Page 1: Introduction
This case study looks at the turn-round in the fortunes of Skoda which has come about through investment in new technology, management training, product development and effective marketing.
The Skoda company began back in 1895 when Czech entrepreneurs, Vaclav Laurin and Vaclav Klement began making bicycles in the Czech town of Mlada Boleslav. They very soon expanded into motorcycle manufacture and by 1905 had made their first motor cars. In the early days the vehicles were quite grand and were as stylish and innovative as many of the famous names of Western Europe and America. The Skoda reputation for quality was such that during the twenties it was the only manufacturer granted a licence by the famous Hispano-Suiza company marque to build its luxury limousines.
After the second world war Czechoslovakia became more and more isolated from outside influences and new vehicle production at the Skoda factory became increasingly basic and functional reflecting the values of the now established Communist government. Raw materials were poor and with little outside intervention Skoda was unable to keep up with western motor manufacturers in terms of style and innovation. The authorities made the rules and even insisted on such things as windscreens not being raked too far back in case the cars looked decadently sporty. The factory concentrated on mass production of standardised products and all resources were ploughed into this. The first millionth Skoda car of a single type was produced in Mlada Boleslav during this period on 29 August 1973.
However, even in the unfavourable environment of a poorly managed economy where innovation was not encouraged the Skoda factory managed to preserve the skills of craftsmanship, invention and design for which it had once been famous. This strength was to prove invaluable when the time came for the rejuvenation of the Czech economy and the company.
After the Velvet Revolution in 1989, the newly formed Czech Republic began rebuilding its economy in the free market and Skoda quickly realised that things had to change if it was to successfully compete in this market. Skoda began the search for an economically sound partner with financial, technical and managerial resources to help improve the efficiency of its factories and assist in the company’s future development. A number of leading automotive manufacturers demonstrated a keen interest, but the Czech government decided to accept the Volkswagen Group proposal, with the full approval of Skoda’s management, engineers and Union members. A key element in accepting Volkswagen for this partnership was the guarantee of the independence and selfreliance of the existing factories and Skoda marque. Skoda was to retain its own identity and responsibility for product development, production and sales operation.
On April 16th 1991, Skoda became a public company and the fourth brand in the International Volkswagen Group, the others being Volkswagen, Audi and SEAT. The Czech company contributed its assets in the former state firm to this new business, thus becoming co-owner of Skoda. The Volkswagen Group contributed capital, advanced technology and managerial assistance and expertise. The Skoda model in production at that time was the Favorit, which had almost no competition on the home market until after the Velvet Revolution. Under the new Volkswagen management the
Favorit model underwent a thorough upgrading, which resulted in 800 technical improvements, including reducing noise levels, single point fuel injection and new safety features. Build quality was improved to meet the rigorous standards upheld by all Volkswagen manufacturing plants and the aesthetic appeal of the Skoda cars was improved with the introduction of new colours and trims, ensuring it was able to hold its place against new competitors in the Czech Republic and improve its appeal in Skoda’s export markets.