I. TITLE OF THE CASESkoda Auto---2007Marlene ReedBaylor University

Rochelle R. BrunzoAlvin College

II. CASE SUMMARY

www.skoda-auto.com/globalA favorite subject of jokes in the Czech Republic (formally Czechoslovakia) Czechoslovakia has historically been Skoda- the ever car produced by Eastern European. Before Volkswagen took over the company in 1999 people would often ask "have you heard the one about ....""How do you do you double the value of Skoda? Fill it with gasoline""What do you call the Skoda convertible? A dumpster""Why does the Skoda have heated rear window? to keep your hands warm when you are pushing it"Despite a bad reputation throughout the 20th century. Skoda produced 556,347 vehicles in 2006, the most ever in a year for them and up to 12.6% over 2005. Skoda introduced two new vehicles in 2006, the Skoda Roomster and the Skoda Fabia hatch book. Also in 2006, Skoda won numerous awards from producing a quality automobile. Skoda is the largest employer in the Czech Republic with 22,554 fulltime employees- and increase of 7% over the year earlier. Headquartered in Made Boleslaw in the Czech Republic Sodas manufacturing plant there is an impressive structure of glass and steel, which was designed by the famous architect Dr. Gunter Hen and based on the concept presented in Professor Hans-Joachim Warnocks 1990 work The Fractal Factory.As indicated in Exhibit 1, Skoda's 2006 revenue and net income was 203 billion and 11 billion Czech crown, up 8.7% and 40.1% respectively from 2005. (The 2006 exchange rate was 22 Czech crowns to $1.00) Skoda's recent balance sheet is provided in exhibit 2.Skoda is not without problems. The global automobile industry has become intensely competitive with Toyota, Nissan and Honda attacking worldwide. General motors and Ford motor regrouping. Chinese auto firms expanding globally and Skoda's parent, Volkswagen having financial troubles. Skoda also has problems with their assembly plants in some countries. Skoda's management wonders whether they should continue building assembly plants outside of the Czech Republic and whether Skoda automobile should be exported to the United States.

HISTORYThe small business that eventually became Skoda Automobile Company was form in 1895 where Vaclav Lauren a mechanic and Vaclav klement, a bookseller, joined together to manufacture the Slovia bicycle in the town of Made Boleslaw, Czechoslovakia about the 40 miles northeast of Prague. Four years later the company began producing Motorcycles and had a total workforce of 68 people. In1901, the company began using its motorcycle parts in the Production of motor vehicles with four wheels and a two Cylinder engine.

Skoda income statement for the year endedDecember 31, 2006 (in millions of Czech crowns)ITEMS200620052004

Sales263,659187,382155,396

Cost of goods sold175,636162,738140,996

Gross profit28,02323,64414,000

Distribution expenses11,90310,6116,132

Administrative expenses3,5873,6863,157

Other operating income 4,7474,0273,147

Other operating expenses2,6782,5252,964

Operating income14,60210,8605,289

Financial income644482360

Financial expenses1,4081,2691,225

Financial result(404)(564)(865)

Profit before income tax14,19810,0734,424

Income tax expense (income)3,1362,1801,291

Current3,6382,3201,475

deferred(502)(140)(184)

