In 1985 Skoda Automobile Company was founded, when Vaclav Laurin and Vaclav Klement began manufacturing Slavia-brand bicycles. In 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 automobiles markets. They established their business on Skoda in 1925 that was manufacture cycles, cars, farm ploughs and airplanes in Eastern Europe. After a long time Skoda overcame hard times over the next 65 years. These included different changes. By 1990 the Czech management of Skoda was looking for a power full foreign partner. Volkswagen AG (VAG) was chosen because of its reputation for quality, strength and dependability. It is the largest car manufacturer in Europe providing an average of more than5 million cars a year – giving it a 12% share of the world car market. Volkswagen A comprises the Volkswagen, Audi, Skoda, SEAT, Volkswagen Commercial Vehicles, Lamborghini, Bentley and Bugatti brands.
ANALYSIS OF CASE:-
Identification of Key weakness:
Although Skoda was a powerful company having enough good business but the analysis identifies that the area of weakness was inside the business as they only have a 1.7 % shares in the market which makes them in a very small position in the overall market which means that they have to face a lot of competitors in the market.
This weakness was partly due to out-dated perceptions of the brand. These interrelated to Skoda's eastern European origins. In the past the cars had an image of poor vehicle quality, assembly, design, and materials. Importantly, this poor perception also affected Skoda owners. For many people, car ownership is all about image.
According to Petr Pavlinek, after the JV formation, Skoda Managers and workers were willingly replaced even well functioning practices with western ones. However these attitudes started to change after the introduction of western methods did not lead to any significant improvements and when the Czechs began to question seemingly uncoordinated measures pursued by foreign managers. Skoda Managers were largely inexperienced in free market economies. The Skoda Auto Union leader argued in 1996:
‘‘We had one enormous weakness. We knew many things better then they [the Germans] did and I think that we do even today. We know how to more practical, we can better improvise to achieve a better result. However, during the previous regime we completely failed in marketing and advertising and all of this''.
Strength of Skoda that they use to turn its brand weakness into an opportunity:
Skoda discovered that cars are being loved more than their owners of competitor's brands. . They found that Škoda should differentiate its product range. Having complete information regarding the brand's weaknesses so that they can make a strategy to make the brand more powerful and to take the advantage of the availability in markets. They make an eye on their existing power and produce cars on customer experiences. The focus on ‘happy Škoda customers' is an opportunity.
According to Nigel Hill, John Brierley, Rob MacDougall (Pg-2) customers have never had it so good. They have a huge choice of high quality products and services at exceptionally competitive prices. The customer really is king, so it pays to keep them happy. Most organisations do now accept the importance of customer focus.
Craig Cochran (pg-2) has argued that organizations interested in quantifying customer satisfaction must use data-gathering and analysis tools to better understand these elusive and ever changing perceptions. Smart organizations employ a variety of tools to monitor customer satisfaction because no single tool is likely to capture the full range of information needed to truly understand perceptions.
According to Fathi Salem Mohammed (pg-13), now Skoda has increased market share by entering new growth market in Middle East, South East Asia and Africa. This is big opportunity for Skoda.
External threats of Skoda:
Threats means having risk and it always come from another business or outside of business. These may include the launching of cheapest product by competitor. In UK many companies are selling different models opposite Skoda. But Skoda Company was strategically thinking to control this threat that potential buyers would overlook Skoda. Otherwise this can create the risk of a further loss of marketplace share.
According to Marios, I.Katsioloudes, (pg-75) threats are seen as being largely a function of competitors, and this is certainly a large part of what an organization is likely to see. Threats are also coming from other stakeholder's areas such as, the Government, labour unions.
It is found that Skoda wants to have stronger product range to compute in UK and globally. Skoda strategically addressed to another of its threats. Pricing reflects the competitive nature of Skoda's market. Different ranges of models having different prices have overcome the problem of crowded markets. Skoda decided they need to respond to European Union legal and ecological rules. Skoda made goods that are more friendly to environment and peoples.
Fathi Salem Mohammed (Pg-13) has strategically found that 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 are also the external threats.
Benefits of using a SWOT analysis:
There are many benefits to using a SWOT analysis:
Ø We can make a framework for identifying and analyzing strengths, weakness, opportunities, and threats.
Ø An imulsion to analyze a situation and develope suitable strategies.
Ø A basis for assessing core competences.
Ø The evidence for,and cultural key to change,
Ø A stimulus to participation in a group experience.
Ø SWOT analysis can be carried out for many types of decision making. These decisions can be strategic and long term or can be an annual departmental planning exercise.
Ø SWOT analysis covers every aspect of the business.
Ø SWOT analysis provides a snapshot of the business position at a specific point in time. Strengths, weakness, opportunities and threats change with the market and with the growth of the business.
Ø A SWOT analysis is an analytical tool that assists in determining highest resource priorities to capitalizing on opportunities, identify and exploit advantages and shore up weakness.
Ø SWOT analysis is a framework for generating strategic alternatives from a situation analysis.
Ø The model SWOT helps managers in internally as well as externally.
Ø Information received from the current analysis is then use for more making better strategy.
According to Michael J.Mard, Robert R.Dunne, Edi Osborne (Page39), Hill and Westbrook argue that SWOT analysis is an overview approach that is unsuited to today's diverse and unstable markets.
Skoda is an international brand distributing goods in a extremely high competitive market. The company must respond positively to internal and external issues to avoid losing sales and market share. Because Skoda won a lot of awards for producing a quality automobiles. They also increased their assets gradually by focusing on customer satisfactions.
According to the present situation there are following recommendations for SKODA:
Ø Skoda should open new assembling plan in Mexico and make it as a base to enter American market and reposition of brand name strategy by increasing marketing efforts. Because US small car demand outpacing North American capacity.
Ø Skoda can Increase market share by entering new growth market in Middle East and Southeast Asia.
Ø Skoda can improve automobiles quality by introducing innovative, electronics features, and design.
2. Hichael J.Stahl ,David W.Grigsby, Strategy Management , Chapter 2 Environment and strategy plan, page 30
3. Gareth R.Jones, Jennifer M. George (2003), Essential of contemporary management, chapter 6 planning strategy and change, page 187
4. Henry Mintzberg, Sunantra Ghoshal(2002) The strategy process: contexts, cases,chapter no (3) Formulating Strategy, page 77,
5. By Petr Pavlinek (2008)successful transformation? Restructuring of the Czech automobile industry, chapter transformation of Skoda auto, page 92
6. According to Marios, I.Katsioloudes, and Global Strategic Planning: Cultural Perspectives for profit and non profit Page 75, Chapter-3 External Strategic Audit.
7. According to Nigel Hill, John Brierley, Rob MacDougall(2003) Business & Economics, Chapter ‘‘How to measure customer Satisfaction'' Page 2
8. According to Michael J.Mard, Robert R.Dunne,Edi Osborne (2004) Business and Economics, Chapter Driving your company's value: Strategic Benchmarking for Value, page 39