University of Jordan

Faculty of Business
Strategic Management

“Skoda Auto”

Case Study

Prepared By

Fathi Salem Mohammed

2009
 Table of Contents

Topics Page
History 3

Vision and Mission 4

Porter’s Five Forces Framework 5

PESTEL Framework 6
External Audit 7
8
CPM-Competitive Profile Matrix
External Factor Evaluation (EFE) Matrix 9

Financial Ratio Analysis 10

Internal Audit 10
Internal Factor Evaluation (IFE) Matrix 11

SWOT Matrix 12

SPACE Matrix 14

Grand Strategy Matrix 15

The Boston Consulting Group (BCG) Matrix 16

The Internal-External (IE) Matrix 16

The Quantitative Strategic Planning Matrix (QSPM) 17

Recommendations 19

References 19

History:

2
In 1895 Skoda Automobile Company was founded, when Vaclav Laurin and
Vaclav Klement began manufacturing Slavia-brand bicycles. Just four years later,
Laurin & Klement began manufacturing motorcycles.

1905
The first car, called the “Voiturette A”, leaves the factory gates and thanks to its
quality and attractive appearance soon gains a stable position in the emerging
international automobile markets.

1907
Laurin & Klement set up a joint-stock company that goes on to export cars to
markets the world over

1925
The Laurin & Klement automobile factory merges with the Skoda machinery
manufacturing company in Plzeň.

1930
ASAP (“Akciova Společnost pro Automobilov Průmysl” – the Automotive
Industry Joint-stock Company) is founded and begins using assembly-line
production methods, which are revolutionary for their time.

1939–1945
During the war years, the factory focuses on producing materials for the military.
Just a few days before the war ends, the factory is bombed and sustains
considerable damage. The enterprise is nationalized in the autumn of 1945.

1946
The enterprise’s reconstruction takes place under a new name, AZNP
(“Automobilové zavody, narodni podnik” – Automotive Plants, National
Enterprise).

1964
The enterprise, now with production area of 800,000 square meters and over
13,000 people on the payroll, begins producing the popular car Š 1000 MB.

1987
Unveiling of the long-awaited Skoda Favorite, a car with a modern design that
later helps to transform Skoda Auto
3
1991
April 16 marks the beginning of a new chapter in the Company’s history, when it
is acquired by the strategic partner Volkswagen. Skoda becomes the Volkswagen
Group’s fourth brand.

1996
Production commences of another milestone car model for the Company – the
Skoda Octavia.

Vision

To have the biggest market share in Europe by looking for extraordinary

solutions those satisfy extraordinarily demanding customers

Mission
Is to provide quality sales, service and transportation needs for our customers.
This is and will be accomplished through a dedicated team of employees whose
number one goal is customer satisfaction along with a management team whose
responsibility is to ensure employee satisfaction, and customer enthusiasm.

Three basic values of Skoda brand are:

Intelligence: We continuously seek innovative technical solutions and new ways
in which to care for and approach the customers that are most important for us.
Our conduct toward the customers is aboveboard, and we respect their desires
and needs.
Attractiveness: We develop automobiles that are aesthetically and technically of
high standard and always continuous an attractive offer for our customers not
only in terms of design or technical parameters but also the wide range of offered
services.
Dedication: We are following the steps of founders our company Messrs. Laurin
and Klement. We are enthusiastically working on the further development of our
vehicles; we identify ourselves with our products.
Porter’s Five Forces Framework:

4
The Threat of Entrants:

Eastern Europe countries that were in former Soviet Union attract many
competitors who find in these countries new market, new customers, and cheap
labors to reduce costs so the threat of entrants is very high.

Bargaining Power of Buyers:

The power of buyers is high because consumers – especially after globalization

have many choices from which to select when they purchase a car

Bargaining power of suppliers:

Many automobile companies move toward Just-In-Time inventory system and

that pushes many suppliers to make their plants near these automobile companies,
and some of these automobile companies made their own parts, so the power of
supplier is very weak.

