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Market and strategy analysis of Skoda

The Skoda entered manufacturing market in 1890 and initially they made bi cycles not cars. Then company became the first manufacturer of motorcycles after that in 1925 Skoda started manufactured cars the 1101 series. It was only car making company in Czechoslovakia.

The basic aim of company was reasonable and affordable price of cars so it kept the cars in simple and sober manner but because of it company had faced lot of problems.

By 1990 the Czechoslovakia management of Skoda was looking for a strong foreign partner to promote and make the brand better. Volkswagen AG (VAG) the largest car manufacturer in Europe was selected among all of other rivals because of its prestige for its brand's strength, quality and reliability in market and faith for VW brands in the heart of customers.

By 1991 30% stake of company was taken by Volkswagen who concentrated on employee training to make them up to the international market standards. The company invested £2 billion in the new models for latest technologies and after ten years in 2001 the whole business was took over by VW.

It initially launched the models like SPARTAK, Octavia, Felicia and others. Now the Skoda prices went up high because of many improvements and customers had to agree that improved VW car was worth paying. There was a paradigm shift of company’s reputation now it is looked for luxury segment cars that are reliable and more dependable. The latest Skoda launched its sports version like Estelle and Rapid increased its sales more.

Problems/ Issues:

Skoda was very popular in its own country because of its low cost and simplicity in design but this boon became a problem as Skoda could not compete other cars on style but only on reasonable price ground. Company budget was so low for promotions, innovations and its distribution chain in 1980 that it used to be said that “trying to sell Skoda was something like trying to sell nuclear waste”.

Just because of these problems initially Skoda was talked in many jokes as

“What do you have to do if your Skoda gets in the way of a swarm of killer bees?

Stop pushing and take refuge in the car!!”

Or

“How do you make a Škoda look good?

Park it between two Ladas!!”

The previous market survey let us know that 60% people will never buy a skoda because its looks are old fashioned and out of sync with its product image. One fifth of people buying Octavia were of the age 45 and just one third were the previous customer of the company.

MISSION

Skoda was to move from to move away from being a cheap brand to being a value-for-money brand. Skoda’s biggest mission was the satisfaction of its customers. It indicated that the brand belongs with a quality products and happy customers.

VALUES

•  Intelligence: SKODAS intelligence is for innovative technical solutions for care of customers and interacting with them in better way.

•  Attractiveness: automobiles of Skoda are always of good standard and designed according to customers’ needs and desire.

• Dedication: company always enthusiastically works on the further developments of their vehicles; we identify new products and produce them in innovative ways.

 

Strategy:

Skoda was the laughing stock of the automobile world In the UK, Škoda’s image was initially slow to improve a major turnabout was achieved with the ironic "It is a Škoda, honest" campaign and other more campaigning, which started in the early 2000s. Škoda started concentrating on following points basically:

•  Set up of strategic partnerships with suppliers and distributors,

•   Loyal customer base by providing good servicing,

•  Expanding customer base by a wide range of attractive features with its products,

•    Reinforce to improve current position,

•    Development markets in eastern Europe and Asia,

•   Continue to upgrade production technologies and processes,

•    Taking care of existing customers as well as targeting the new one customers by launching new advanced cars in sense of design and facilities like Roomster and 2nd generation Škoda Octovia.

We can imagine it’s aggressiveness by its tag line about its product was given as “Emotionalizing the brand and give it a sharper profile in international markets”.

 

MARKETING MIX:

Skoda took care of the great marketing elements it generally concentrated on promotion of its product but initially its prime focus was the price only.  Skoda’s latest Fabia was launched with a large number of promotional advertisements on TV and newspapers showing its new added features to tempt customers. Skoda did the following

• The original TV camp was of 4 weeks and the poster campaign was of two weeks.

• The campaign targeted the consumer press and attempted to get journalists to discuss Skoda in a positive light

• The direct mailings were used to build loyalty among Skoda drivers and get across the brand's new image.

• The automobile magazine Auto Express carried a competition to win a Skoda car that generated 27,000 responses. As consolation prize scale model was given with an invitation to test drive a full-size model to the winner candidates.

The company conducted many campaign’s to promote the new brand position the focus was customers emotions and t keep them happy like  the ‘Fabia Cake’ TV advert that showed that the car was ‘full of lovely stuff’ with the happy music (‘Favorite things’) in the background.  Along with it for customer convince the company redesigned the website that was easy and handy. The message that website conveyed was ‘experience the happiness of Škoda online’ it was a great appeal to young audience. Many functions were facilitated online like booking of test drive and a lot more it all made customer feel that Skoda is a reliable and lovely car to have.

Competitors

Skoda has to move up its market although its customers are completely different still it has to look for the possible competitors like bmw and LEXUS.

