Strategic Management
“
Skoda Auto
”
Case Study
Prepared By
Muhammad Owais Jabbar Shoaib Mujeeb Shabbir Ali Mashal Sara Abbasi Ahsan Ayub Sheraz Riaz
Syed Muhammad Mubasshir
Date
20/01/11Table of Contents
Page
Topics
4
Vision and Mission
5
Porter’s Five Forces Framework
6
PESTEL Framework
7
External Audit
8
CPM-Competitive Profile Matrix
9
External Factor Evaluation (EFE) Matrix
10
Financial Ratio Analysis
10
Internal Audit
11
Internal Factor Evaluation (IFE) Matrix
12
SWOT Matrix
14
SPACE Matrix
15
Grand Strategy Matrix
16
The Boston Consulting Group (BCG) Matrix
16
The Internal-External (IE) Matrix
17
The Quantitative Strategic Planning Matrix (QSPM)
19
Vision
To have the biggest market share in Europe by looking for extraordinary
solutions those satisfy extraordinarily demanding customers
Mission
Is to provide quality sales, service and transportation needs for our customers.
This is and will be accomplished through a dedicated team of employees whose
number one goal is customer satisfaction along with a management team whose
responsibility is to ensure employee satisfaction, and customer enthusiasm.
Three basic values of Skoda brand are:
Intelligence: We continuously seek innovative technical solutions and new ways
in which to care for and approach the customers that are most important for us.
Our conduct toward the customers is aboveboard, and we respect their desires
and needs.
Attractiveness: We develop automobiles that are aesthetically and technically of
high standard and always continuous 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.
Porter’s Five Forces Framework:
The Threat of Entrants:
Eastern Europe countries that were in former Soviet Union attract many
competitors who find in these countries new market, new customers, and cheap
labors to reduce costs so the threat of entrants is very high.
Bargaining Power of Buyers:
The power of buyers is high because consumers – especially after globalization
have many choices from which to select when they purchase a car
Bargaining power of suppliers:
Many automobile companies move toward Just-In-Time inventory system and
that pushes many suppliers to make their plants near these automobile companies,
and some of these automobile companies made their own parts, so the power of
supplier is very weak.
Threat of Substitutes
The threat of substitute will be public transportation in big, crowded, and heavy
populated countries, this substitute may be faster and cheaper than driving a car
there, because people need to find a parking for their cars and usually it will be
with fees.
Competitive Rivalry:
The automobile market is one of the most competitive markets in the world, in
addition, there are many companies try to reduce their costs by moving to low
cost countries such as Eastern Europe and Asia countries, and try to find new
market, so the competitive rivalry is high in the long run.
Political:
- Heavy taxes and tariffs in some countries make Skoda increase its automobiles’ price.
- Political sanctions, violence and terrorism make some limitation to expand globally in Asia market.
Economic:
- Fuel Prices fluctuations affect the costs and that reflect on the price of automobiles, so that may change the customer behavior toward some features of automobiles.
- Skoda could get benefits from economic unions such as Central European Free-Trade Area (CEFTA) which includes: Poland, Hungary, Slovakia, Czech, Slovenia, Romania, and expand heavily there.
Social
:- Negative customers' perception toward Skoda brand because of bad images about automobiles industry in Eastern Europe countries.
- Increase in population in some countries make their governments to
redesign their traffic and make public transportation more useful will affect automobiles sales in these countries.
Technological
- Should exploit evolution in technology to introduce new features and options to reposition Skoda brand and to get competitive advantage.
Environmental:
- Because of pollution problem and its effect on Ozone, Skoda should develop and concentrate on manufacturing green environmental cars.
Legal
:- Green marketing laws and laws on environmental issues such as industrial pollution.
- Currency exchange - Legal registration
External Audit
1.
Growing automobile
industry in Middle East by
9%, Southeast Asia by
14%, and Africa by 8%.
2. By 2010, electronics are
expected to account for
nearly 40 percent of an
average vehicle’s value.
3.
The forecast for the
market for new passenger
cars in Russia is +11%.
4.
U.S. small-car demand
outpacing North
American capacity
1.
Highly crowded and
competitive environment.
2. Franchised dealerships are
free to set vehicle prices,
and they may or may not
offer customers the
discounts that automakers
provide.
3. Continuous increasing in
oil prices may affect
automobiles sales around
the world.