Threat of Substitutes

The threat of substitute will be public transportation in big, crowded, and heavy
populated countries, this substitute may be faster and cheaper than driving a car
there, because people need to find a parking for their cars and usually it will be
with fees.

Competitive Rivalry:

The automobile market is one of the most competitive markets in the world, in
addition, there are many companies try to reduce their costs by moving to low
cost countries such as Eastern Europe and Asia countries, and try to find new
market, so the competitive rivalry is high in the long run.

PESTEL Framework:
Political:
5
 - Heavy taxes and tariffs in some countries make Skoda increase its
automobiles’ price.
- Political sanctions, violence and terrorism make some limitation to expand
globally in Asia market.

Economic:
- Fuel Prices fluctuations affect the costs and that reflect on the price of
automobiles, so that may change the customer behavior toward some
features of automobiles.
- Skoda could get benefits from economic unions such as Central European
Free-Trade Area (CEFTA) which includes: Poland, Hungary, Slovakia,
Czech, Slovenia, Romania, and expand heavily there.

Social:
- Negative customers' perception toward Skoda brand because of bad images
about automobiles industry in Eastern Europe countries.
- Increase in population in some countries make their governments to
redesign their traffic and make public transportation more useful will affect
automobiles sales in these countries.

Technological
- Should exploit evolution in technology to introduce new features and
options to reposition Skoda brand and to get competitive advantage.

Environmental:
- Because of pollution problem and its effect on Ozone, Skoda should
develop and concentrate on manufacturing green environmental cars.
Legal:
- Green marketing laws and laws on environmental issues such as industrial
pollution.
- Currency exchange
- Legal registration

External Audit
Opportunities Threats

6
 1. Growing automobile
industry in Middle East by
9%, Southeast Asia by
14%, and Africa by 8%.
2. By 2010, electronics are
expected to account for
nearly 40 percent of an
average vehicle’s value.
3. The forecast for the
market for new passenger
cars in Russia is +11%.
4. U.S. small-car demand
outpacing North American
capacity
CPM-Competitive Profile Matrix
7
1. Highly crowded and
competitive environment.
2. Franchised dealerships are
free to set vehicle prices,
and they may or may not
offer customers the
discounts that automakers
provide.
3. Continuous increasing in
oil prices may affect
automobiles sales around
the world.
 Skoda Peugeot Renault Opel

Critical Weig Ratin Weight Ratin Weight Ratin Weight Ratin Weight
Success ht g ed g ed g ed g ed
Factors Score Score Score Score

Price 0.12 4 .48 2 .24 3 .36 2 .24

Financial 0.15 3 .45 4 .60 3 .45 4 .60

Position

Advertisi 0.09 2 .18 3 .27 2 .18 4 .36

ng

Innovatio 0.22 2 .44 3 .66 2 .44 4 .88

n

Market 0. 22 2 .44 4 .88 2 .44 4 .88

Share

Managem 0.10 3 .30 3 .30 3 .30 3 .30

ent

Global 0.10 3 .30 4 .40 3 .30 4 .40

Expansio
n

Total 1.00 2.59 3.35 2.47 3.66

External Factor Evaluation (EFE) Matrix

8
 Key External Factors Weight Rating Weighted
Score
Opportunities
1. Growing automobile industry in 0.15 3 0..45

Middle East by 9%, Southeast

Asia by 14%, and Africa by 8%.
2. By 2010, electronics are 0.15 2 0.30

expected to account for nearly 40

percent of an average vehicle’s
value

3. The forecast for the market for 0.20 3 0.60

new passenger cars in Russia is

+11%

4. U.S. small-car demand outpacing 0.15 2 0.30

North American capacity

Threats

1. Highly crowded and competitive 0.15 3 0.45

environment

2. Franchised dealerships are free to 0.10 2 0.20

set vehicle prices, and they may
or may not offer customers the
discounts that automakers
provide.
3. Continuous increasing in oil 0.10 2 0.20
prices may affect automobiles
sales around the world.
Total 1.00 2.50

