Rebuilding Skoda - Overcoming Brand Prejudice at Skoda Auto

Spend $1 billion rebuilding a car company from the bottom up and you would expect some return. Combine German engineering and Czech manufacturing and the result might be excellent, but communicating these changes and overcoming deep-seated consumer aversion to a brand is an extremely difficult task. In this comprehensive case study package, Srivastava and Malaviya show how it is possible to rebuild even the most badly perceived brands.

by Prashant Malaviya, Swati Srivastava
Last Updated: 23 Jul 2013

It was a terrible skoda indeed, as the Czechs would say, when the most infamous of its car manufacturers adopted its company name… "skoda", of course, means shame in Czech. As with other lapses of judgement, this one would haunt the company for decades, as its products became the laughing stock of the automobile world and synonymous with poor quality. Thus when Volkswagen took over the former Communist state enterprise in 1991, it had the mammoth task ahead to transform opinion about the brand.

This two-part case study, entitled Skoda Auto: Rebuilding the Brand (with the B case entitled Brand Turnaround), describes in detail the several phases undertaken by the company to combat Skoda's historic image of cheap and shoddy quality. By Swati Srivastava, Research Associate at INSEAD under the guidance of Prashant Malaviya, Associate Professor of Marketing at INSEAD, the case charts how Volkswagen reformed the product offering and production quality in an effort to win back brand equity and market share.

Having effectively rebuilt the Skoda product around the two prongs of quality and affordability, only the task of communicating the changes remained. A campaign was launched throughout Eastern and Western Europe… to differing receptions. In Skoda's traditional Eastern European markets, the response was positive strengthening the brand's presence. In the UK market however, where the company had less than a 1% market share, the campaign had little effect.

The root of the problem in the UK was fairly obvious…and serious. With Skoda jokes being traded at a fierce rate since the 1970s, the company had lost control of the brand. Jokes published on websites and in special Skoda joke books were as cheap as the car was reported to be. A market research study revealed that the situation was even worse than expected with UK consumers having a deep prejudice against the brand.

Was the company's negative brand image so deeply entrenched that it was impossible to reposition? How, if it was possible to recover the brand, could consumer perceptions be changed? The answers to these crucial questions are revealed in the postscript B case. The Skoda series, which is also available in a CD-ROM format containing many of the original commercials used across different geographies, and accompanied by an instructor's CD-ROM that includes the B case, provides a comprehensive learning tool for international marketing students. It highlights unique cross-cultural branding and marketing challenges associated with brand renewal and development and is sure to encourage lively and productive discussion.

INSEAD 2003

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