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 / Fall 2005 / Issue 40(originally published by Booz & Company)


Skoda Leaps to Market

Leapfrogging in itself does not explain Skoda’s success. Cheap labor was also not the decisive factor (many labor markets are less costly than the Czech Republic these days). Other factors included Volkswagen’s precise school of management, the integration of Czech and German corporate cultures, and the positioning of Skoda as a smart, rather than cheap, buy. Probably the greatest factor of all was the deliberate appeal to pride — pride in craft, pride in design, and general pride in company — in a culture and country where that emotion had been in short supply for many years.

Skoda factory, Mladá Boleslav. Photograph courtesy of Skoda 

Newborn near Paradise
An hour’s drive north of Prague, the new “motor city” of Mladá Boleslav differs from Detroit in its size (its population is about 43,000), its architecture (the churches and castle date back 800 years or more), and its formal foundation in the 10th century a.d. by Boleslav the Pious (“Not to be confused with Boleslav the Cruel,” notes a town official). Leaders of the early Protestant Czech Brethren movement, which made Mladá Boleslav its own Jerusalem, were in communication with Martin Luther in Wittenberg, with Desiderius Erasmus in Amsterdam, and with John Calvin in Geneva. The Communists added a lot of concrete, some Marxist statues, and a few loudspeakers tied to streetlamps, but did not fundamentally alter the town’s sense of self.

The Skoda car plant stretches a mile across, with a railway running through it. On one side, beyond the towering red and white chimney stacks, is a splendid baroque chapel by Giovanni Alliprandi. On the other, stacked up like gray vertebrae, are the Orwellian apartment blocks built by the Communists to house factory workers. (Since 1989, many families have moved to new houses at the edge of town.) In the distance is Cesky Raj, literally “Czech paradise,” an exquisite series of soft stone hills topped with fairy-tale castles and bounded with stands of oak. This is where Czechs dream of living when they retire, where German executives slip off to for a celebratory lunch, and where newborn Skodas get their first spin.

Inside the car plant everything is orderly, clean, regular. Skeletal cars proceed like cogs through an expensive watch. Orange robot arms rotate to weld car roofs and sides. Farther along, teams of uniformed workers install parts by hand. It is difficult to see who is working for Skoda and who for a supplier renting out space on the assembly line. In terms of nationality, the plant is also mixed: Most of the blue-collar workers and many managers are Czech, but the senior executives tend to be German, imported from VW’s Wolfsburg headquarters.

“Germans and Czechs just fit together,” says Milan Maly of the Prague University of Economics, an expert on contemporary management structures in Eastern Europe. “German managers are very precise, very strict, but making decisions is suffering to them. Czech managers are bigger individualists, better innovators.” He singles out as significant an early German decision to bring order to the Skoda plant’s parking lot. “People were parking all over the place, but Czech managers thought it crazy to worry about such a detail when there were production issues to resolve. The Germans were proved right. First bring order, then comes change.”

Today, to a casual observer, the Skoda plant feels like a hybrid of the two cultures. The offices have the crisp efficiency typical of German layouts, whereas the canteen embodies a scruffy and unpretentious style that the Czechs seem to prefer. Three languages are spoken in the plant: a clipped English or German by the executives, and English or Czech by their subordinates and by the blue-collar employees, who tend to be young and to spend as much time text-messaging on mobile phones as they do talking.

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  1. Alfred D. Chandler Jr. and Bruce Mazlish, Leviathans: Multinational Corporations and the New Global History (Cambridge University Press, 2005): The global rise of multinational corporations, cowritten by Harvard’s eminent historian.
  2. Graeme Maxton and John Wormald, Time for a Model Change: Re-engineering the Global Automotive Industry (Cambridge University Press, 2004): A definitive overview of the changing global context.
  3. Dennis Pamlin, editor, Sustainability at the Speed of Light (World Wildlife Fund, 2002): Online book contains a powerful chapter on leapfrogging for environmental sustainability. Click here.
  4. Dave Randle, The True Story of Skoda (Sutton, 2002): Illustrated chronicle of Skoda’s history from its 1895 origins to the Octavia.
  5. Horacio Rozanski, Allen Baum, and Bradley Wolfsen, “Brand Zealots: Realizing the Full Value of Emotional Brand Loyalty,” s+b, Fourth Quarter 1999: How Volkswagen originally “leaped to market” with its Beetle. Click here.
  6. Skoda’s Web site: Includes financials, automotive history, sports sponsorship, and current models. Click here.
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