Profit for the year11,0627,8933,333

When the Nazis marched Czechoslovakia in 1939, hitter grabbed Skoda auto and made it and the sarmaments factory that was a part of the Hermann Goering-were. He also ordered Skoda to move the steering wheel of its autos to the left-side where, it was remained ever since.As soon as World War II was, over the company was nationalized by the Soviets, who had taken over the country, and renamed it AZNP Skoda. Under the Soviets Skoda gained a monopoly status as the Czech passenger car manufacturer and this is when the jokes really began as the quality of the cars for the mass market that had little style and often looked like a metal box. As poor as their quality was, the still ahead of its Eastern European Counterparts such as trabant, Warburg, and Lada.Interestingly, the name Skoda in the Czech language means a shame and the company in the 40 years of soviets regime certainly lived up to its name. It was unfortunate that the oldest car company in central European fell greatly in the both quality and prestige. Because of a lack of innovation, its models became outdated its factories became inefficient, and its worker were not well trained.When consumers were forced to purchase automobiles from soviets companies and were prevented from, purchasing goods outside the region, there was no real incentive to produce a competitive automobile. Likewise, workers who were guaranteed, lifetime employment by the government were not motivated to produce quality products in order to keep their jobs.On November 17, 1989, a student rally for the freedom began at Wenceslas Square in Prague, and within two weeks the communist government had relinquished power to the government in what would later be referred to as, Velvet Revolution. In 1993, Czechoslovakia split into two parts the Czech Republic and Slovakia. The Czech Republic began to put into place laws to encourage privatization of national assets and the development of new entrepreneurial enterprises. The privatization of national companies took place by the three means. A sale of the assets to outside owners (often companies from other countries); a management employee buyout and voucher privatization in which citizens were given vouchers for a minimal price that they could use to purchase the stock of national companies that were being privatized.EXHIBIT 2 Skoda Balance Sheet for the Year Ended December 31, 2006 (in Millions of Czech Crowns)ASSETS2006 20052004Intangible assets13,35113,21012,602Property, plant and equipment39,80941,46642,236Investments in associates 187 - 608Other receivables and financial assets 387374 346Non-current assets54,07055,02355,792Inventories 12,24812,270 9,232Trade receivables 5,4976,624 7,048Current tax receivables 449231 -Other receivables and financial assets28,43614,43011,600Cash 4,5121,176 4,534Current assets51,34234,33132,414TOTAL ASSETS105,21289,75588,206 EQUITYShare capital16,70916,70916,709Share premium 1,578 1,578 1,578Reserves39,96128,39525,860TOTAL EQUITY 58,32146,75744,147LIABILITIESNon-current financial liabilities 1,995 4,990 4,986Other non-current liabilities 834 631 -Deferred tax liabilities 2,528 2,837 2,982Non-current tax payables 398 268 -Non-current provisions 4,597 4,111 3,368TOTAL NON-CURRENT LIABILITIES 12,277 12,83711,336Current financial liabilities 5,331 2,475 7,734Trade payables19,168 18,85519,904Other current liabilities 3,153 2,3281,138Current tax payables 1,945 1,056849Current provisions 4,997 5,4473,098TOTAL CURRENT LIABILITIES34,59430,16132,723TOTAL EQUITY AND LIABILITIES 105,21289,75588,206

After the Velvet Revolution in Czechoslovakia in 1989, a Republic was formed, and Vaclav Havel was elected president. The government immediately began to seek a buyer for Skoda as a part of its privatization of national assets. That buyer was found, and on April 16, 1991, Skoda became the fourth brand of the Volkswagen Group after VW, Audi, and Seat (the Spanish subsidiary). Volkswagen bought a 70 percent interest in the company, and the Czech government retained a 30 percent interest. In 2000, Volkswagen bought out the remaining 30 percent interest from the Czech government.The new infusion of capital and emphasis on research and development from Volkswagen brought forth such popular models as the smaller Felicia, the larger middle-class Model Octavia and the latest products the Superd Czech and the roomy Roomster. This model began to take the market share from other car manufactures in the Western European small car market. Exhibit 3 provides a picture of Skoda Superd. Skoda progressed so well improving the affiance and attractiveness of its cars that in 2006. Skoda brand vehicles received the following honor`s 1st place " car of the year" for the Skoda Roomster in Estonia, Finland and Bulgaria; 1st place " Auto Trophy" in the Minivan category for Skoda Roomster; 1st place in Sweden and Belgium; and " Red Dot" design award for Skoda Octavia Combined.

