ‘defeat’ software in their ‘clean’ diesel vehicles, in order to pass emission standards. Its diesel vehicles were actually emitting levels of a form of nitrogen, called NOx, up to forty times the emission limit in some countries it turns out (Smith, Parloff, Fortune: Hoaxwagen). The onslaught of litigation, recalls, and reputation damage have subjected the company to one of the worst crisis in its 79 year history. The cost of this situation totaled to nearly 18 billion euros by the end of June, 2015 (Şen, Shift p. 7). Apart from all this, Volkswagen Group has taught everyone that the management of stakeholders, engaging in ethical conduct, and corporate governance are all essential to long term profitability.

The Management of Stakeholders …

Just as the scandal was discovered by the Environmental Protection Agency, the acting CEO, Martin Winterkorn, who also served as a chairman of the board for the Audi silo of the Volkswagen Group, resigned. He aspired to sell more cars than any other company, and the diesel vehicle lines were essential to meeting that goal. Acting as both a principle, and an agent, a conflict of interest arises, known as the agency theory (MVH, Ch. 3: Lecture). He was also known as the protégé of Ferdinand Piëch, who was chairman of the supervisory board.

Volkswagen Stakeholder Management

The Volkswagen Group “does not have a single board of directors. Instead, it has a supervisory board that is meant to hold management to account” (Milne, Volkswagen: System failure). However, due to the emissions scandal, their system obviously does not work all that well. Half of the 20 seats of this supervisory board are German workers; this may seem strange, but companies in Germany who employ more than 2,000 people are required to do so (MVH, Ch. 3: Slides: Appendix B). To make matters worse, of these ten workers, four are “members of the Porsche and Piëch families” (Milne, Volkswagen: System failure). This adds another layer of agency theory, and frankly shows low cultural intelligence on the part of Volkswagen Group, as this creates conflict of interest, and does not work cross culturally.

Aside from ‘breaking the bank’ and losing the trust of many industry related stakeholders, they lost the trust of the most important stakeholder of all, the consumer. Not only did they lie to their consumers, who thought they were buying vehicles that were less harmful to the environment than vehicles with the traditional combustion engine, but they were harming some of them physically as well. The excess NOx released into the atmosphere by all of the 12 million vehicles with, ‘defeat’ software, caused a number of respiratory illnesses.

Ethical Conduct … or Misconduct …

The dictionary definition says that fraud is any “deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage”, (Dictionary) many are clearly represented in the Volkswagen Group crisis. The company cheated on emissions tests, lied to and harmed their consumers as well as the general public. Furthermore, CEO Martin Winterkorn, “was given a memo about emissions irregularities in 2014, though the company continued to install defeat devices in its cars” (Watkins, Gates, Ewing, Russel, The New York Times). The company had to know about this situation well before this, as they were installing ‘defeat’ software deliberately; but, what makes it worse is that they continued to install it even after they knew they had been caught. Since the scandal, the German government has gone after Martin Winterkorn.

Volkswagen Ethics

This ‘tone-at-the-top’ set by ex-CEO, Martin Winterkorn, seems to have trickled throughout different branches of the company. The rampant unethical behavior of upper executives was also present in other branches, like the engineering department. The decision to have installed the ‘defeat’ software may have been made at the top, but the engineers are probably the ones who came across it, and were definitely the ones who installed this software. This tells me that Volkswagen Group is working under the value approach in regards to control systems, this is because of the unethical behavior not being an isolated incident. In situations like this, you would think that compliance guidelines would be considered. However, in a company without a board of directors, but a board heavily influenced by management, it is not hard to see why this consideration got pushed aside.

Corporate Governance in Action …

The mix of C-level executives and positions on the supervisory board may be one of the leading factors that caused the scandal. However, keep in mind that this is not unique to Volkswagen Group, it is required by Germany in order for job security.

Corporate governance in Germany is viewed differently than in the United States, primarily in the way we structure our businesses. In Germany, the “emphasis’ is ‘on the preservation of jobs in contrast to’ the ‘U.S. model of shareholder returns” (MVH, Ch. 3: Slides: Appendix B). The combination of the pursuit of job preservation as well as management’s interest of leading sales in mind, has to have played a role in causing the crisis.

