Sep 25, 2017 term paper 2

SKODA HAS A CENTURY-LONG HISTORY OF BUILDING AUTOMOBILES. 18 LOCATED IN THE SMALL TOWN OF MLADA…

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Skoda has a century-long history of building automobiles.18 Located in the small town of Mlada Boleslav, nearly forty miles from Prague in the Czech Republic, Skoda survived—and even prospered—until the latter years of Communist domination. When the Czech Republic began converting to a market economy in the late 1980s, Skoda was determined to seek Western assistance to reinvent itself. It turned to Volkswagen AG, which purchased a 30 percent equity share of the company in 1991 and subsequently raised its stake to 70 percent. The new joint venture was managed by a five-member board, consisting of two Czechs (Skoda’s chairman and vice president for human resources) and three Germans appointed by Volkswagen. By 1996, the joint venture had already produced results. Product quality had risen to international standards and new models had been introduced. Local suppliers were now supplying quality parts and components at competitive prices. With factory modernization, production, sales, and wages had all risen, while the number of factory workers had been reduced. The remaining workers received better training in advanced manufacturing methods. That same year, Skoda won its country’s Best Company of the Year Award. The question on everyone’s mind was whether Skoda was indeed still a Czech company or whether it had become a Volkswagen or German clone. From the beginning of the joint venture, the goal was to transfer knowledge and expertise to the Czech firm. German technicians were temporarily transferred to Skoda to facilitate this goal. German and Czech managers were paired as part of a tandem system for purposes of local employee development. As one German manager noted, integration of the locals, not domination, was the goal. During the initial stages of the partnership, the tandem system helped train the Czech managers and provided the requisite confidence to succeed. As time went on, most German managers returned to Germany and shop-floor operations were increasingly assumed by Czech managers. However, VW retained control over strategic decision making in view of its equity position in the company. In the initial stages of the venture, Czech managers felt they had a great deal to offer in view of their long history in automobile manufacturing. However, the Germans rarely asked their opinions. As one Czech manager noted, if the Germans come and change everything, it’s like saying the local workers did everything poorly and the Germans will do it correctly. It was also noted that the Germans on the scene showed little interest in the Czech legal system, history, or culture. A major stumbling block in the beginning was the difficulty each side had understanding the other. Indeed, language was always a problem. The German visitors felt that the local Skoda workers should work hard to learn German—the language of the parent company. Many Czech workers, on the other hand, preferred to speak English as a common (or perhaps neutral) language. This issue was never resolved. To get ahead in the company, Czech managers had to speak either English or German. The absence of Czech-language skills on the part of the German managers troubled many Czechs, especially the line workers. There was also the issue of expectations. One Czech manager noted that in the Czech national culture, people are more action-oriented and less theoretical, while the Germans are more concept-oriented and prepare things systematically. The initial challenge was to ensure that everyone understood that there were different ways to reach the same target. Throughout, the Germans emphasized efficiency and organization. They also stressed training, appropriate work clothes, equipment, discipline on the shop floor, and cleanliness and orderliness in the factory. At the same time, some Czech managers and workers complained about the materialism of their German counterparts. They also complained that Czech workers had lost their innate sense of loyalty to Skoda. Both sides agreed that the joint venture had been a success and had brought a change in the mind-set of the Czechs. They now saw the company in strategic and competitive terms. Even so, many remained reluctant to accept responsibility. An experienced German manager observed that what was missing at Skoda was selfconfidence. The Czechs needed to be given a chance to grow and develop in their own way. Soon, they should be capable of running a highly efficient firm. The question seemed to be whether their German partners would let them do it.

QUESTIONS FOR DISCUSSION

1. What did each side hope to gain from the Skoda-Volkswagen alliance? Did each side get what it wanted?

2. Why did the Skoda-Volkswagen alliance develop so smoothly? What did each side do to facilitate its success?

3. What problems remain for the Skoda-Volkswagen alliance? What can be done now to prepare for these problems?

4. If Germany’s approach to employee participation works so well, why isn’t it used more widely in other parts of the industrialized world?

5. What problems will German industry face as they attempt to retain their traditional management methods yet remain competitive in an increasingly challenging global environment?


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