Skoda Auto

Case Study

Table of Contents
Topics

Page

History

Vision and Mission

Porters Five Forces Framework

PESTEL Framework

External Audit

CPM-Competitive Profile Matrix

External Factor Evaluation (EFE) Matrix

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:
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 Plze.
1930
ASAP (Akciova Spolenost pro Automobilov Prmysl the Automotive
Industry Joint-stock Company) is founded and begins using assembly-line
production methods, which are revolutionary for their time.
19391945
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 enterprises reconstruction takes place under a new name, AZNP
(Automobilov 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 1000 MB.
2

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

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.
Porters Five Forces Framework:

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:
-

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.

Green marketing laws and laws on environmental issues such as industrial

pollution.
Currency exchange
Legal registration

Legal:

External Audit
5

Opportunities

Threats

1. Growing automobile

1. Highly crowded and

industry in Middle East by

competitive environment.

9%, Southeast Asia by

2. Franchised dealerships are

14%, and Africa by 8%.

free to set vehicle prices,

and they may or may not

2. By 2010, electronics are

offer customers the

expected to account for

discounts that automakers

nearly 40 percent of an

provide.

average vehicles value.

3. Continuous increasing in

3. The forecast for the

market for new passenger
cars in Russia is +11%.
4. U.S. small-car demand
outpacing North American
capacity

oil prices may affect

automobiles sales around
the world.

CPM-Competitive Profile Matrix

Peugeot

Skoda
Critical
Success
Factors

Weig
ht

Ratin
g

Weight
ed
Score

Ratin
g

Weight
ed
Score

Renault
Ratin
g

Weight
ed
Score

Opel
Ratin
g

Weight
ed
Score

Price

0.12

.48

.24

.36

.24

Financial
Position

0.15

.45

.60

.45

.60

Advertisi
ng

0.09

.18

.27

.18

.36

Innovatio
n

0.22

.44

.66

.44

.88

Market
Share

0. 22

.44

.88

.44

.88

Managem
ent

0.10

.30

.30

.30

.30

Global
Expansio
n

0.10

.30

.40

.30

.40

Total

1.00

2.59

3.35

2.47

3.66

External Factor Evaluation (EFE) Matrix

Key External Factors

Weight

Opportunities
7

Rating

Weighted
Score

0.15

0..45

0.15

0.30

0.20

0.60

0.15

0.30

1. Highly crowded and competitive

environment

0.15

0.45

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.

0.10

0.20

0.10

0.20

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 vehicles
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

Total

1.00

2.50

Financial Ratio Analysis 12/2006

Growth Rates %
Sales (Qtr vs year ago qtr)
Net Income (YTD vs YTD)
Liquidity Ratios
Current Ratio
Quick Ratio
Efficiency Ratio

Skoda
1.12
1.48

Industry
9.40
11.80

1.48
1.13

2.10
0.90

Assets to sales
Profitability Ratios
Returns to sales
Returns to Assets
Debt Ratio
Total liabilities to

0.52

11.0

0.055
0.11

3.2
6.4

1.80

277.2

Internal Audit
Strength

Weakness

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

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.

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors
Strengths
1. Skoda won numerous awards for

Weight

Rating

Weighted Score

0.15

0.45

0.15

0.45

0.08

0.24

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

0.10

0.30

0.18

0.72

0.18

0.18

2. Total Skoda market share is 1.7%.

0.08

0.16

3. Skoda has problems with their

assembly plants outside of the
Czech Republic
Total

0.08

0.08

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
Weaknesses
1. Weak 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.

1.00

2.58

SWOT Matrix
Strengths

10

Weaknesses

1.

2.
3.
4.
5.

Opportunities
1. Growing automobile

and Africa by 8%.

1.

2.
3.

S-O Strategies
1.

industry in Middle East by

9%, Southeast Asia by 14%,

Skoda won numerous awards

for producing a quality
automobile.
Skoda implements low-cost
country sourcing strategy.
Skoda is the largest employer
in the Czech Republic.
Total assets are gradually
increasing.
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.

2.

Using price as a competitive

advantage to concentrate on Russia
Market (S2,O3)
Open assembly plant in Mexico to
feeding North America market
(S1,S2,S5,O1,O4)

2. By 2010, electronics are

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.
Total Skoda market share
is 1.7%.
Skoda has problems with
their assembly plants
outside of the Czech
Republic.

W-O Strategies
1.

