Volkswagen's Acquisition of Skoda Auto: A Central European Success Story
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Case Code: BSTR262 Case Length: 24 Pages Period: 1991-2007 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.400 Organization: Volkswagen, Skoda Auto Industry: Auto and Ancillaries Countries: Czech Republic Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background - Skoda
Skoda was set up in 1895, at a place called Mlada Boleslav in what was then a part of the Austro-Hungarian Empire. It was originally called Laurin and Klement Co. (L&K), after the two founders Vaclav Laurin, a mechanic, and Vaclav Klement, a bookkeeper. L&K's main business was manufacturing and selling bicycles. The firm's bicycles proved popular, and L&K ventured into making motorcycles in 1899. L&K's motorcycles participated in several racing events, and won some of them, enhancing the company's reputation. L&K started manufacturing cars in 1905. When its first model, the Voiturette A, became a commercial success, L&K started expanding, and in 1907, the firm was incorporated as a joint stock company. During the First World War (1914-1919), L&K was involved in arms production.
After the War ended, L&K diversified into making trucks, buses, aviation engines and agricultural machinery, in addition to cars. This required additional investments, for which it started looking for a partner. In the early 1920s, after a fire at the L&K factory, the need to find a partner became critical. In 1925, L&K was acquired by Skoda Plzen, the largest industrial enterprise in what was then Czechoslovakia. After the merger, L&K's vehicles began to be sold under the Skoda name.
In the period between the two World Wars, Skoda's cars were exported across Europe. During that time, the company's cars were known for their elegant looks and technical superiority. Although sales were affected to some extent by the Great Depression, Skoda's popularity did not diminish significantly. During the Second World War (1939-1945), Skoda came under the control of Nazi Germany, and the company's production facilities were used to support Germany's war efforts. After the War, Czechoslovakia came under the influence of Soviet Communism, and all the companies in the country were nationalized. Skoda Plzen's different business units, including the auto manufacturing unit, were split into seven independent entities...
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