Social Performance in Organizations
Volkswagen Automobile Company, established in the year 1937 has for a long time existed as one of the most admirable automobile manufacturers in the world. The corporation has been ranked as the second largest among automobile producing companies for several times. The paper will discuss the nature and structure of the Volkswagen Company, its stakeholders and their contribution towards financial performance of the firm and lastly, its controversial corporate responsibility issue.
The Nature and Structure of the Volkswagen Company
The Volkswagen Company is an automotive manufacturing company with subsidiaries all over the world. The firm’s headquarters is based in Germany. The company’s main business is based on the design and manufacturing of both passenger as well as commercial vehicles (Ladd, 2014). Other firm’s products include the manufacture and design of engines and motorcycles. The company is one of the greatest performing automotive businesses in the world, considering its track record in the year 2012 where it emerged as the automotive company with the second largest number of car production in the world (Ladd, 2014). In fact, the only firm that was above the Volkswagen Company in the year 2012 was Toyota, while the General Motors came third. In the year 2014, the company made a record of the production of 10.14 million cars.
The Volkswagen Company has two major business divisions. First is the financial services division and second is the automotive sector (Ladd, 2014). Currently, there are 340 subsidiaries affiliated to the Volkswagen Company all over the world (Ladd, 2014). The corporation further engages in joint ventures with other firms in foreign countries, to manufacture and distribute vehicles in those nations. For example, in China, the Shanghai Volkswagen and the FAW Volkswagen are just but some of the examples of the joint ventures of the company (Ladd, 2014). Founded in the year 1937, the corporation is a public company which is listed on the Frankfurt stock exchange and, therefore, the members of the public are invited to buy shares.
There are two major external factors affecting the Volkswagen Automobile Company. These are the legal aspects and competition. First, regarding the legal environment, the government of the Republic of Germany and other countries hosting the subsidiary firms of Volkswagen like China, are committed towards environmental protection. Volkswagen Automobile Company, therefore, faces a lot of challenges complying with the strict environmental protection law due to the dangerous emissions from its vehicles. Another legal factor is the protectionism by other countries like the US. The protectionism policies imposed by different nations to protect their local businesses affect the company greatly because it finds it difficult to penetrate the international market and compete with other automobile manufacturers effectively. The second challenging environmental factor faced by Volkswagen is competition from other rival automobile companies. Specifically, the Toyota Company and the General Motors Company are some of the greatest rivals of the Volkswagen Company. It therefore calls for a lot of innovation to make the firm relevant for the coming years.
With the rising number of customers in the company, the greatest challenge faced by the latter is the customer satisfaction. Automotive purchasers affiliated to the firm demand a very high quality product with very minimal breakdown issues and that fits their status in society. The employees also demand a good salary for their workers to perform better and be able to come up with the automotive products of unquestionable quality (Kfuri, 2012). Other issues include the environmental conservation such as reduction of pollution and looking after the welfare of the suppliers. These acts are referred to as corporate social responsibility. The main stakeholders of the company are therefore the employees, the suppliers, the customers and the investors and the community.
The first and the most important stakeholders to the Volkswagen Company are the employees (Kfuri, 2012). These people are involved in the day to day activities and are responsible for the production of the Volkswagen vehicles. What these employees require from the company in exchange for their quality service is a good salary and a proper working environment. Motivation, using both the monetary and non-monetary initiatives, should the initiated by the firm to keep the motivation of the workers high. They, therefore, play very key roles in the company by ensuring quality and timely production of vehicles and enhance good relations between the community and the company.
The second most important stakeholder of the company are the customers. These are the people who ensure the continuity of the business by purchasing the products. Without them, the company is dead. The profits earned by the firm are further a reflection of how the business treats its employees in terms of the salary payment and the prices (Kfuri, 2012). Too high prices scare away customers while reasonable prices enhance profits and keep the clients to the company. The third most fundamental stakeholder for the Volkswagen Company is the investors. These are the people who are determined to see the firm rise, and they, therefore, loan money to the business to assist in its expansion for the latter to realize a maximum output. The investors in most cases may not be employees of the company, but they own the shares in it and are interested in the growth of it so that they may also benefit from the dividends received from the business.