Volkswagen: The Parent Company Volkswagen (VW) is Europe's largest car maker, annually producing approximately 5 million cars, trucks and vans such as the Passat, vetta, rabbit, new beetle, Golf and fox. Volkswagen also produces a full line of luxury cars such as Audi, Lamborghini, Bentley and Bugatti. Volkswagen operates plants in African, the Americas, the Asia / Pacific region, and Europe. Volkswagen also owns 34% of the voting rights Swedish truck maker scania. In 2007, Volkswagen however has high production costs, products with inflated strikers prices, and deteriorating quality. In order to turn the company around. VW is planning to save $ 8.4 billion from operations by 2010. Their plan also calls for introducing as many as 10 new low price models. VW's global makers are also suffering. Sales of VW products in the United States are falling, and its new models are experiencing sluggish sales in Europe. The once dominant position VW held in China is now being threatened by General motors. VW realizes the exports out of Europe are a key to its survival, and competitors like Nissan and Toyota are extending market share at the rapid race. The company's losses in 2005 in the United States alone were more than $ 1 billion a greater loss per car even than general motors. Strategic plants at Volkswagen call for wage costs, trimming the number jobs, and cutting back on its current overcapacity of 30%. They are also considering the sales of some operations. VW has already sold their car rental business, Europe car, to European investment firm Eurazeo. They are now considering selling Geda's AG, an automotive technology consulting firm. Early in 2006, VW announced that it planned to cut 20,000 jobs over the next three years.Skoda TodayMission StatementSkoda developed the following Mission Statement Three basics value of the Skoda brand are:Intelligence- We continuously seeks innovation solutions and new ways in which to care for and approach the customers that are most important for us. Our conduct towards the customers is above abroad, and we respect their desires and needs.Attractiveness- We develop automobiles that are aesthetically and technically of high standard and always constitute an attractive offer for our customers not only in terms of design or technical parameters but also the wide range of offered services.Dedication- We are following the steps of founders our company Messrs, Laurin and klement. We are enthusiastically working on the further development of our vehicles; we identify ourselves with our products.

Top Management Skoda follows German models for its corporate governance which utilizes members of the board of directors as member of senior management of the company. In accordance with its articles of association the general meeting (the sole shareholders Volkswagen) elects and recall members of the board of directors and decides how they will be compensated for their work. The board of directors, in turn, elects and recalls its chairman. As Skodas statutory body, the board of directors runs all companys operations and acts in its name. The board has six members, each with a term of office of three years, and multiple terms are possible. Each of the six members of the board of directors runs one of Skodas six departments. Skodas board members are listed in Exhibit 3.Central Europe OperationsDespite flat markets in Central Europe in 2006, Skoda maintained its position as the member one carmaker in this region. In Poland, the brands second market in this region, 28,783 vehicles were sold (up 4.1 percent from 2005). This corresponds to a market share of 12.0 percent, making Skoda the market leader in Poland. In Slovakia, the sales of Skoda vehicles grew by 3.0 percent and remained the market leader by a wide marginIn the Czech Republic, the overall passenger car market contracted in comparison with 2005confirming an ongoing declining trend. This decline was offset by rapid expansion of the overall market for light commercial vehicles. Skoda did maintain its vehicles sales volume in 2006 and retained its position of domestic market leader in both the passenger car and light commercial vehicle segments.Compared to 2006, demand for new passenger cars in markets in Central Europe is expected to remain flat. Positive movement can be anticipated in the Polish (year-on-year growth of 2.0 percent) market, while the Hungarian market is forecasted to decline substantially (-9.0 percent).Eastern Europe OperationsThe highest growth in 2006 sales was achieved by Skoda in Eastern Europe. A total of 70,986 vehicles were delivered in this region, an increase of Skoda in Ukraine were up to 64.2 percent over the previous year.The forecast for the overall markets for new passenger cars in Eastern Europe was one of growth in 2007, the most dynamic market being Russia (+11.0 percent).

EXHIBIT 3Skoda Board of Directors/Senior ManagementChairman of the Board Detlef Wittig

Sales and Marketing DepartmentFred KapplerHuman Resources Department Martin JohnCommercial affairs Department HolgerKintscher

Production and Logistic DepartmentHorst Muhi

Department Technical DevelopmentHerald Ludanek

Western Europe OperationsSkoda grew in Western Europe market share to 2.1% in 2006. (The 2005, market share was 1.9%) A total of 301,343 vehicles were delivered to customers in the region (+ 9.1% year on year). Over 10% sales growth was recorded in the following Western European countries. Germany, Spain, Belgium, Greece, Switzerland, Finland and Luxembourg. The most vehicles were sold in Germany- 103,931 vehicles total which was up 25.3% over 2005.In 2007, overall demand for new passenger cars in Western Europe was forecast as likely to fall slightly (-1.0%) compared to 2006, primarily as a result of anticipated declines in the German (-2.6%) and British (-1.5%) markers the French market was expected to improve (+4.5%)

