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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"Central Europe is not an emerging market, it's
reemerging. And its companies are playing the game of catch-up incredibly fast."
-Justin Jenk, a Principal with McKinsey & Co. in Moscow in
1997.1
"Skoda was a joke and it should never again be a joke.'"
-Karl-Gunter Busching, a Production Manager at Skoda, in
2000.2
"We are one of the three oldest car manufacturers in the
world… and we are an example of how a car company can complete a successful
transformation from a local producer into a global player."
- Vratislav Kulhanek, Chairman of the Board of Management at
Skoda Auto, in 2001.3
Skoda Crosses The Half Million Milestone
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The year 2006 was significant for the Skoda Auto Group (Skoda), an auto
manufacturer based in the Czech Republic. That year, the company crossed the
500,000 units mark for the first time, in production as well as in sales of
vehicles. Production, at 556,347 units, represented a 12.6 percent increase over
2005, while sales, at 549,667 units, had increased 11.7 percent.
Improved sales
reflected positively on Skoda's financial performance as well, and in 2006, the
company posted a revenue increase of 8.7 percent and an increase in net profits
of 40.2 percent over 2005 (Refer to Exhibit I for the production and sales
breakup of Skoda vehicles, and to Exhibit II for Skoda's Income Statement).
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Another event of significance for Skoda in 2006 was the
launch of a new vehicle called the Skoda Roomster. The Roomster, which was
positioned as a leisure activity vehicle, was Skoda's fourth model line after
the Octavia, the Fabia, and the Superb lines. Skoda said that the sales of the
Roomster in 2006, at 14,422 units, had been satisfactory. Skoda was the Czech
Republic's best-known company, and in addition to being a major
employer, contributed significantly to the country's exports.
It was also one of the oldest car companies in
the world along with Mercedes and Peugeot.4
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Skoda was often cited as an example of a company from a country east of
the 'Iron Curtain'5 that had managed to
succeed in the market economy.
During the Cold War6,
Skoda cars were widely derided in Western Europe for their unappealing
looks and poor performance. However, after Skoda became a part of
Volkswagen AG (VW) in 1991, its image was transformed.
VW played a significant role in improving Skoda's reputation and
developing its capabilities, and by the late 1990s, the company came to
be known for its high quality, sturdy cars, and had established itself
as a 'value for money'brand. |
Volkswagen's Acquisition of Skoda Auto
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