Skoda Peugeot Renault Opel Critical Success Factors Weig ht Ratin g Weight ed Score Ratin g Weight ed Score Ratin g Weight ed Score Ratin g Weight ed Score Price 0.12 4 .48 2 .24 3 .36 2 .24 Financial Position 0.15 3 .45 4 .60 3 .45 4 .60 Advertisi ng 0.09 2 .18 3 .27 2 .18 4 .36 Innovatio n 0.22 2 .44 3 .66 2 .44 4 .88 Market Share 0. 22 2 .44 4 .88 2 .44 4 .88 Managem ent 0.10 3 .30 3 .30 3 .30 3 .30 Global Expansio n 0.10 3 .30 4 .40 3 .30 4 .40 Total 1.00 2.59 3.35 2.47 3.66
Key External Factors
Weight
Rating
Weighted
Score
Opportunities
1.
Growing automobile industry in Middle East by 9%, Southeast Asia by 14%, and Africa by 8%.0.15 3 0..45
2.
By 2010, electronics areexpected to account for nearly 40 percent of an average vehicle’s value
0.15 2 0.30
3.
The forecast for the market for new passenger cars in Russia is +11%0.20 3 0.60
4.
U.S. small-car demand outpacing North American capacity0.15 2 0.30
Threats
1. Highly crowded and competitive environment
0.15 3 0.45
2. Franchised dealerships are free to set vehicle prices, and they may or may not offer customers the discounts that automakers provide.
0.10 2 0.20
3. Continuous increasing in oil prices may affect automobiles sales around the world.
0.10 2 0.20
Total 1.00 2.50
Financial Ratio Analysis 12/2006
Growth Rates %
Skoda
Industry
Net Income (YTD vs YTD)
1.48
11.80
Liquidity Ratios
Current Ratio
1.48
2.10
Quick Ratio
1.13
0.90
Efficiency Ratio
Assets to sales
0.52
11.0
Profitability Ratios
Returns to sales
0.055
3.2
Returns to Assets
0.11
6.4
Debt Ratio
Total liabilities to
1.80
277.2
Internal Audit
Strength
Weakness
1. Skoda won numerous awards for producing a quality automobile.
2. Skoda implements low-cost country sourcing strategy. 3. Skoda is the largest employer
in the Czech Republic. 4. Total assets are gradually
increasing.
5. Skoda achieves highest growth in 2006 sales in Eastern
Europe, number one carmaker in Central Europe, and grew its Western Europe market share to 2.1
1. Poor brand name due to Skoda relates to Eastern Europe origins that in the past the cars had an image of poor vehicle quality, and design.
2. Total Skoda market share is 1.7%.
3. Skoda has problems with their assembly plants outside of the Czech Republic.
Internal Factor Evaluation (IFE) Matrix
Key Internal Factors
Weight
Rating
Weighted Score
1.
Skoda won numerous awards for producing a quality automobile.0.15 3 0.45
2.
Skoda implements low-cost country sourcing strategy.0.15 3 0.45
3.
Skoda is the largest employer in the Czech Republic.0.08 3 0.24
4.
Total assets are gradually increasing.0.10 3 0.30
5.
Skoda achieves highest growth in 2006 sales in Eastern Europe, number one carmaker in Central Europe, and grew its Western Europe market share to 2.10.18 4 0.72
Weaknesses
1. Weak brand name due to Skoda relates to Eastern Europe origins that in the past the cars had an image of poor vehicle quality, and design.
0.18 1 0.18
2. Total Skoda market share is 1.7%.
0.08 2 0.16
3. Skoda has problems with their assembly plants outside of the Czech Republic
0.08 1 0.08
Total 1.00 2.58
11
Strengths Weaknesses
1. Skoda won numerous awards for producing a quality automobile.
2. Skoda implements low-cost country sourcing strategy. 3. Skoda is the largest employer
in the Czech Republic. 4. Total assets are gradually
increasing.
5. Skoda achieves highest growth in 2006 sales in Eastern Europe, number one carmaker in Central Europe, and grew its Western Europe market share to 2.1.
1. Poor brand name due to Skoda relates to Eastern Europe origins that in the past the cars had an image of poor vehicle quality, and design.
2. Total Skoda market share is 1.7%.
3. Skoda has problems with their assembly plants outside of the Czech Republic.
Opportunities S-O Strategies W-O Strategies
1. Growing automobile industry in Middle East by 9%, Southeast Asia by 14%, and Africa by 8%.
2. By 2010, electronics are expected to account for nearly 40 percent of an average vehicle’s value.
3. The forecast for the market for new passenger cars in Russia is +11%.
4. U.S. small-car demand outpacing North American capacity
1. Using price as a competitive advantage to concentrate on Russia Market (S2,O3)
2. Open assembly plant in Mexico to feeding North America market (S1,S2,S5,O1,O4)
1. Increase market share by entering new growth market in Middle east, Southeast Asia, and Africa(W2,O1)
2. Improving automobiles quality by introducing innovative, electronic features, and design (W1,O2)
Threats S-T Strategies W-T Strategies
1. Highly crowded and competitive
environment.