AsiaSkoda's deliveries in Asia in 2006 totaled 36,541 vehicles, up 21.1% over the previous year. India again the largest market saw 12,105 vehicles delivered to customers for year on year increase of 35.2%. Other important market were Turkey (5,725 vehicles compared to 7,261 in 2005), Egypt (3,683 vehicles compared to 2,328 in 2005) and Israel (3,518 vehicles compared to 2,906 in 2005)By 2006, Skoda had developed its production facilities even further in other countries. In May of 2006, an agreement was signed for a joint manufacturing plant for the Volkswagen and Skoda Auto brands in Kaluga, Russia. The first vehicles bound for the Russia market to leaves the gates of the joint plant will be the Skoda Octavia, and this event was to take place as early as autumn in 2007. In June of 2006, a licensing agreement was signed to allow production of Skoda fabia and Skoda Superd model lines in China. In the run-up to its Chinese market launch in 2005 Skoda presented the new Skoda Octavia model at the Beijing motor show in November 2006.Skoda produces finished vehicles as well as vehicles kits in various stages of assembly. The vehicles kits are shipped from the production plants and assembled in their assembly plant the company also manufactures engines, gearboxes, engine and gearbox components and genuine parts and accessories.Skoda's 2006 revenues broken down by the product category are provided in exhibit 4.Skoda assembly plants were recently opened in Kazakhstan, Ukraine, Bosnia and Herzegovina, and India. Exhibit 5 identifies the countries to which Skoda Automobiles were shipped from 2000 to 2006. Note the decreasing trend in the Czech Republic and Central Europe while Eastern and Western Europe and Asia are growing. In total, Skoda operated in nearly 90 countries all over the globe. Exhibit 6 illustrates the Skoda auto Group Structure around the world.

MarketingIn addition to a growing number of vehicle deliveries worldwide. Skoda has developed a network of authorized sales and service partners (up 5.5% from 2005). To assure that its customers receive standards compliance and improved service quality, Skoda has trained over 4,400 service employees in the Czech Republic and abroad. The construction of 100 new Skoda dealerships also illustrates strong growth of the brands distribution network.

EXHIBIT 4Skoda Sales Revenues by product lines in 2006

PRODUCTPERCENT OF REVENUES

Vehicles88.7%

Part and accessories7.3%

Supplies to other VW Companies2.9%

Other goods and services1.1%

Total100%

EXHIBIT 5 Skoda Vehicle Deliveries by Region from 2000 to 2006Country 2000 2001 2002 2003 2004 2005 2006Czech Republic 80,882 82,405 74,466 71,522 64,676 65,166 65,171Central Europe (excluding CR)89,517 92,766 83,549 93,747 87,13973,855 75,626Eastern Europe 13,11624,167 27,224 26,652 31,564 46, 692 70,986Western Europe 229,109 244,099 283,323 235,861 240,672 276,216 301,343Overseas & Asia22,779 16,815 22,953 22,249 27,624 30,182 36,541A new type of marketing communication was developed for the Skoda Roomster aimed a new target audience. The company envisions that the Roomster is not just a means of transportation for this customer segment, but it is also a way to express their personal style. The comprehensive campaign developed for the launch of this new model is based on the claim, Find your own room, which emphasizes the principal features of the car which are styling, roominess, and perspective.

EXHIBIT 6 Skoda Auto Group StructureSkodaAutpDeutschland GmbhBased in Welterstadt,Germany Skoda Auto Stake:100%kodaAutoDeutschland GmbhBased in Welterstadt,Germany Skoda Auto Stake:100%daAutoDeutschland GmbhBased in Welterstadt,Germany Skoda Auto Stake:100%

Skoda Auto Slovenskos.r.o.Based in Bratislava, Slovak RepublicSkoda Auto Stake:100%

Skoda Auto a.s.Based in MladaBoleslaw,Czech Republic

SkodaAutoPolskaS.A.PolandSkoda Auto Stake:51%

Skoda Auto IndiaPrivate, Ltd.Based in Aurangabad,IndiaSkoda Auto Stake:100%

000 Volkswagen RussBased in Kaluga,RussiaSkoda Auto Stake:37.5%

EducationSkoda established the Skoda Auto School of Economics in 2000 as the first company-operated university in the Czech Republic. Skoda decide to hire highly proficient university professors to reach in the school, and the university was subsequently fully accredited for awarding degrees. In the several years since its inception, the number of applicants for the school has grown to the point that demand has outstripped supply. The three-and-a-half year bachelor program allows students to work in the plant to earn credit for their studies in management, and the first students enrolled in the school graduated in 2004.Beginning in 2006, the university bean offering a master's degree in management. A total of 585 students were enrolled in the school in 2006, and 157 graduates were awarded bachelor's degrees. Approximately, one-half of the graduates found jobs working for the company or its suppliers. Another one-third elected to continue their studies in the master's degree program.