BMW- it understands its customer well and tries to achieve maximum satisfaction the latest feature of cars was multi point fuel injection system. Cars of BMW have got a style statement.

LEXUS- it is produced by Toyota its greatest advantage is it is the super car with carbon fiber construction and dynamic balance that’s the attraction center of customers

 

SWOT ANALYSIS

Swot analysis proved very important for the company as it came to know about the external opportunities and threats which could be used as strength by the company to maximize the profit and to regain the market position. By understanding and having a deep knowledge of problems and the market trends Skoda gave new impetus to its campaign.

Strengths:

•   Škoda won several awards for quality automobile production

•   Skoda's implementations of low cost country sourcing strategy

•   Skoda is having largest manpower in the Czech Republic.

•   Total assets are gradually increasing.

• Skoda is achiever of highest growth in Eastern Europe, central Europe and Western Europe.

Weakness:

• Poor brand identity due to it origin country notorious for poor vehicle quality and design.

• Total Skoda market is just 1.7%.

• Skoda has problems with their assembly plants outside its native country.

Opportunities:

• Growing automobile industry throughout the world

•  By 2010, electronics are expected to account for nearby 40% of an average vehicle’ value

Strategies

•  Open assembly plants nearby its future markets like in Mexico for America markets and in India or china for its Asian markets to reduce its manufacturing cost.

•  Using price as a competitive advantage to concentrate on new potential markets as India or Russia.

Strategies

• Increase market share by entering new growth markets

• Improving automobiles quality by introducing innovations in electronics, features and designs

Threats:

• Highly crowded and competitive environment

• Franchised dealerships are fire to set vehicle prices, and they may or may not offer customers the discounts that automakers provide

Strategies

• Aggressive marketing efforts to make new repositioning.

• Focus on production of middle and small engine cars.

Strategies

Offer good servicing to its existing customers and also providing new range of guarantee and warrantee on its automobile products to attract new customers to tempt.

Results:

Initially

•  Skoda started attracting customers in more better way in comparison of its competitors like fiat or citron,

•   60% agreed Škoda is giving value for their money,

•  84% believed the campaign approaching different markets in a clever way,

• 29% sales increased,

•  News in news papers were like “The way things are now rolls Royce can only benefit from association with Škoda” OR “Škoda is not a joke any more-felons spot for the Czech car maker was the public  favorite”.

Finally in 2000s

•         Ranked 2nd overall in 2004 (J.D. Power, customer survey)

•         Skoda models ranked in top 10 (which car survey)

•         Skoda Satisfaction rating 87%.

•         Maintained a good growth level.

•         Škoda is the fastest-growing brand within the giant VW Group Empire that also includes Audi, Bentley, Lamborghini and Seat. One of the oldest car makers in the world, Škoda took 85 years to sell five million cars. Since VW first acquired a stake (30 per cent) in 1991, Škoda has sold the same number of cars in just 16 years.

Recommendation/possible solution:

Following could be the possible solutions and further recommendations as well for the company,

•  Start working on the famous quote “Only an early bird catches its prey”, by concentrating new potential markets like Asia or US with the advantage of its low cost cars compared to local automobile companies.

•  For low costing try to open manufacturing and assembling plants nearby to its new targeted markets to reduce its transportation cost.

•  Offer wide range of servicing, a good duration of guarantee or warrantee with an enlarged network of service centers to keep existing customer’s faith and smile.

•  Start thinking about new technologies, innovations to add with the products  to attract market attention towards the brand. Company may think about following features:

Hybrid Engine: cars working with two more fuel sources, which are fuel efficient,

Eco friendly technology: efficient cars working with other fuel sources like bio fuels or solar energy instead of petrol or diesel models,

User friendly facilities: addition of some futuristic devices to its products like night vision, good innovative sound systems, air-conditioning and comfortably of its models.

Safety attires: it may be the last but not the least and the most important thing any customer looks is the safety norms followed by his car. He always wishes to travel in the safest vehicle to secure his precious life. For this purpose company may add additional air bags on the roof side to protect head injuries and automatic breaking system in any accidental cases etc.

After the all improvements company must initiate its new broad level campaigning to attract customers having comparison with other brands available in market in the same price range. We are to give a whole package of cost and facilities but here we must take care of cost asked for the provided facilities and it must be non comparing temptation for the customers.

 

Executive summary 

Skoda initially entered the business with the strategy of reasonable price of car for the customers but while making it affordable and low price the company forgot to look on its design according to new technological advancements and the latest market trends. But after rebranding of the company with VW group there was a drastic change in the sales n profit margins of the car. The new strategy was customer satisfaction along with new innovative technologies for the car making it lovelier and quality was great and the new car was engineered with practicality and value for money. The new brand value of Skoda looked for fuel efficient and eco friendly cars. Recent market survey tells that the Skoda cars are now in the top ten cars.

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