SWOT ANALYSIS OF SKODA

Strengths
To identify its strengths, Skoda UK carried out research. It asked customers directly for their opinions about its cars. It also used reliable independent surveys that tested customers' feelings.

For example, the annual JD Power customer satisfaction survey asks owners what they feel about cars they have owned for at least six months. JD Power surveys almost 20,000 car owners using detailed questionnaires. Skoda has been in the top five manufacturers in this survey for the past 13 years.

In Top Gear's 2007 customer satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Skoda the 'number 1 car maker'. Skoda's Octavia model has also won the 2008 Auto Express Driver Power 'Best Car'.

Skoda attributes these results to the business concentrating on owner experience rather than on sales. It has considered 'the human touch' from design through to sale. Skoda knows that 98% of its drivers would recommend Skoda to a friend. This is a clearly identifiable and quantifiable strength. Skoda uses this to guide its future strategic development and marketing of its brand image.

Strategic management guides a business so that it can compete and grow in its market. Skoda adopted a strategy focused on building cars that their owners would enjoy. This is different from simply maximising sales of a product.

As a result, Skoda's biggest strength was the satisfaction of its customers. This means the brand is associated with a quality product and happy customers.

Weaknesses
A SWOT analysis identifies areas of weakness inside the business. Skoda UK's analysis showed that in order to grow it needed to address key questions about the brand position. Skoda has only 1.7% market share. This made it a very small player in the market for cars. The main issue it needed to address was: how did Skoda fit into this highly competitive, fragmented market?

Perceptions of the brand

This weakness was partly due to out-dated perceptions of the brand. These related to Skoda's eastern European origins. In the past the cars had an image of poor vehicle quality, design, assembly and materials. Crucially, this poor perception also affected Skoda owners. For many people, car ownership is all about image. If you are a Skoda driver, what do other people think?

From 1999 onwards, under Volkswagen AG ownership, Skoda changed this negative image. Skoda cars were no longer seen as low-budget or low quality. However, a brand 'health check' in 2006 showed that Skoda still had a weak and neutral image in the mid-market range it occupies, compared to other players in this area, for example, Ford, Peugeot and Renault. This meant that, whilst the brand no longer had a poor image, it did not have a strong appeal either.

Change of direction

This understanding showed Skoda in which direction it needed to go. It needed to stop being defensive in promotional campaigns. The company had sought to correct old perceptions and demonstrate what Skoda cars were not. It realised it was now time to say what the brand does stand for.

The marketing message for the change was simple: Skoda owners were known to be happy and contented with their cars. The car-buying public and the car industry as a whole needed convincing that Skoda cars were great to own and drive

Opportunities

Opportunities occur in the external environment of a business. These include for example, gaps in the market for new products or services. In analysing the external market, Skoda noted that its competitors' marketing approaches focused on the product itself. Many brands place emphasis on the machine and the driving experience:

Audi emphasises the technology through its strapline, 'Vorsprung Durch Technik' ('advantage through technology').

BMW promotes 'the ultimate driving machine'.

Skoda UK discovered that its customers loved their cars more than owners of competitor brands, such as Renault or Ford.

Differentiation

Information from the SWOT analysis helped Skoda to differentiate its product range. Having a complete understanding of the brand's weaknesses allowed it to develop a strategy to strengthen the brand and take advantage of the opportunities in the market.

It focused on its existing strengths and provided cars focused on the customer experience. The focus on 'happy Skoda customers' is an opportunity. It enables Skoda to differentiate the Skoda brand to make it stand out from the competition. This is Skoda's unique selling proposition (USP) in the motor industry.

Threats

Threats come from outside of a business. These involve for example, a competitor launching cheaper products. A careful analysis of the nature, source and likelihood of these threats is a key part of the SWOT process.

The UK car market includes 50 different car makers selling 200 models. Within these there are over 2,000 model derivatives. Skoda UK needed to ensure that its messages were powerful enough for customers to hear within such a crowded and competitive environment. If not, potential buyers would overlook Skoda. This posed the threat of a further loss of market share. Skoda needed a strong product range to compete in the UK and globally.

In the UK the Skoda brand is represented by seven different cars. Each one is designed to appeal to different market segments. For example:

the Skoda Fabia is sold as a basic but quality 'city car' the Skoda Superb offers a more luxurious, 'up-market' appeal the Skoda Octavia Estate provides a family with a fun drive but also a great big boot.

Pricing reflects the competitive nature of Skoda's market. Each model range is priced to appeal to different groups within the mainstream car market. The combination of a clear range with competitive pricing has overcome the threat of the crowded market.

Environmental constraints

The following example illustrates how Skoda responded to another of its threats, namely, the need to respond to EU legal and environmental regulations. Skoda responded by designing products that are environmentally friendly at every stage of their life cycle. For example:

recycling as much as possible. Skoda parts are marked for quick and easy identification when the car is taken apart.

using the latest, most environmentally-friendly manufacturing technologies and facilities available. For instance, painting areas to protect against corrosion use lead-free, water based colours.

designing processes to cut fuel consumption and emissions in petrol and diesel engines. These use lighter parts making vehicles as aerodynamic as possible to use less energy.

using technology to design cars with lower noise levels and improved sound quality

Outcomes and benefits of SWOT analysis

Skoda UK's SWOT analysis answered some key questions. It discovered that:

Skoda car owners were happy about owning a Skoda the brand was no longer seen as a poorer version of competitors' cars.