SuppliersOne of the key components of Skoda's strategy is quality. Suppliers are selected in a systematic and controlled process which involves the technical development and production functions. The most important activity of the purchasing department in 2006 was to secure everything needed for the series of production of the new model line, the Skoda Roomster.In 2006, production-related purchasing was CZK 208.8 billion in comparison to CZK 105.2 billion in 2005. The share by domestic suppliers was 62.6 percent, and in 2005 it was 63.9 percent. Suppliers from Central and Eastern Europe who satisfy the strict eligibility conditions are winning contracts within the Volkswagen Group.The selection of suppliers is powered by modern information and communications technology. One of the most important applications in Skoda's Internet B28 platform is online negotiations. A total of 403 online negotiations took place in 2006 as compared to 220 such negotiations in 2005.

QualityA key part of the integrated management system at Skoda is the quality management system. The company is subjected to audit for compliance with the International ISO 9001-2000 standard. In the autumn of 2006, TUV NORD carried out the second audit of this system. The result was a renewal of the certificate which was granted in 2004. This certificate documents that Skoda has introduced and uses a quality management system in the areas of development, production, sales, and service and that the system used complies with the ISO standard.

Health ManagementIn October of 2006, Skoda launched the "Healthy Company" program which focuses on improving employee health and fighting diseases. Individual measures taken in the program focus on support for healthy diets, bolstering the immune system, the cessation of smoking, and improving conditions in the workplace. Skoda also put into operation a central first-aid clinic in accordance with the newly revamped Integrated Rescue System.The company places a great deal of emphasis on improving work conditions based on the results of measurements of employees' physical duress and ergonomic analyses of individual work areas. A number of ergonomic measures were implemented in the body shop and the vehicle assembly area (e.g. strategically placed special palettes and stands to ease parts handling, utilizing robots on selected work procedures, optimizing tool and jig placement, etc.)In addition, a Pandemic Plan was drawn up to address the potential danger of bird flu. At Skoda's expense, a total of 5,074 employees were vaccinated against the seasonal flu. Treatment and reconditioning spa trips were utilized by a total of 1,364 employees. The average work attendance in 2006 was 96.6 percent.The success of Skoda has reverberated throughout Europe. The French automobile manufacturer Renault decided to invest in Automobile Dacia of Romania to produce a car that would sell for about S5,000 for the emerging markets of Eastern Europe. Likewise, General Motors invested S100 million in a partnership with Auto Vaz of Russia to produce an inexpensive mini-SUV for sale in that country and eventually be exported elsewhere. Skoda itself decided to produce 50 prototypes of the new mid-size Bentley in the Czech Republic in a move that shocked the United Kingdom automotive industry.

