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Executive Summary

Skoda Auto, established over a century ago, has a long proud history of making automobiles. After privatisation, and under the guidance of VW Group, Skoda has focused on producing high value-for-money automobiles. Therefore, Skoda focuses on gaining competitive advantages by reducing its costs below those of its competitors; this is the generic business level strategy of cost-leadership. 

The sustainability of this strategy is determined by the firm’s access to internal resources, along with the threats of the external environment. The internal analysis identified three rare, difficult to imitate sources of cost advantages. Firstly, technological advances, coming from the knowledge transfer from the VW Group, secondly low-cost access to inputs due to strong supplier relations and Central Europe location, and finally learning curve economies stemming from the companies long history. The external analysis recognised the threats of increased input costs, and the threat of new market entrants from China and India, as well the switching to transportation substitutes due to increasing fuel costs. 

Based on this analysis we concluded that Skoda is in a good position, in order to exploit the opportunities of the industry, whilst neutralising the threats. Therefore, we recommended that Skoda should continue to follow its cost-leadership strategy. However, to ensure its sustainability as a source of value enhancement, we suggest that Skoda should further leverage its relationship with VW Group in order to develop further, more efficient production processes, and models. Also, in order to maintain low costs and to neutralise the threat of market entrants from China and India, Skoda should continue to move more of its operations to these locations, both for lower costs as well as for greater local customisation 

Skoda’s goals are to: 

Make their customers enthusiastic about, and loyal to, the Skoda brand 

Adhere to the wishes of its external and...