There are several ways in which a company may benefit financially from its stakeholders. First, the investors or shareholders participate in the financial decisions of the firm by sitting in the meetings and passing resolutions (Kfuri, 2012). In the event that the company is not in a financial position to carry out its activities in an efficient manner, the shareholders or the investors always come in to rescue the business by providing the necessary revenue required to save the company. Through the purchase of shares of the firm, the capitalization of the latter is increased. In Volkswagen, for example, the major shareholders who are also the financiers of the business are; Porsche Automobile with a shareholding of 52 percent of the total shares in the company. The Lower Saxony state enjoys 20 percent of the shares, which translate to the same percentage of money pumped into the firm. Lastly, the Qatar Holdings and some other small shareholders all have 17 percent and 10 percent respectively (Ladd, 2014). Apart from the profits of the company the contribution of the shareholders does a great part in enhancing the financial situation of the business. Since each shareholder is committed to ensure that his/her money does not go to waste, he/she is so much determined to ensure that the company has a proper leadership with reasonable salaries. They, therefore, determine the governance structure of the company which is essential in enhancing the financial performance of the firm.
Another way in which the stakeholders of a company participate in its financial performance is through the purchase of goods and services (Nolte & Wright Butcher, 2012). The goods of the firm which are vehicles need a company to establish a good customer base through advertisement for it to survive. A business may build its financial situation where it has a large pool of clients (Nolte & Wright Butcher, 2012). Profits are income of the company, which is generated through the purchase of items produced by the firm. The best deal a business may offer to its customers is, therefore, properties of very high and unquestionable quality. The price must also be very reasonable to attract the customers from all the walks of life. The clients also feel so much appreciated when the company gives a proper after sale service. It builds the confidence of the customer to the firm and, therefore, creates high chances of return which means, good money for the business.
Thirdly, a good relation and interaction between the company and its stakeholders who include its customers, investors, shareholders and suppliers create a good environment for proper financial performance of a company (Nolte & Wright Butcher, 2012). In business, earning a profit is not always a big deal for a firm but sustaining the profit is what matters. The sustenance of a good record of financial performance can, therefore, only be enhanced by good relations which include early payments, giving discounts and rewarding loyal customers (Nolte & Wright Butcher, 2012). Lastly the stakeholders are the ambassadors of the company to the public and they, therefore, sale the name of the company outside. They seek for political, social and economic connections for the success of the business. While sometimes these interactions do not give a direct benefit, they improve the image of the company and, therefore, find favor amongst customers.
Controversial Corporate Responsibility Issue Associated with the Company
The most controversial social responsibility issue of the company is how to produce vehicles that minimize environmental pollution (Mansouri, 2016). The fuel and fumes emitted by the vehicles always contain very dangerous chemicals to the health of a human being and, therefore, endangering their lives (Mansouri, 2016). Making pollution free vehicles is, therefore, the nightmare for the company. Volkswagen faces allegations of claiming to produce environmentally safe vehicles as a way of having an unfair advantage over other motor vehicle manufacturing companies, when in real sense, their cars are polluting the environment (Mansouri, 2016). Volkswagen is now not only perceived as an environmentally polluting company but also a firm the management of which is dishonest to the stakeholders.
In conclusion, social responsibility touches on the manner in which the company relates with its stakeholders. In the case of the Volkswagen Company, the stakeholders include the employees, the customers, the shareholders, the community and the suppliers. All these people play a very crucial role towards the financial performance of the firm and must thus be treated with respect. Good interactions are, therefore, necessary for the creation of a good image for the company. Lastly, Volkswagen has been very dishonest in its social responsibility through lying about the environmental safety of the emissions of its vehicles.