Trends in the World Automobile IndustrySuch substitute products as bicycles are being replaced by automobiles in many countries. Until the beginning of the 21st century, cars were out of the reach of most Chinese even the middle class. But as incomes increase and tariffs on imported cars began to fall after Beijing's accession to the World Trade Organization and imported models began to flood the market, domestic producers were forced to cut their prices.A price war is heating up with sticker prices on Chinese cars falling by as much as 15 percent. In the first years of the 21st century, 100 state-owned car companies still existed in China, and most were losing money. The government was encouraging the merger of many of these firms to achieve economies of scale. Industry projections suggested that the strongest potential growth in automobile sales would be in the developing countries of Asia, South America, Eastern Europe, and Africa rather than the mature economies of Western Europe, North America and Japan.Mergers of automobile companies are being considered in China, and there was a strong movement worldwide to an amalgamation of automobile companies located in different countries. In February of 2007, DaimlerChrysler AG acknowledged that it might have to find a partner or spin off its ailing U.S. arm (Chrysler) due to the depth of the crisis facing Detroit's automakers. The list of potential partners included Renault SA and Nissan Motor Company. Nissan had hinted earlier that it was interested in a North American partner.Ford Motor Company CEO Alan Mulally also expressed interest in assessing whether Ford could rely on other companies for some manufacturing or other tasks. Toyota had suggested in 2006 that it was interested in further conversations with Ford. Ford also was searching for a buyer for its Range Rover and Jaguar divisions, which were showing a lack of profitability.In 2006, General Motors considered an alliance with Renault and Nissan before deciding to remain as they are. However, GM executives have made it clear that they anticipate their company's future growth will come largely from outside the United States partly by making use of existing low-cost partners such as South Korea's GM Daewoo Auto and Technology Company and China's Shanghai Automotive Industries Corporation.Unfortunately, many of the cross-border mergers and joint ventures in the industry in the past had a difficult time surviving. For instance, the joint venture between General Motors and Saab cost General Motors S2 billion, which would be difficult to recoup. In addition, Ford bought Jaguar in the early 1990s and invested approximately S5 billion in that model; but by 2007 Ford was considering finding a buyer for it. Other global ventures that did not have positive outcomes were Ford-ACE, Chrysler-Lamborghini, Chrysler-Rootes, Renault-Volvo, BMW-Rover and Volkswagen-Rolls. For the high cost of acquisition, that automobile companies might have more easily created their own new models.In making plant location decisions, companies normally consider the following factors: labor costs, energy costs, access to a workforce that has the right skills, access to the necessary infrastructure (roads, railroads, favorable political climate) and closeness to important global markets. The Skoda plant in the Czech Republic had been a good selection for Volkswagen for those reasons. There was also a tendency to move to just-in-time inventory systems at automobile manufacturers around the world, which caused suppliers to move their operations closer to auto plants. This movement was occurring around the Skoda plant at Milada Boleslav.Another haunting problem is the ever-escalating price of nonrenewable energy sources and the higher petroleum prices that resulted. Even as newer form of renewable energy sources were being developed, automobile manufacturers were rushing to their drawing boards in an attempt to be among the first in the market to design and manufacture automobiles operating on those newer forms of energy. Toyota had led the way with this movement; and after taking a decade to sell its first 1 million gasoline-electric hybrid vehicles worldwide, the company stated in 2007 that it plans to sell 1 million a year by 2010.The FutureThe automobile industry has gone from primarily a national to a regional a finally a global marketplace. Skoda has to decide whether to continue the movement of assembly plants abroad when the Czech Republic had such inexpensive labor. Prepare a three-year strategic plan for the Skoda board of directors who manage the company.References:Hoovers, a D&B Company.http://premium.hoovers.com/subscribe/co/profile.xhtml? ID=ffffcrxhyyrhfrjtshFlint,Jerry(january1999).Global math. Wards Auto World, Volume35, issue 1,p.15.*2009 financial statements for this case are available at www.pearsonglobaleditions.com/davidperleybrook.umfk.maine.edu/slides/Spring2009/BUS411/SKODA.pptwww.skoda-auto.comwww.skoda.co.ukwww.euromonitor.comwww.marketresearch.comperleybrook.umfk.maine.edu/slides/Spring2009/BUS411/SKODA.pptsss

III. PROBLEM STATEMENTHow will Skoda Auto work to improve its performance to be competitive in automobile industry? What are the strategies needed to change the perception of the stakeholder about the quality of Skoda auto? Will Skoda continue to expand the assembly plants outside Czech Republic? How will Skoda cope up with other competitors who are having a fast pace growth in the market? How can the management deal IV. STATEMENT OF THE OBJECTIVE To create effective marketing strategy To be competent in terms of global market competition To identify new opportunities for growth and bringing innovation to the market To renew the negative perception of its brand nameV. AREAS OF CONSIDERATIONStrengthWeakness

1. Won numerous awards for producing quality automobile2. Implementation of low wage cost country sourcing strategy3. Long-term existence as automobile manufacturer in Europe4. Graduates of Skoda Auto School of Economics serves as their competent employee5. Emphasis on research and development from Volkswagen

1. Poor brand name2. Low total market share3. Assembly plants outside the Czech Republic4. Negative perception on car models5. Employees are claiming for high wage which can decrease the profit margin

OpportunitiesThreats

1. Failed cross border merger and joint venture2. Moving manufacturing and assembly plants to low wage cost countries3. Growing automobile market in Asia and Africa4. American market is open for European companies5. Manufacture automobile operating in new form of energy1. High and intense automobile competition in the market2. Increasing price of nonrenewable energy sources and petroleum3. Monopolistic competition worldwide4. Decline in sales at Eastern Europe5. High wage rate of other countries that make it difficult to be competitive