Financial Ratio Analysis 12/2006

Growth Rates % Skoda Industry
Sales (Qtr vs year ago qtr) 1.12 9.40

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Net Income (YTD vs YTD) 1.48 11.80
Liquidity Ratios
Current Ratio 1.48 2.10
Quick Ratio 1.13 0.90
Efficiency Ratio
Assets to sales 0.52 11.0
Profitability Ratios
Returns to sales 0.055 3.2
Returns to Assets 0.11 6.4
Debt Ratio
Total liabilities to 1.80 277.2

Internal Audit

Strength Weakness
1. Skoda won numerous awards 1. Poor brand name due to Skoda
for producing a quality relates to Eastern Europe
automobile. origins that in the past the cars
had an image of poor vehicle
2. Skoda implements low-cost quality, and design.
country sourcing strategy.
2. Total Skoda market share is
3. Skoda is the largest employer 1.7%.
in the Czech Republic.
3. Skoda has problems with their
4. Total assets are gradually assembly plants outside of the
increasing. Czech Republic.
5. Skoda achieves highest growth
in 2006 sales in Eastern
Europe, number one carmaker
in Central Europe, and grew
its Western Europe market
share to 2.1

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted Score

Strengths
10
 1. Skoda won numerous awards for 0.15 3 0.45

producing a quality automobile.

2. Skoda implements low-cost 0.15 3 0.45

country sourcing strategy.

3. Skoda is the largest employer in 0.08 3 0.24

the Czech Republic.

4. Total assets are gradually 0.10 3 0.30

increasing.

5. Skoda achieves highest growth in 0.18 4 0.72

2006 sales in Eastern Europe,

number one carmaker in Central
Europe, and grew its Western
Europe market share to 2.1
Weaknesses
1. Weak brand name due to Skoda 0.18 1 0.18
relates to Eastern Europe origins
that in the past the cars had an
image of poor vehicle quality, and
design.

2. Total Skoda market share is 1.7%. 0.08 2 0.16

3. Skoda has problems with their 0.08 1 0.08

assembly plants outside of the
Czech Republic
Total 1.00 2.58

SWOT Matrix

11

Opportunities
1. Growing automobile
industry in Middle East by
9%, Southeast Asia by 14%,
and Africa by 8%.
2. By 2010, electronics are
expected to account for
nearly 40 percent of an
average vehicle’s value.
3. The forecast for the market
for new passenger cars in
Russia is +11%.
4. U.S. small-car demand
outpacing North American
capacity
Threats
1. Highly crowded and
competitive
environment.
2. Franchised dealerships
are free to set vehicle
prices, and they may or
may not offer
customers the discounts
that automakers
provide.
Strengths
1. Skoda won numerous awards
for producing a quality
automobile.
2. Skoda implements low-cost
country sourcing strategy.
3. Skoda is the largest employer
in the Czech Republic.
4. Total assets are gradually
increasing.
5. Skoda achieves highest
growth in 2006 sales in
Eastern Europe, number one
carmaker in Central Europe,
and grew its Western Europe
market share to 2.1.
S-O Strategies
1. Using price as a competitive
advantage to concentrate on Russia
Market (S2,O3)
2. Open assembly plant in Mexico to
feeding North America market
(S1,S2,S5,O1,O4)
S-T Strategies
1. Increase marketing efforts to
make new repositioning(S4,
S5, T1, T3)
2. Focus on producing middle
and small engine
cars(S1,S2,T3)
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Weaknesses
1. Poor brand name due to
Skoda relates to Eastern
Europe origins that in the
past the cars had an image
of poor vehicle quality,
and design.
2. Total Skoda market share
is 1.7%.
3. Skoda has problems with
their assembly plants
outside of the Czech
Republic.
W-O Strategies
1. Increase market share by
entering new growth market in
Middle east, Southeast Asia,
and Africa(W2,O1)
2. Improving automobiles quality
by introducing innovative,
electronic features, and design
(W1,O2)
W-T Strategies
1. Offer 5 years/200000
Kilometer warranty on all
vehicles (W1, T1)
SPACE Matrix
Financial Strength Rating Environmental Rating
Stability

