SKODA AUTO- 2007 (Case Study)

3/13/2012

Submitted to:
Mr. Manzoor Ahmed Mirani
GROUP MEMBERS:

Zareen Ahmed Memon
Sajid Ali Shaikh
Erum Naseer korejo
Sheeraz Ali Shaikh

SKODA AUTO- 2007

INTRODUCTION: | 1895 | Vaclav Laurin and Vaclav Klemnet form bicycle company. | 1891 | Laurin and Kelemnt start making 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 Plzen. | 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 (Automobilove zavody, narodni podnik” – Automotive Plants, National Enterprise). | 1989 | Czech republic formed. | 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. |

Five Forces Analysis

1. Threat of Entry Eastern European consumers get access to a great variety of cars then they have before and increasing buying power of consumers in emerging countries and in Soviet Union Countries. These two factors can increase the competitive environment and increase the threat of new entry in Market.

2. Bargaining Power of Buyers Now days, consumers have variety of cars from which they can select for themselves.
In addition, globalization has made selection of car easy for the customers. Now customers can buy from all over the world at low cost. This globalization and increasing number of automobile companies has increased bargaining power of buyers.

3. Bargaining Power of Suppliers With a movement toward just-in-time inventory systems worldwide in the automobile manufacturing industry, there has been greater pressure upon suppliers to move their plants to locations contiguous to the automobile plants they are supplying. Some automobile companies have also begun supplying their own parts and thereby eliminating many of the suppliers they formerly used. Therefore, the bargaining power of suppliers has been greatly weakened.

4. Pressure from Substitute Products Substitutes for automobile are actually bicycle and motor bike in developing countries. So it seems less pressure from substitute side. In developed countries, there can be more substitutes of automobile so it can increase pressure from substitute side in developed countries.

5. Rivalry Among Existing Competitors In this modern era, demand of automobile is increasing day by day. So many new companies are emerging in developed and developing countries. They are trying to produce low cost product with good quality. These companies are all trying to reduce costs by moving to low-cost countries, so Skoda’s location in such a country will not be a competitive advantage for long.

External Factor Evaluation Matrix

Key External Factors | Weights | Rating | Weighted Score | | 0.0 to 1.0 | 1 to 4 | | Opportunities | | | | Growing automobile market in Eastern Europe, China, Africa, India and other emerging economies. | 0.15 | 4 | 0.6 | Possibility of moving manufacturing and assembly plants to low-cost countries. | 0.1 | 4 | 0.4 | First mover advantage to those companies using alternative fuels | 0.15 | 2 | 0.3 | American Markets favor European-manufactured cars | 0.13 | 2 | 0.26 | Threats | | | 0 | Movement of the global automobile manufacturing industry to a monopolistically-competitive structure with increased competition. | 0.08 | 3 | 0.24 | Costliness of non-renewable energy sources. | 0.11 | 2 | 0.22 | Higher wage rates in some countries are making it difficult for automobile manufacturers to remain competitive. | 0.15 | 4 | 0.6 | Decline in sales in Eastern European countries that have become a part of the European Union because of the increased availability of used vehicles from other European countries. | 0.08 | 3 | 0.24 | There is an insufficient infrastructure because the Soviets have never put money into such “public goods;” in their satellites (occupied states) | 0.05 | 2 | 0.1 | Totals | 1 | | 2.96 |

External Factor Evaluation Matrix

Key Internal Factors | Weights | Rating | Weighted Score | | 0.0 to 1.0 | 1, 2, 3 or 4 | | Internal Strengths | | | | 100-year history as a vehicle manufacturer. | 0.06 | 3 | 0.18 | Capital infusions from Volkswagen. | 0.1 | 4 | 0.4 | Emphasis on research and development from Volkswagen. | 0.08 | 4 | 0.32 | Strength of Volkswagen’s reputation. | 0.1 | 4 | 0.4 | Highly-skilled work force available in the Czech Republic. | 0.07 | 3 | 0.21 | Relatively low wages in Czech Republic. | 0.06 | 3 | 0.18 | Largest employer in the Czech Republic. | 0.04 | 3 | 0.12 | Synergy with other Volkswagen products. | 0.06 | 4 | 0.24 | Internal Weaknesses | | | | Location in a country that must deal with outdated infrastructure. | 0.1 | 1 | 0.1 | Perception from the past that Skoda produces a low-quality product. | 0.07 | 2 | 0.14 | Perception by some that their new 4-door limousine is not a limousine at all. | 0.08 | 2 | 0.16 | Growing unrest of Skoda’s employees in seeking higher wages which decrease profit margins. | 0.1 | 1 | 0.1 | Reputation of Skoda may spill over to the Bentley and frighten off buyers. | 0.08 | 2 | 0.16 | Totals | 1 | | 2.71 |