However:

the brand was still very much within a niche market a change in public perception was vital for Skoda to compete and increase its market share of the mainstream car market.

The challenge was how to build on this and develop the brand so that it was viewed positively. It required a whole new marketing strategy.

Unique selling proposition

Skoda UK has responded with a new marketing strategy based on the confident slogan, 'the manufacturer of happy drivers'.

The campaign's promotional activities support the new brand position. The key messages for the campaign focus on the 'happy' customer experience and appeal at an emotional rather than a practical level. The campaign includes:

the 'Fabia Cake' TV advert. This showed that the car was 'full of lovely stuff' with the happy music ('Favourite things') in the background.

an improved and redesigned website which is easy and fun to use. This is to appeal to a young audience. It embodies the message 'experience the happiness of Skoda online'.

Customers are able to book test drives and order brochures online. The result is that potential customers will feel a Skoda is not only a reliable and sensible car to own, it is also 'lovely' to own.

Analysing the external opportunities and threats allows Skoda UK to pinpoint precisely how it should target its marketing messages. No other market player has 'driver happiness' as its USP.

By building on the understanding derived from the SWOT, Skoda UK has given new impetus to its campaign. At the same time, the campaign has addressed the threat of external competition by setting Skoda apart from its rivals.

THE BOSTON CONSULTING GROUP (BCG) MATRIX

Market share position

STARS

QUESTION MARKS

skoda
Industry Sales Growth Rate

CASH COWS

DOGS

Refer to table above SKODA AUTO in quadrant 1 we called question mark. Division in quadrant 1 have a low relative market share position and they compete in a high growth industry. Generally, firms need highly cash for growing industry but their cash generation is low. The global automobile industry has become intensely competitive with Toyota, Nissan, and Honda attacking worldwide and at the same time Skodas parent company Volkswagen having financial problem. Beside that, Skoda management should decide whether continue their assembly plants outside of Chezh Republic and whether Skoda

automobiles should exported to the united state. We can see their lack of cash but market growth very high. Skoda auto must decide whether to strengthen them by pursuing an intensive strategy. In this quadrant they require intensive strategy efforts to improve existing product and market.

Product development The new infusion of capital and emphasis on research and development to create new model like small car and middle class car. Improving the efficiency and attractiveness of new car. Market Penetration Marketing communication was developed for the Skoda Roomster aimed at a new target audience. Introducing low price model. The customer receives service standard compliance and improves service quality. The comprehensive campaign is develop to launch of new model Market Development

 Skoda automobiles should be export to the United States. Volkswagen merge with Skoda Auto in April 16 1991, VW hold 70% shares in Skoda Auto and the rest retained by Czech government. They sure can be sold there because reputation and quality of product by Volkswagen Construct new Skoda dealership globally.

Building assembly plants outside of Czech Republic. Divestiture Trimming the number of jobs. Cutting back on its current overcapacity of 30 percent. Sale of some operations, VW has already sold their car rental business, Europcar, to European investment firm Eurazeo

THE INTERNAL EXTERNAL(IE) MATRIX

Strong 3.0 to 3.99

Medium 2.0 to 2.99

Low 1.0 to 1.99

ii

iii

High 3.0 to 3.99

The EFE Total Weighted Score

iv 2.0 to 2.99

vi

skoda skoda
vii Low 1.0 to 1.99 viii ix

Division 1

Division 2 Division 3

Skoda Auto fall in division 2, the best way their need to hold and maintain this company because this firm have a good future refer to the financial report there shows profit increasing year by year. In Central Europe flat market in 2006 but, Skoda maintained its position as the number one carmaker in this region. In the Poland, the brands second largest market, In Slovakia remained market leader by a wide margin and the most dynamic market being Russia (+11.00 percent). To hold and maintain this company, we need to implement the strategy which is market penetration and product development.

Product development The new infusion of capital and emphasis on research and development to create new model like small car and middle class car. Improving the efficiency and attractiveness of new car. Market Penetration Marketing communication was developed for the Skoda Roomster aimed at a new target audience. Introducing low price model. The customer receives service standard compliance and improves service quality. The comprehensive campaign is develop to launch of new model Improving the efficiency and attractiveness of new car.

THE GRAND STRATEGY MATRIX

Rapid Market Growth

Quadrant II

Quadrant I

skoda
Weak Competitive Position Strong Competitive Position

Quadrant III

Quadrant IV

Slow Market Growth

Skoda Auto located in quadrant I of the Grand Strategy Matrix is in an excellent strategic position. For this firm, continued concentration on current markets and products is an appropriate strategy. Product development The new infusion of capital and emphasis on research and development to create new model like small car and middle class car.

