Czech Republic EU

Czech Republic is strategically located at the center of Europe. After the fall of Soviet Union and the end of communism in Czech republic after the velvet revolution there was a considerable growth in the field of economic and industrial area. When the Czech Republic joined into EU and CEC it attracted a lot of investments form the foreign investors. The Czech economic GPD has increased gradually from 3.5 in 2004 to 4.1 in 2005.Along with the country’s strategic location in central of Europe, its low-cost structure and skilled work force have also attracted strong inflows of foreign direct investment. This investment is rapidly modernizing its industrial base and increasing productivity.

Before the liberalization of the Czech economy, majority of the companies were mostly run by the state government and had little investments from the outside world. The production level of Czech also reduced and compared with its neighbors.

The Czech Republic boasts a flourishing consumer production sector. In the early 1990s most state-owned industries were privatized through a voucher privatization system. Every citizen was given the opportunity to buy, for a moderate price, a book of vouchers that he or she could exchange for shares in state-owned companies. State ownership of businesses was estimated to be about 97% under communism. The non-private sector is less than 20% today.

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With the liberation of economy and the nod form the government to FDI the Czech economy and its trade balance gradually increased to 3 billion Euros. The GDP and per capita increased staidly. In order to increase the FDI investments the government offered investment incentives in order to enhance the Czech Republic’s natural advantages, thereby attracting foreign partners and stimulating the economy. Shifting emphasis from the East to the West has necessitated adjustment of commercial laws and accounting practices to fit Western standards. Formerly state-owned banks have all been privatized into the hands of west European banks and oversight by the central bank has improved. The telecommunications infrastructure has been upgraded. The Czech Republic has made significant progress toward creating a stable and attractive climate for investment, although continuing reports of corruption are troubling to investors.(Czech Republic 2003)

As Czech Republic has joined the EU in may 2004, most of the foreign investors and leading multinational companies invested huge amount of money into it. The companies like SAB Millers, Volkswagen, and Tesco acquired the companies of Czech Republic and were able to invest more amounts of money and technology into them. With higher competition among the local and foreign companies, the local companies were able to improve its qualities and have an opportunity to compete with them in the global market.

When SAB miller acquired the local leading Czech brewing company Plzensky Prazdroj it brought along with it technology which helped it to generate more amount of quantity.

As Czech Republic in centrally placed in Europe and it is a member of EU gave SAB miller a foothold in the European market. This also brought good revenues for the local producers and suppliers. There was a steady demand for the local products.

Likewise when Czech automaker Skoda was acquired by the German automobile giant Volkswagen, it not only entered a new market but it also helped Skoda to invest more funds into its new technological researchs.The result was that the profits of Skoda gradually jumped from 209 Million dollars to 6.65 billion dollars in a span of time.

The operational strategies are made on the day to day basic of the companies’ at local functional levels. Effective organizational strategies success will only occur depending on the performance of the company. Resources and workforce play a major role at the success of operational strategy. Even though Volkswagen completely owns Skoda it does not make the interference in the management style. With the help of Volkswagen Skoda was able to become a major brand, Skoda were able to position them selves to compete with major car brands. With the help of Volkswagen Skoda was able to use new technologies for better communication with its suppliers and distributors. As Volkswagen being a parent organization of Skoda it does has a major say in its marketing and operational strategies, in designs in order to keep the competitive advantage over its competitors’. In the case of SAB millers which is the parent company of Plzensky Prazdroj the production and managerial strategies are held by the child company where as the marketing and decision making strategies are done by the parent company. All the decisions about the production and buying of raw materials are held with Plzensky in order to continue with its old tradition and local heritage.

As Kim and Mauborgne (2005) said the creation of a strategy is about providing value its buyers along with reducing the costs will help them have a competitive advantage over its competitors. With help of just in time strategy Skoda was able to have economic scale gains. Skoda was able to create a new market space in Czech and Europe through its cost efficient methods. As in the case of ZVVZ as which had a tough competition with Enven in its local market, they acquired it and were able to reduce the competition. ZVVZ was able to successfully able to create a market for its own in the environmental products. As it has no competitors they ensured that they give high perceived value to its customers at a lower prices, to make do this they reduced the cost by outsourcing the logistics.

Kim and Maubroge (2005) point out that to have a competitive advantage over its competitors a firm has to successfully align with cost, utility and price potions. Pilsners rural locations enable them to brew and procure raw materials at a very cheap price. And in order to minimize the costs pilsners also utilized the water from theits local stream. Thus they are focused on customer satisfaction they have more customer base. By using proper value innovation companies try to have a competitive advantage over its competitors , Pilsner a brewing company did not use any value innovation in its strategies. Even in the case of Skoda until Volkswagen acquired them they had no proper value innovation. In case of ZVVZ it created new markets and new products lines by effectively utilizing value innovation technique. This ensured that ZVVZ has major competitive advantage over its competitors and ensured them to be a market leader.

As the competition among the major companies is increasing, there has been a major impact on the organizational cultures with comparisons to local companies and its parents companies. The positive impacts can been seen at Skoda where the distance between employees and management is high and always ensured for the better performance of the company. Independent decisions are taken at managerial level to have positive results. How ever in some cases the employees were not comfortable this power distance, which lead them to have high risk and uncertainty and due to this there are more misunderstandings among the management and employees. In this case employees were not able to make decisions which lead to having confusion also led to the failures of the companies.

In conclusion Czech economy had been able to transfer itself from being a centralized economy to a free economy. The foreign direct investment ensured that Czech economy jumped from a small to very big economy with the help of FDI the local companies were able to invest heavy money into its research departments, which resulted in huge gains for the company. Czech strategic location which is at the center of Europe ensured that major investments are poured into it.

References

David A. Grvin (1992) Operation strategy . Prentice Hall international England.

Kim, C.W., and Mauborgne, R. (2004) Blue Ocean Strategy, Harvard Business Review [online]. pp 76-84, [cited on 30th April 2008]. Accessed via Ebscohost.

Krajewski L, Ritzman L(1998) Operation managements 5^th edition , Addison Wesley , England.

Slack N, Chambers S, Johnston R (1995) , operations management 5^th edition , Prentice hall, England.