Volkswagen Acquisition of Skoda

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Question Paper Integrated Case Studies - II (MB3J2): October 2008 Case Study∗ (100 Marks)
• This section consists of questions with serial number 1 - 5. • Answer all questions.

• Marks are indicated against each question.

Read the case carefully and answer the following questions:
“The greater the level of involvement of a company in foreign markets, the greater the need for it to monitor the political climate of the business.” In relation to the effect of a country’s political environment on a company’s performance, analyze how the political environment of Czechoslovakia impacted Skoda? ( 18 marks)


“In the early 1990s, Volkswagen’s (VW) sales in the US were declining, making it imperative for the company to start looking for new markets to safeguard its long term interests leading to its acquisition of Skoda.” Examine the various reasons for companies to adopt cross-border merger and acquisition. Also, discuss the benefits derived by Volkswagen and Skoda with this acquisition. ( 22 marks) “Known over the world for its quality engineering, Volkswagen’s task was to transform the poor image and socialistic policies of Skoda into a customer-oriented, market-focused organization.” In this context, analyze the various Human Resource (HR) issues that companies face at the time of an acquisition and the way VW has tackled these issues. Also, examine how VW has improved the production and quality in the manufacturing plants of Skoda? ( 20 marks) In the light of the rise in brand consciousness among customers, analyze the importance of brand building. Discuss the various brand building initiatives adopted by VW to improve Skoda’s image. ( 20 marks) “Volkswagen embarked on its multi-brand strategy in an effort to rationalize its brands. It had 4 vehicle brands – Audi, VW, SEAT and Skoda, with each brand maintaining its distinct identity.” Discuss the advantages and disadvantages of a multi branding strategy in competitive markets. How far is the multi-brand strategy of VW justified? Give reasons. ( 20 marks)




Volkswagen’s Acquisition of Skoda Auto: A Central European Success Story “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 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

* The above case is prepared only for the purpose of examination and not to illustrate effective or ineffective performance of the company. The case contains factual information adapted to and combined with other information to enable analysis of the given topics.


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“Central Europe’s Best Companies,” The Economist, June 30, 1997. Tom Mudd, “The Last Laugh,” Industry Week, September 18, 2000. Luca Ciferri, “New Flagship Model will Complete Skoda Rebirth,” Automotive News Europe, July 2, 2001. “Slav Motown,” The Economist, January 6, 2001. The ‘Iron Curtain’ was the boundary which symbolically,...
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