2.

Increase market share by

entering new growth market in
Middle east, Southeast Asia,
and Africa(W2,O1)
Improving automobiles quality
by introducing innovative,
electronic features, and design
(W1,O2)

expected to account for

nearly 40 percent of an
average vehicles 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

S-T Strategies
1.

competitive
environment.

2.

Increase marketing efforts to

make new repositioning(S4,
S5, T1, T3)
Focus on producing middle

11

W-T Strategies

1. Offer 5 years/200000
Kilometer warranty on all
vehicles (W1, T1)

2.

Franchised dealerships
are free to set vehicle

and small engine

cars(S1,S2,T3)

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.

SPACE Matrix
Financial Strength

Rating

Environmental
Stability

Rating

Return on assets

Rate of inflation

-3

Leverage

Technological changes

-4

12

Net Income

Price Elasticity of
demand

-6

ROE

Competitive pressure

-6

Barriers to entry new

markets

-6

Average

-5

Y-axis

-3.25

Average

1.75

Competitive
Advantage

Rating

Industry Strength

Rating

Market share

-1

Growth potential

Product Quality

-2

Financial stability

Customer Loyalty

-1

Ease of entry new

markets

Control over other

parties

-1

Resources utilization

Technological know-how

-1

Profit potential

Average

1.20

Average

2.40

X-axis

1.20

Directional vector point is :( 1.20, -3.25)

13

FS
Aggressive

Conservativ
e

C
A

IS

Defensive

Competitiv
e
ES

Grand Strategy Matrix

Rapid Market Growth
Quadrant II

Quadrant I

Strong
Competitiv
e

Weak
Competitiv
e

Position

Position
Quadrant III

Quadrant IV
Slow Market Growth

14

The Boston Consulting Group (BCG) Matrix

Market share position

Stars

Industry
Sales Growth
Rate

Question Marks
Skoda

Dogs

Cash Caw

The Internal-External (IE) Matrix

The IFE Total Weighted Score
Strong 3.0 to 3.99
High

I
3.0 to 3.99

Medium IV
The EFE
2.0 to
Total
Weighted
2.99
Score
VII

Medium 2.0 to 2.99

II

Low 1.0 to 1.99

III

VI

Skoda

VIII

IX

Low
1.0 to 1.99

The Quantitative Strategic Planning Matrix (QSPM)

15

Key Internal Factors

Strengths
Skoda won numerous awards for
producing a quality automobile

Weight

Strategy 1

Strategy 2

Open new
assembling plant
for Skoda cars in
Mexico and make
it as a base to enter
American Market

Reposition of brand
name strategy by
increasing marketing
efforts

AS

AS

TAS

TAS

0.15

0.20

0.20

Skoda implements low-cost country

sourcing strategy

0.15

Skoda is the largest employer in the

Czech Republic

0.08

Total assets are gradually increasing

0.10

0.40

0.20

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
Weaknesses

0.18

0.18

0.36

Weak 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
Total Skoda market share is 1.7%

0.18

0.36

0.72

0.08

0.32

0.16

Skoda has problems with their

assembly plants outside of the Czech
Republic

0.08

SUBTOTAL

1.00

16

1.46

1.64

Key Internal Factors

Weight

Strategy 1

Strategy 2

Open new
assembling plant
for Skoda cars in
Mexico and make
it as a base to enter
American Market

Reposition of brand
name strategy by
increasing marketing
efforts

AS

AS

TAS

TAS

Opportunities
0.15

0.15

0.60

0.15

0.20

0.15

0.60

0.30

Highly crowded and competitive

environment
Franchised dealerships are free to set
vehicle prices, and they may or may not
offer customers the discounts that
automakers provide

0.15

0.60

0.45

0.10

Continuous increasing in oil prices may

affect automobiles sales around the
world

0.10

SUBTOTAL

1.00

Growing automobile industry in Middle

East by 9%, Southeast Asia by 14%,
and Africa by 8%.
By 2010, electronics are expected to
account for nearly 40 percent of an
average vehicles value
The forecast for the market for new
passenger cars in Russia is +11%
U.S. small-car demand outpacing North
American capacity

Threats

SUM TOTAL ATTRACTIVENESS

SCORE

References
17

1.35

1.35

2.91

2.99

1. www.skoda-auto.com
2. www.skoda.co.uk
3. www.euromonitor.com
4. www.marketresearch.com

18