 Improving the efficiency and attractiveness of new car. Market Penetration Marketing communication was developed for the Skoda Roomster aimed at a new target audience. Introducing low price model. The customer receives service standard compliance and improves service quality. The comprehensive campaign is develop to launch of new model Market Development Skoda automobiles should be export to the United States. Volkswagen merge with Skoda Auto in April 16 1991, VW hold 70% shares in Skoda Auto and the rest retained by Czech government. They sure can be sold there because reputation and quality of product by Volkswagen. Construct new Skoda dealership globally. Building assembly plants outside of Czech Republic. When the organization has excessive resources, integration strategies maybe effective strategy for Skoda Auto. Forward Integration The construction of 100 new Skoda dealerships also illustrates strong growth of the brands distribution network. Building assembly plants outside of Czech Republic.

Backward Integration Suppliers are selected in a systematic and controlled process which involves technical development and production functions. The selection of suppliers is powered by modern information and communication technology. Horizontal Integration April 16 1991 Volkswagen buys 70 percent Interest Company and 30 percent retained by Czech government. (Merge) Related Diversification 1895 manufacture the Slavia bicycle in the town of Malda Boleslav. 1901 the company using motorcycle parts in the production of motor vehicle with four wheels and two cylinder engine.

QUANTITATIVE STRATEGIC PLANNING MATRIX (QPSM) Strategy 1 Strategy 2

Open new assembling plant for Skoda cars in Mexico and make it as a base to enter American market Key Internal Factors Strengths 1. Skoda achieved the highest sales in 2006 compared to its competitors especially in Western and Eastern Europe 0.14 4 0.56 Weight AS TAS

Reposition of brand name strategy by increasing marketing effort

AS

TAS

0.14 2. Market share in Western Europe recorded higher sales

0.56

3. Establish an auto school named Skoda Auto School of Economics in 2000 as the first company operated university in the Czech Republic. To produce 0.10 4 0.40

graduate people in sales department and engineering department indirectly can make Skoda Auto more effective. 4. Quality is the key components of Skoda strategywon numerous award for producing quality automobile 5. Having a program called Healthy Company which focuses on improving their employee health and fighting diseases Weaknesses 1. Skodas parent, Volkswagen, having financial problem 2. Skoda has problem with their assembly plant in some countries 3. Demand for Skodas cars in 0.14 2 0.28 2 0.28 0.14 2 0.28 0.12 0.10 3 0.30 0.14 4 0.56

Central Europe showed declining trend Subtotal 1.00 1.68 1.54

Strategy 1

Strategy 2

Open new assembling plant for Skoda cars in Mexico and make it as a base to enter American market Key External Factors Opportunities 1. In Slovakia, sales of Skoda vehicles grew by 3% and remained the market leader by a wide margin 2. Forecast growth in 2007 for overall market of new 0.05 0.05 3 0.15 Weight AS TAS

Reposition of brand name strategy by increasing marketing effort

AS

TAS

0.20

passengers cars in Eastern Europe-Russia was expected as the most dynamic market with future growth of 11% 3. The construction of 100 new Skoda dealerships which Illustrate the strong growth of brand's distribution network. 4. A new type of marketing communication was developedSkoda Roomster target new audience. Threats 1 Automobile industry become more competitive with Asian carmakers like Nissan, Honda and Toyota extending their market share worldwide, Chinese auto firm expanding globally 2. Regrouping of General Motors and Ford Motors 0.15 0.20 0.10 0.10

0.15

0.30

0.40

0.40

0.40

3. Skoda's parent, Volkswagen, having financial problem 4. Escalating price of nonrenewable energy sources and higher petroleum prices 5. Effect of world Trade Organization-imported models began to flood the market, thus the domestic producers were forced to cut the price Subtotal SUM TOTAL ATTRACTIVENESS SCORE 1.00 0.05 0.20 0.10

0.20

0.30

0.40

1.30 2.98

1.60 3.14

This technique is QPSM, which comprises two strategies Skoda Auto to indicate which alternative strategies are the best. In Table QPSM, two alternative strategies, Strategy 1 open new assembling plant for Skoda cars in Mexico and make it as a base to enter American market and Strategy 2

Reposition of brand name strategy by increasing marketing effort. Sum total attractiveness score in strategy 1 is 2.98 versus 3.14 that indicate the business should reposition of brand name strategy by increasing marketing effort.

Strategy 2 Reposition of brand name strategy by increasing marketing effort Low cost Skoda Auto only think cost in creates effective marketing rather than built new assembly plant in other country and plus marketing plan. Save time Skoda Auto take short-term to make attractive marketing rather than built new plant in other country

Recommendation

The best solution is using the grand strategy matrix (GSM) which company can apply all the strategies within GSM. For this firm, continued concentration on current markets and products. GSM make Skoda Auto more flexible to apply their strategies to suit with the problems occurs. Increase production and sales export more in Asian Asian have big market in China, Indonesia, Malaysia and others in Asian. Besides that, they need to produce low price model for middle class. Improving the efficiency and attractiveness of marketing new car creativity is important to make marketing more quality and different from others to attract and introduce people about our new car and indirectly stimulate buying that car.