Volkswagen's Acquisition of Skoda Auto: A Central European Success Story
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Case Details:
Case Code : BSTR262
Case Length : 24 Pages
Period : 1991-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Volkswagen AG, Skoda Auto Industry : Automobile
Countries : Czech Republic
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Background - Skoda
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Skoda was set up in 1895, at a place called Mlada Boleslav in what was then a
part of the Austro-Hungarian Empire7. It
was originally called Laurin and Klement Co. (L&K), after the two founders
Vaclav Laurin, a mechanic, and Vaclav Klement, a bookkeeper. L&K's main business
was manufacturing and selling bicycles. The firm's bicycles proved popular, and
L&K ventured into making motorcycles in 1899. L&K's motorcycles participated in
several racing events, and won some of them, enhancing the company's reputation.
L&K started manufacturing cars in 1905. When its first model, the Voiturette A,
became a commercial success, L&K started expanding, and in 1907, the firm was
incorporated as a joint stock company. During the First World War (1914-1919),
L&K was involved in arms production.
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After the War ended, L&K diversified into making trucks,
buses, aviation engines and agricultural machinery, in addition to cars. This
required additional investments, for which it started looking for a partner. In
the early 1920s, after a fire at the L&K factory, the need to find a partner
became critical. In 1925, L&K was acquired by Skoda Plzen, the largest
industrial enterprise in what was then Czechoslovakia. After the merger, L&K's
vehicles began to be sold under the Skoda name8.
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In the period between the two World Wars, Skoda's
cars were exported across Europe. During that time, the company's cars
were known for their elegant looks and technical superiority. Although
sales were affected to some extent by the Great Depression9,
Skoda's popularity did not diminish significantly. During the Second
World War (1939-1945), Skoda came under the control of Nazi Germany, and
the company's production facilities were used to support Germany's war
efforts. After the War, Czechoslovakia came under the influence of
Soviet Communism, and all the companies in the country were
nationalized. Skoda Plzen's different business units, including the auto
manufacturing unit, were split into seven independent entities10... |
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