StrengthsBecause of almost 100 years existence of Skoda it achieves the respect of the buyers in Europe. Despite of its bad reputation it won several awards for producing quality automobile. Also, Volkswagen helps a lot to innovate and improve Skoda products because of its research and development team and its finances. The graduates of Skoda Auto can be used to govern the opening markets and assembly plants because they were well trained and competent enough.WeaknessSkodas main weakness is its poor brand name and the negative perception about the car models. Customers think that they produce a low quality vehicle that did not satisfy their needs. Skoda has low total market share because they are not globally known and starting to enter new markets. The assembly plants outside the Czech Republic experience loss of control and employee turnover. Employees claiming for high wage can decrease the profit margin because the expenses will increase and the sales remain constant.OpportunitiesThe unsuccessful merger and joint ventures give way to other company who did not try to merge and cater the market without exerting effort to eliminate the competitors. Moving the assembly plants to low wage countries can give higher profit margin because of low cost of production. Skoda should focus on developing countries such as Asia and Africa because the potential high growth sales are can be achieved. Manufacturing cars using alternative fuel must be done because of changing technology and continuous decrease in fossil fuels, automobile companies must think of ways how to cope up with future possible threats.ThreatsMany automobile companies are competing in the market offering low price, good quality and unique features that other company dont have. The continuous increase in fuel is a problem because it increases the cost of production and shipping which result to increase in price of automobiles. There are companies merging and establishing monopolistic competition which can affect the pricing of the automobiles. The decline in sales in Eastern Europe affects the financial aspect of Skoda. High wage rate of other countries can be a threat because they can pay higher compensation to employees which can trigger them to work harder rather than in low wage rate countries.

SWOT MatrixStrength-Opportunities1. Open new market in low wage cost countries that will help to lessen the cost of production. Also, Skoda can use their competent employees to lead the manufacturing and assembly plants to cater the potential growth of automobile sales in developing countries such as Asia, South America, and Africa. (S2, S4, ,O2, O3)2. Skoda can develop a car line using new forms of energy to compete with other car brands using advance technology. These can help them to be left behind in the future. (S5, O4,O5)Strength-Threats1. Expand collaboration and innovation with other Volkswagen brands to help in modification and improvement of the car models and become more competitive. (S5, T3)2. Move manufacturing to countries with low wages and demand for value priced automobiles to decrease the effect of decline in sales in Eastern Europe and the difficulty to be competitive because of high wage countries. (S5,T4,T5)Weakness-Opportunities1. Increase market share by entering Asia and Africa (W2,O2,O3)2. Rebrand Skoda as a quality vehicle cut off price Volkswagen (W1,W4,03,O4)

VI. ALTERNATIVE COURSES OF ACTIONACA 1 Rebranding StrategyACA 2 Expansion to low cost countriesACA 3 Making new car model using renewable source of energyACA 4 Use of VW to enter global market

AnalysisAdvantagesDisadvantages

ACA 1

Renewed mindset of the customers to Skoda High profit margin Long term emphasis Awareness Consistency in market place Expensive due to marketing campaign Limited flexibility Impersonal Timescale

ACA 2

Relocation possibilities Enter new market, new opportunity Lesser cost of dealership New employee Broad customer base Considerations Time consuming Expensive Loss of control Compromised quality Employee turnover Financial challenge

ACA 3

Uniqueness Eco-friendly Expensive

ACA 4

Easy to enter global market Volkswagen customers can also be Skoda customers. Possible to be not known because of their identity.

VII. CONCLUSION AND RECOMMENDATIONCRITERIAACA1ACA2ACA3ACA4

Cost benefit4231

Broad applicability3142

Timeliness4123

Completeness4132

Risk3241

Total187169

Legend:1-Fair2-Good3-Better4-Best

Definition of Criteria: Cost benefit- the result where they can benefit higher cost among all the alternatives Broad applicability- the extent where the alternative can apply Timeliness- the length of time top consume Completeness- if the ACA plan has all the major elements Risk- which ACA will result to greater damageBased on the analysis, ACA 1 proved to be the best among the 4 alternatives. We there for conclude that Skoda Auto need to change its bad reputation and be known to be a good quality one. We recommend rebranding to get back the trust and good impression in their product. The bad image result to the downfall in international market share and loss on consumer. They need to get the consumers feedback to know what they need to change to achieve the quality that consumer wants. VIII. ACTION PLANACTIVITYPERSON/S RESPONSIBLEESTIMATED TIME