Return on assets 2 Rate of inflation -3

Leverage 1 Technological changes -4

Net Income 2 Price Elasticity of -6

demand

ROE 2 Competitive pressure -6

Barriers to entry new -6

markets

Average 1.75 Average -5

Y-axis -3.25

Competitive Rating Industry Strength Rating

Advantage

Market share -1 Growth potential 2

Product Quality -2 Financial stability 2

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Customer Loyalty -1 Ease of entry new 3
markets

Control over other -1 Resources utilization 2

parties

Technological know-how -1 Profit potential 3

Average 1.20 Average 2.40

X-axis 1.20

Directional vector point is :( 1.20, -3.25)

FS
Conservativ Aggressive
e

C IS
A

Defensive Competitiv
e

ES

Grand Strategy Matrix

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 Rapid Market Growth

Quadrant II Quadrant I

Weak Strong
Competitiv
Competitiv
e
e
Position
Position

Quadrant IV
Quadrant III
Slow Market Growth

The Boston Consulting Group (BCG) Matrix

Market share position

Stars Question Marks

Industry
Sales Growth
Rate Skoda

Cash Caw Dogs

The Internal-External (IE) Matrix

15
 The IFE Total Weighted Score

Strong 3.0 to 3.99 Medium 2.0 to 2.99 Low 1.0 to 1.99

High
I II III
3.0 to 3.99

Medium IV V VI
The EFE
2.0 to Skoda
Total
Weighted
2.99
Score

VII VIII IX

Low

1.0 to 1.99

The Quantitative Strategic Planning Matrix (QSPM)

Strategy 1 Strategy 2

Open new Reposition of brand

assembling plant name strategy by
for Skoda cars in increasing marketing
Mexico and make efforts
it as a base to enter
American Market

Key Internal Factors Weight AS TAS AS TAS

Strengths
Skoda won numerous awards for 0.15 2 0.20 2 0.20
producing a quality automobile

Skoda implements low-cost country 0.15 - - - -

16
sourcing strategy

Skoda is the largest employer in the 0.08 - - - -

Czech Republic

Total assets are gradually increasing 0.10 4 0.40 2 0.20

Skoda achieves highest growth in 2006 0.18 1 0.18 2 0.36

sales in Eastern Europe, number one
carmaker in Central Europe, and grew
its Western Europe market share to 2.1
Weaknesses
Weak brand name due to Skoda relates 0.18 2 0.36 4 0.72
to Eastern Europe origins that in the
past the cars had an image of poor
vehicle quality, and design
Total Skoda market share is 1.7% 0.08 4 0.32 2 0.16

Skoda has problems with their 0.08 - - - -

assembly plants outside of the Czech
Republic
SUBTOTAL 1.00 1.46 1.64

Strategy 1 Strategy 2

Open new Reposition of brand

assembling plant name strategy by
for Skoda cars in increasing marketing
Mexico and make efforts
it as a base to enter
American Market

Key Internal Factors Weight AS TAS AS TAS

Opportunities
Growing automobile industry in Middle 0.15 1 0.15 3 0.60
East by 9%, Southeast Asia by 14%,
and Africa by 8%.
By 2010, electronics are expected to 0.15 - - - -
account for nearly 40 percent of an
average vehicle’s value
The forecast for the market for new 0.20 - - - -
passenger cars in Russia is +11%
17
U.S. small-car demand outpacing North 0.15 4 0.60 2 0.30
American capacity

Threats
Highly crowded and competitive 0.15 4 0.60 3 0.45
environment
Franchised dealerships are free to set 0.10 - - - -
vehicle prices, and they may or may not
offer customers the discounts that
automakers provide

Continuous increasing in oil prices may 0.10 - - - -

affect automobiles sales around the
world
SUBTOTAL 1.00 1.35 1.35

SUM TOTAL ATTRACTIVENESS 2.91 2.99

SCORE

Recommendation

Open new assembling plant in Mexico and make it as a base to enter

American market and reposition of brand name strategy by
increasing marketing efforts

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References
1. www.skoda-auto.com

2. www.skoda.co.uk

3. www.euromonitor.com

4. www.marketresearch.com

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