Volkswagen Crisis Management

While on the topic of corporate governance, one cannot forget about crisis management. The way in which a company responds to a crisis will help determine how the public will perceive them once the crisis has been disclosed. In the case of Volkswagen Group, many instances were handled poorly. One of which to be remembered, by current CEO, Matthias Müller, was that “it was a technical problem, we had not the right interpretation of the American law … We didn’t lie. We didn’t understand the question first” (Smith, Parloff, Hoaxwagen). Outrage was met with this attempt of an excuse for the company’s wrongdoings; furthermore, the company stopped allowing executives to be interviewed in response to said outrage. Before this though, the company had initially blamed a group of “rogue” engineers for the scandal (Smith, Parloff, Hoaxwagen). It not only shows unethical behavior throughout the organization, but it shows that executives are willing to blame their employees in order to secure their position in the company. This does not showcase great leadership capabilities, which one would expect from a company that has reached the size that Volkswagen Group has.

A ‘Shift’ …

            In conclusion, it is safe to say that the benefits of making socially responsible decisions in the long run do outweigh the consequences of making decisions in pursuit of short term profitability. While this may not always be the case, Volkswagen has endured the ramifications of not making socially responsible decisions. However, it may not be too late for the company.

Volkswagen has shifted many things around within the company since the scandal, but, the most important have to be their vision and corporate culture. A change in the way the company views civil society, the elimination of “fear of reprisal”, as well as third party experts getting involved in the supervisory board, are all things that need to happen (Rekowski, Shift p. 9). It now “aspires to help shape the transformation of manufacturing and mobility in the future” through establishing transparency in the organization, shifting from diesel to electric vehicle production, and also has started a number of health and environmental initiatives (Scholing-Darby, Shift p. 3). Only time will tell if these initiatives are enough to save the German giant in the long run.

References …

BA 400 Chapter 3 Lecture Slides. Michael Van Hemert. BA 400. W17 Semester.

Fraud. (n.d.). In Dictionary Online. Retrieved from

http://www.dictionary.com/browse/fraud?s=t

Milne, R. (2015, November 4). “Volkswagen: System failure.” Financial Times. Retrieved from

https://www.ft.com/content/47f233f0-816b-11e5-a01c-8650859a4767

Rekowski, M. (2016). Shift: The Volkswagen Sustainability Magazine. “Motor of Change.”                  Retrieved from https://www.volkswagenag.com/en/sustainability/shift.html

Scholing-Darby, M. (2016). Shift: The Volkswagen Sustainability Magazine. “Editorial.”     Retrieved from https://www.volkswagenag.com/en/sustainability/shift.html

Şen, S. (2016). Shift: The Volkswagen Sustainability Magazine. “A Year Marked by Crisis.”            Retrieved from https://www.volkswagenag.com/en/sustainability/shift.html

Smith, G. Parloff, R. (2016, March 7). “Hoaxwagen.” Fortune. Retrieved from

http://fortune.com/inside-volkswagen-emissions-scandal/

Watkins, D. Gates, G. Ewing, J. Russel, K. (2017, January 11). “How Volkswagen Has                    Grappled With Its Diesel Scandal.” The New York Times. Retrieved from              https://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html?_r=5&register=facebook

Organic SEO with Social Mention

Social Mention …

You may ask yourself, what is Social Mention? Is it an idea or a method of doing something? Neither, it’s an application that may very well keep your business up to date with all the latest trends. So, how do you use it, and what does it do? We will discuss both of these in a bit.

How … ?

The first thing you want to do is check the frequency with which your keywords are being searched for. In addition, you want to determine where and how people are talking about your product or service. Also, this can help you keep up to date on the ‘juicy’ gossip people spread about your business. This stage of keyword research may be time-consuming; thankfully, applications like Social Mention emerged to save us all some time!

Social Mention

If you were to work on a website for a customer, one of the first things you want to do is learn who they work with and prosper from. This will help you decide which social media, back-links, and blogs to focus on in terms of who will be likely to link back to the customers page.

Furthermore, Social Mention operates similarly to Google AdWords. You visit their main page and input the keywords you wish to track; also, you can input which social medias you want to track on. They have a list of over 100 different social media platforms to track your audience on. In just a few minutes you can see who visited your page. In addition, you can also filter the users in a variety of different ways like ‘sentiment’ or ‘influence’. Hence, understanding what people are saying, and in which context, should help you create content that will drive traffic to your page.

For a more in depth look at Social Mention, check out the blog at KissMetrics that I have linked below.

https://blog.kissmetrics.com/social-media-and-seo/

Bidding Optimization Strategies

Bidding Optimization …

Advertising on Google relies heavily on bidding optimization; yet, it isn’t necessarily true that the highest bid gets their ad ranked the highest. Equally as important, is the quality of the ad itself. Therefore, if two people bid the same amount and one has higher ad quality, then they will win the placement and rank more highly and at a lower cost than the other user. While, if both users had the same ad quality, the one who paid more will win the auction. Also, you don’t always pay the maximum of your bid for ad placement. Google charges you only as much as is needed to beat the runner up. In addition, if you would like to learn more about the AdWords Auction process, then please watch the video below.