Compilation of feedback and market research must be done. The company should gather necessary feedbacks and suggestions from customers to correct and improve the areas where they lack of attention. The company must conduct a market research to know the preference of the potential buyers.Research and Development Team &Marketing Head and Staff2-3 months

Strategic Planning for brand repositioning. After gathering necessary research and information, the persons responsible will formulate the rebranding strategy. They will study and create new image separating the bad perception to the name of the product. Top management, Marketing Head, Controller6 months

Market launching. After formulating the rebranding strategy, the company will test the strategy by launching it to the market. In this stage, the company will be able to introduce the reformatted company and position the brand in a positive perception. Sales Head, marketing Head and Controller2-3 months

WASTE MANAGEMENTFocus on low emissionsIn Green Line models, fuel economy and reduced emissions are not only a priority for the engine, but also in product design, body construction and choice of tyres. The combination of these measures reduces vehicle weight, improves aerodynamics and therefore lowers fuel consumption and emissions.Resource efficiencyThe deliberate choice of lightweight materials for production (non-ferrous metals, high-strength sheet metal, plastics, etc.) allows raw materials to be used in the most efficient way possible and also reduces waste.RecyclingIt continues throughout its active usage, all the way through to recycling at the end of its lifecycle. A wide range of different processes ensure that new vehicles manufactured by the Volkswagen Group are at least 85% recyclable and 95% recoverable. All KODA models are certified by the independent British Vehicle Certification Authority (VCA) and comply with all legal requirements including those for recycling capability. Recycling capability not only refers to vehicles and parts which the Company is obliged to take back (tyres, oil, batteries) but also focuses on fluids, plastic parts, glass and packaging. KODA AUTO takes a keen interest in new recycling processes and technologies. A particular focus is the use of recycled materials to replace increasingly scarce primary raw materials. All materials and parts are labelled for easier sorting into material groups at the end of their lifecycle. This ensures that carefully pre-sorted materials are sent for recycling or subsequent recovery. In the EU, end-of-life KODA AUTO vehicles are taken back free of charge. The Company relies on an extensive network of partner companies for recycling. In the Czech Republic, customers can also return wear parts such as tyres, batteries and oil to a network of authorised recyclers.Protection against the air pollutionThese facilities use mainly water-soluble paints, and most of the VOCs produced are mixed with natural gas and burned. The heat released is used for heating purposesReconditioning of contaminated areasKODA AUTO ensures that none of its activities are detrimental to the environment. It has also been successful in mitigating the consequences of industrial production dating from before its acquisition by the Volkswagen Group. By the end of 2011, more than 81% of the contaminated sites had been reconditioned, at a total cost of CZK 610 million.Water consumption and ground water protectionTwo of the most important challenges for environmental management at KODA AUTO are to limit water consumption to the lowest possible level and discharge used water back into natural circulation with minimum environmental impact. Trends in water consumption and wastewater volume per vehicle produced confirm the success of these efforts. Wastewater quality is also considerably higher than legally required.The surrounding bodies of water are not substantially affected by abstraction of water, since all three of KODA AUTOs Czech production locations are supplied for the most part with surface water from rivers. As a precaution, deep bore holes have been drilled here to safeguard supplies when water levels are low. Drinking water is supplied by external companies and waterworks with sources with sufficient capacity Waste managementIn waste management, KODA AUTO subscribes to the principle of prevention, then recovery, then disposal. Processes are designed to prevent waste and keep the volume of waste as low as possible. Reducing hazardous waste and waste with dangerous properties is a priority. Once all recycling possibilities have been exhausted, the remaining waste is disposed of in an environmentally-sound manner. Rigorous implementation of this strategy has steadily reduced the volume of waste per vehicle produced in recent years. This progress becomes quite clear from a long-term perspective: Back in 1993, the production of a single car produced 132 kg of waste per vehicle (without metallic waste), compared with only 33 kg in 2011. In 2011, only 8.9% of the total waste volume was ultimately disposed of in landfills or incinerators. Most waste, including metals, was recycled. This applies in particular to glass, paper, waste oil, solvents, wire and electronic waste.Packaging materialsKODA AUTO strives to minimise the amount of packaging material necessary and to use reusable packaging wherever possible and environmentally beneficial. Packaging material is selected for maximum recyclability. Packaging which can no longer be used is recycled.