2. Franchised dealerships are free to set vehicle prices, and they may or may not offer
customers the discounts that automakers provide.
1. Increase marketing efforts to make new repositioning(S4, S5, T1, T3)
2. Focus on producing middle and small engine
cars(S1,S2,T3)
1. Offer 5 years/200000 Kilometer warranty on all vehicles (W1, T1)
SPACE Matrix
Financial Strength Rating Environmental Stability
Rating
Return on assets 2 Rate of inflation -3
Leverage 1 Technological changes -4
Net Income 2 Price Elasticity of demand
-6
ROE 2 Competitive pressure -6
Barriers to entry new markets -6 Average 1.75 Average -5 Y-axis -3.25 Competitive Advantage
Rating Industry Strength Rating
Market share -1 Growth potential 2
Customer Loyalty -1 Ease of entry new markets
3 Control over other
parties
-1 Resources utilization 2 Technological know-how -1 Profit potential 3
Average 1.20 Average 2.40
X-axis 1.20
Directional vector point is :( 1.20, -3.25)
Grand Strategy Matrix
Conservativ e Aggressive Competitiv e Defensive FS IS C A ES
The Boston Consulting Group (BCG) Matrix
The Internal-External (IE) Matrix
Quadrant II Quadrant I
Quadrant IV Quadrant III
Rapid Market Growth
Strong Competitiv e Position Weak Competitiv e Position
Slow Market Growth
Question Marks Dogs Cash Caw Skoda Industry Sales Growth Rate
Market share position
Strong 3.0 to 3.99 Medium 2.0 to 2.99 Low 1.0 to 1.99 High 3.0 to 3.99 Medium 2.0 to 2.99 Low 1.0 to 1.99
The Quantitative Strategic Planning Matrix (QSPM)
Strategy 1
Open new assembling plant for Skoda cars in Mexico and make it as a base to enter American Market Strategy 2 Reposition of brand name strategy by increasing marketing efforts
Key Internal Factors Weight AS TAS AS TAS
Strengths
Skoda won numerous awards for producing a quality automobile
0.15 2 0.20 2 0.20
Skoda implements low-cost country 0.15 - - -
IV V VI VII VIII IX
Skoda
The EFE Total Weighted ScoreThe IFE Total Weighted Score
sourcing strategy
Skoda is the largest employer in the Czech Republic
0.08 - - -
-Total assets are gradually increasing 0.10 4 0.40 2 0.20
Skoda achieves highest growth in 2006 sales in Eastern Europe, number one carmaker in Central Europe, and grew its Western Europe market share to 2.1
0.18 1 0.18 2 0.36
Weaknesses
Weak brand name due to Skoda relates to Eastern Europe origins that in the past the cars had an image of poor vehicle quality, and design
0.18 2 0.36 4 0.72
Total Skoda market share is 1.7% 0.08 4 0.32 2 0.16
Skoda has problems with their assembly plants outside of the Czech Republic 0.08 - - - -SUBTOTAL 1.00 1.46 1.64 Strategy 1 Open new assembling plant for Skoda cars in Mexico and make it as a base to enter American Market Strategy 2 Reposition of brand name strategy by increasing marketing efforts
Key Internal Factors Weight AS TAS AS TAS
Opportunities
Growing automobile industry in Middle East by 9%, Southeast Asia by 14%, and Africa by 8%.
0.15 1 0.15 3 0.60
By 2010, electronics are expected to account for nearly 40 percent of an average vehicle’s value
0.15 - - -
-The forecast for the market for new passenger cars in Russia is +11%
-U.S. small-car demand outpacing North American capacity
0.15 4 0.60 2 0.30
Threats
Highly crowded and competitive environment
0.15 4 0.60 3 0.45
Franchised dealerships are free to set vehicle prices, and they may or may not offer customers the discounts that automakers provide
0.10 - - -
-Continuous increasing in oil prices may affect automobiles sales around the world
0.10 - - -
-SUBTOTAL 1.00 1.35 1.35
SUM TOTAL ATTRACTIVENESS SCORE
2.91 2.99