Budgeting …

When you create an advertising campaign, you should always input a daily budget. You may ask yourself what an appropriate budget might be for your business. To answer this, ask yourself how much you can afford. You should assume that Google will consume your total budget every day, from this you can figure out a monthly budget. This monthly budget will indicate how much you can accomplish, but don’t get discouraged if you own a small business! You don’t necessarily need a large budget to achieve large results. Consequently, having a small budget can make it difficult to try different variations of ads. You will need to rely on having a strong quality score for your ads.

In addition, you need to look at the lifetime value of your customers. You need to think about how much money you will be making off of this customer over their lifetime, versus how much it cost you to acquire that customer. This will let you know if your ad was profitable in this instance.

For a more in depth, and professional perspective, check out the link to SearchEngineLand below!

http://searchengineland.com/bidding-optimization-strategies-take-search-marketing-results-next-level-220171

Common Bidding Strategies …

  • Cost-per-Click = This method is used to push traffic towards your webpage in multiple different ways. It is the most common bidding strategy.
  • Cost-per-Impression = This method is used primarily to build brand awareness. Or if you want more users to see your message.
  • Cost-per-Acquisition = This method is used to drive conversion; this could be in the form of a sale, phone call, completed web form, etc.

Flexible Bidding Strategies …

Bidding Optimization

Each of the six automated bidding strategies can be found in the graphic below; if you would like a more in depth look at what each of them do, then please follow the link below.

https://support.google.com/partners/answer/6172624?hl=en&ref_topic=6123873

What is Programmatic Display Buying?

What is Programmatic Display Buying?

Programmatic display buying involves using Google AdWords Display Network to gain customer attention earlier in the purchase funnel. The Google Display Network is structured to find the right customers for your business across millions of pages. Therefore, you can be strategic in putting your message in front of your audience at the right time and place.

First of all, to find the right audience you need to do keyword research using the Google Keyword Planner Tool. Next, make a list of keywords and topics and put it into AdWords, Google then uses contextual targeting to reach customers. In the Display Network, you can choose which sites your ads will be shown on. In addition, you can choose specific websites, different types of websites, or different audiences to display to. Also, using manual placement allows you to display on videos, games, or even mobile apps. If you want to target a specific type of consumer you should choose to market to in-market audiences. Opposite, if you want to target a broad audience you should use affinity audience targeting.

In addition, you want to utilize a variety of different ad formats; this is your chance to engage the user. Using Display you can increase brand awareness of your business, build loyalty, and sell more products or services.

Programmatic Display Buying

Goals and Results …

Finally, you will want to continuously monitor your performance. AdWords Display lets you see how your results stack up to your goals. It does this by showing you which pages gave you the most sales at the lowest cost, and which ads got the most clicks. Looking at your report, you can make adjustments to your bidding and targeting strategies to get the most value. In addition, AdWords may automatically adjust some things if data shows it will help you reach your goals.

For a more in depth and professional outlook of programmatic advertising, you should look to MarketingLand (link below).

http://marketingland.com/library/display-advertising-news/display-advertising-programmatic-media-buying

Best Keyword Research Techniques

Digital Marketing: Keyword Research

This blog is one of my most important ‘Student Best Practices in Digital Marketing‘ because, it all starts with research. Before creating a search campaign in Google AdWords, you must do extensive keyword research on keyword variations. Consumers use keywords in search engines to define what service, product, or information they are looking for. Therefore, keywords model consumer search behavior. These are the keywords you should focus on, either highly relevant or high volume keywords.

From these keywords you gather insight as to how far in the purchase funnel a particular consumer might be. For example, whether or not they use short or long-tail keywords in their search. A short-tail keyword could be ‘electric car’, while the long-tail keyword would be ‘best electric car 2016’. Long-tail keywords tend to tell the marketer that the consumer is closer to purchasing the product being researched.

A useful tool in finding accurate search volumes for a particular keyword is Google AdWords Keyword Planner Tool. It’s become the standard for keyword research planning. The Keyword Planner Tool will help you get new keyword ideas using a phrase, and it can also give you search volume and trend data.

keyword research

The Keyword Planner Tool can provide closely or broadly related search terms relative to a given keyword. It helps in determining consumer behaviors, and also helps by estimating the budget of all of your campaigns. It is usually beneficial to use the broad match type, as this will help you reach the widest audience possible. There are many other match types you can use for keywords as well. Such as, modified broad match type, phrase match type and exact match type.

If you would like to learn how to start performing keyword research, you should check out the blog I have linked below:

https://moz.com/beginners-guide-to-seo/keyword-research