Running Head: Skoda Auto Case Study
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Skoda Auto Case Study
Audrie Bielskis
Siena Heights University
Skoda Auto
Introduction
Skoda automobiles made the first car to ever be produced in Eastern Europe. Skoda’s
headquarters are located in Milada Boleslav in the Czech Republic. The company was grabbed
by Hitler in 1939 and made into an armaments factory. After World War II, Skoda was
nationalized by the Soviets and became the only Czech passenger car manufacturer. After the
Velvet Revolution in Czechoslovakia in 1989, the Czech Republic began the privatization of
national assets. In 1991 Skoda became the fourth brand of the Volkswagen Group. After this
acquirement, Skoda progressed so well improving efficiency and attractiveness of its cars that
numerous honors were bestowed upon the company in 2006.
Situation Analysis
STEEP Analysis
Sociocultural Factors:

The demand for new passenger cars in 2007 is expected to remain flat in Central
Europe(-), grow in Eastern Europe(+), and fall slightly in Western Europe(-).

Substitute products, such as bicycles, are being replaced by automobiles in many
countries.(+)

Cars are no longer out of reach for Chinese(+)

The global automobile industry has become intensely competitive with Toyota, Nissan,
and Honda attacking worldwide, General Motors and Ford Motor regrouping, and
Chinese Auto firms expanding globally.(-)
Technological Factors:

Automobile manufacturers are trying to produce automobiles that operate on new forms
of energy with little success(-)
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Economical Factors:

The price of nonrenewable energy sources is escalating and petroleum prices are
increasing as a result(-)

A price war is beginning as sticker prices on Chinese cars is falling by as much as 15%(-)

Mergers are being encouraged, but many past cross-border mergers and joint ventures in
the industry have had a difficult time surviving (-)

The strongest potential growth in automobile sales is projected to be in developing
countries of Asia, South America, Eastern Europe, and Africa rather than the mature
economies of Western Europe, North America, and Japan. (+)
Ecological Factors: There are no obvious ecological factors
Political Regulation Factors:

Tariffs on imported cars began to fall after Beijing’s accession to the World Trade
Organization (+)
SWOT Analysis
Strengths:

Skoda’s production in 2006 was up 12.6% over 2005 with a production of 556,347
vehicles.

Skoda introduced 2 new vehicles, the Roomster and Fabia hatchback, in 2006.

In 2006, Skoda won numerous awards for producing a quality automobile.

Skoda is the largest employer in the Czech Republic with a full-time employee increase
of 7% from 2005

2006 Skoda revenues were 203 billion Czech crowns, up 8.7% from 2005.

2006 Skoda net income was 11 billion Czech crowns, up 40.1% from 2005.
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Skoda maintained its position as the number one carmaker in Central Europe despite flat
markets.

Highest growth in 2006 sales were achieved by Skoda in Eastern Europe.

Sales of Skoda in Russia doubled in 2006 and went up 64.2% in Ukraine.

More than 10% sales growth was recording in Germany, Spain, Belgium, Greece,
Switzerland, Finland, and Luxembourg.

Skoda’s vehicle deliveries in Asia are also up significantly from 2005.

An agreement was signed for a joint manufacturing plant for the Volkswagen and Skoda
Auto brands in Kaluga Russia.

A licensing agreement was signed to allow production of the Skoda Fabia and Skoda
Superb model lines in China in June 2006.

Skoda has developed a network of authorized sales and service partners that is up 5.5%
from 2005.

To improve service quality, Skoda has trained over 4,400 service employees in the Czech
Republic and abroad.

100 new Skoda dealerships have been constructed

In 2000, Skoda established the Skoda Auto School of Economics which has a bachelor
program that allows students to work in the plant to earn credit for their studies in
management. Demand for entry to this school has surpassed supply.

Suppliers of Skoda are selected in a systematic and controlled process.

Online negotiations involving selection of suppliers have gone up from 220 in 2005 to
403 to 2006
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Skoda has received an official certificate that documents Skoda’s introduction and use of
a quality management system in the areas of development, production, sales, and service
and that the system used complies with the ISO standard.

In 2006, Skoda launched the “Healthy Company” program which focused on improving
employee health and fighting diseases.
Weaknesses:

Skoda has historically been considered a joke.

Skoda had a bad reputation throughout the twentieth century because of company
nationalization by the soviets after World War II.

Models were outdated, factories became inefficient, and workers were not well trained.

After 1960, Skoda began producing cars that had little style and often looked like a metal
box

The name “Skoda” in the Czech language means “a shame”.

Parent company of Skoda, Volkswagen, has high production costs, products with inflated
sticker prices, and deteriorating quality.

Volkswagen’s global markets are suffering
Opportunities & Threats:

Listed in the STEEP Analysis. Opportunities will have a (+) next to them and
threats have a (-) next to them.
Case Problem Areas
Skoda would like to know whether they should continue to build assembly plants outside of the
Czech Republic. The company also wonders whether Skoda automobiles should be exported to
the United States.
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Alternative Solutions
1. Try to make more agreements for joint plants with Volkswagen. Do so in countries of
Asia, South America, Eastern Europe, and Africa. Begin exporting to the United States.
Positives:

Industry projections suggested the strongest potential growth in
automobiles sales would be in these developing countries

Developing countries will most likely have low labor costs

Sales for Skoda in Asia and Eastern Europe have increased significantly
from previous years.

Volkswagen operates plants in Africa, the Americas, the Asia/Pacific
region, and Europe

Volkswagen has already signed an agreement for a joint
manufacturing plant for the Volkswagen and Skoda Auto brands in
Russia, so they’re probably open to more

Exportation costs would probably be lower because with more plants,
vehicles/vehicle kits may not have to be shipped as far. Prices of vehicles
may be able to decrease as a result of this

Energy costs will probably not change much

Skoda sales in Czech Republic are decreasing, need to look elsewhere for
sales
Negatives:

Sales of VW products in the U.S. are falling
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
VW’s losses in 2005 in the U.S. alone were more than $1 billion

Developing countries may not have a workforce with the right skills

Many cross-border mergers and joint ventures in the industry in the past have had
a difficult time surviving

Depending on location in each country, there may not be access to necessary
infrastructure or closeness to important global markets

Many people in the United States have never heard of Skoda
2. Try to make more agreements for joint plants with Volkswagen. Do so in countries of
Asia, South America, Eastern Europe, and Africa. Do not export to the United States.
Positives:

Industry projections suggested the strongest potential growth in
automobiles sales would be in these developing countries

Developing countries will most likely have low labor costs

Sales for Skoda in Asia and Eastern Europe have increased significantly
from previous years.

Volkswagen operates plants in Africa, the Americas, the Asia/Pacific
region, and Europe

Volkswagen has already signed an agreement for a joint
manufacturing plant for the Volkswagen and Skoda Auto brands in
Russia, so they’re probably open to more
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
Exportation costs would probably be lower because with more plants,
vehicles/vehicle kits may not have to be shipped as far. Prices of vehicles
may be able to decrease as a result of this

Energy costs will probably not change much

Skoda sales in Czech Republic are decreasing, need to look elsewhere for
sales
Negatives:

Developing countries may not have a workforce with the right skills

Many cross-border mergers and joint ventures in the industry in the past have had
a difficult time surviving

Depending on location in each country, there may not be access to necessary
infrastructure or closeness to important global markets
3. Continue to build assembly plants outside of the Czech Republic. Do not build plants in
countries with mature economies such as in Western Europe, North America, and Japan.
Do not export to United States.
Positives:

Skoda sales in Czech Republic are decreasing, need to look elsewhere for
sales

Energy costs could be decreased as more energy efficient plants are built

Skoda has the option to build plants that operate on less expensive
renewable energy
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
Strongest potential growth in automobiles sales are projected to be in
developing countries of Asia, South America, Eastern Europe, and Africa
rather than mature economies

Labor costs in Asia, South America, Eastern Europe, and Africa will likely
be lower than those in mature economies

Sales for Skoda in Asia and Eastern Europe have been increasing
significantly from previous years.

Exportation costs would probably be lower because with more plants,
vehicles can be assembled closer to the place of sale. Prices of vehicles
may be able to decrease as a result of this

Skoda can choose the exact location they prefer, rather than being forced
to use one already exists in a possibly less than ideal location

Can ensure closeness to necessary infrastructure and important
global markets
Negatives:

Costs more to build new plants than to agree to share already existing ones

If they should choose to build plants that operate on renewable energy, it will cost
slightly more to do so than it would to build a nonrenewable energy dependent
plant

Developing countries may not have a workforce with the right skills
Recommendation and Implementation
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Based on the above given information, I would suggest the third alternative. There are more
positives than the first two alternatives and it is tied with alternative two for the least amount of
negatives.
Asia, South America, Eastern Europe, and Africa should all be targeted as these are the areas
with the highest projected growth. Skoda should continue to market the vehicles by emphasizing
how efficient, attractive, and family friendly they are. Their focus on customers is also excellent
and should be continued as well. Price should stay the same or decrease if possible. Many people
in developing countries will be less likely to have the financial resources that people living in
mature economies will. The purchase of a car will be a much bigger decision and price will be a
main factor in their decision making process. The marketing strategies Skoda has already been
using have been working well, they just need to expand them to other countries. There is not
much that can be done about the cost of building new plants. I believe that the cost of building
plants that operate on renewable resources will be made up for by the money saved from not
having to purchase the increasingly costly nonrenewable resources. The issue of a workforce
without the right skills could possibly be solved by offering graduates of the Skoda Auto School
of Economics incentives to work in these new plants and to help train new employees. Maybe
Skoda could even open up more schools in different countries as Skoda Auto School of
Economics has had more applicants than can be accepted.