Businesss – czech republic business essay

The undermentioned study, get downing with an overview of the Czech Republic, will analyse the benefits multi-national companies have brought to Operations Management or Strategy of the companies visited in the Czech Republic. It will further look at the control that the Czech weaponries of these transnational companies wield over their merchandise and operations schemes.

The study besides aims to happen how successful these companies have been with respects to Value Innovation. Finally the study will measure the relationship between the civilization of these international companies and that of the Czech Republic. Relevant theories and statements are used through the length of the paper to back up the positions of the writer. Economy in Passage: An Overview Post Liberalisation, during the hay yearss of communism all agencies of production in Czechoslovakia were nationalized. The province took over all industrial activities, turning big houses into monopolistic organisations. State adopted Centralized planning, detering entrepreneurship and concentrated merely at fulfilling production ends with no concern for market demands. Forceful urbanisation and industrialisation took topographic point, and as the economic system became dependent on that of the Soviet Union the focal point turned to military supplies. As the function of concern was to chiefly carry through the cardinal program, production seldom met demand, quality declined and work ethic hit an all clip low, as did entrepreneurial spirit ( Dana, 2000 ) .

With the weakening of Soviet Union, the Communist government was overthrown in 1989. Following the ‘ Velvet Divorce’ and dividing from the Slovak Republic in 1993, the “ new” and more comfortable Czech Republic has been sharply transforming the society from a centralised province to a democracy and a free market economic system. Liberalisation and gap of markets to transnational houses in the undermentioned old ages, coupled with strategic economic reform, the state has been able to accomplish steady and stable growing. King et Al, ( 1999 ) opine that out of the emerging European states, the Czech Republic is likely the most economically and politically stable state which enjoys low national debt, a balanced budget, strong foreign currency militias, comparatively low rising prices and really low unemployment. By fall ining the European Union in May 2004, the Czech Republic adopted the common trade policy ( CTP ) , which exists on the European degree within the EU, as binding. By making so, the state officially waived its right to prosecute an independent trade policy toward 3rd states. The state besides plans to follow the Euro by 2010. The current GDP is at 6.

5 % a considerable growing from 1. 9 % in 2002. Past reforms, the accession to the EU and spread outing capacity in the car industry have driven these additions. Trade public presentation is good with double-digit growing in exports in recent old ages. A authorities shortage of around 3 % of GDP reflects strong growing and new budgetary regulations ( Euromonitor, 2008 ) . This chiefly has been possible due to the liberalisation policies and the gap of market to multi national companies. Multi-national intercession and benefits to the Czech Republic.

King et Al, ( 1999 ) opine that it is merely since the Velvet Revolution of 1989 that “ western style” quality direction doctrine and pattern have begun to do important in-roads into the Czech manner of making concern. After the Czech Republic’s accession to the EU, foreign companies, in line with general outlooks, showed great involvement in concern cooperation with their Czech opposite numbers. The autumn of barriers to merchandise ( duties, quotas and other limitations ) and a solid concern clime in the Czech Republic guaranteed by the authorization of the EU has led to a crisp growing of foreign trade between the Czech Republic and the EU ( CNB, 2008 ) . There has been a major inflow of foreign direct investing since investors appreciate that the Czech Republic has a extremely qualified labor force, a long tradition of industrial production, developed substructure, comparatively low production costs ( in respect to rewards in peculiar ) , and a suited place in the Centre of Europe – ideal for optimal merchandise distribution ( CzechInvest, 2008 ) . These factor conditions along with low barriers of entry and a flat playing field provide the state with a competitory advantage over other developing, former eastern axis states ( Porter, 1990 ) . As the market was merely opening to investors, the MNCs enjoyed high bargaining power, small or no competition and sops in the signifier of revenue enhancement releases, As many transnational giants like Volkswagen, SAB Miller, Siemens, Philips etc started puting in the contributing economic ambiance of Czech Republic, they besides brought in their best patterns and implemented the same. They were instrumental in presenting quality constructs, thin and efficient production, mechanization and better work moralss to a work force which was used to the slack mass production system of the Communist epoch. Smaller Czech fabrication industries where besides benefited as they turned into providers, following schemes like Just In Time ( JIT ) , thin supply concatenation direction, for the transnational houses.

Increased exports and higher FDI’s has therefore helped the state cut down its trade shortage, beef up its economic system, and at the same clip cut down unemployment. Merchandise, Operational and Strategic Control. The Czech authorities had initiated the return over of Skoda by Volkswagen to transform Skoda, a company antecedently characterized by socialist constructions, into a client oriented, larning organisation and, therefore, to “ best-in-class” degree ( Guttman, 1995 ) . This was a strategic move for Volkswagen every bit good, as the move would give them an chance to incorporate a auto maker with hundred old ages of experience and add a 4th trade name to the VW group.

With the return over of Skoda by Volkswagen, it introduced JIT techniques, thin production, incorporate concern systems and besides the civilization. Its quite arguable that Volkswagen followed a planned/deliberate dimension of scheme so as to guarantee that the fabrication scheme was in line with the concern aim of the house ( Barnes, 2002 ) . Though works operations and direction were controlled by Skoda, Volkswagen holds full control of the merchandise fabrication procedure and design. This enabled value add-on and major design alterations to dated designs of Skoda. The tradeoff of liberty for better production capablenesss seems to hold paid off for Skoda as these factors have helped the company go a well-thought-of trade name and have helped them derive sustainable competitory advantage in the part ( Silveira and Slack, 2001 ) . They are the biggest exporter out of Czech Republic, accounting for 7. 7 % of entire exports. Their net income borders have grown by 60 % from 2004 to 2006 ( Skoda Group, 2006 ) .

In the instance of Pilsner Urquell, owned by the South African beer giant SAB Miller, control is wholly vested in the parent company, though Pilsner has control over the merchandise every other is taken by SAB. Technology and cognize how transportation has helped them increase their production many creases. Pilsener might hold discretion to map and advance its merchandise in its place market but for the remainder of the universe SAB Miller takes all the determinations with respects to its selling scheme. The distribution of Pilsner is besides controlled by SAB Miller given really small liberty to them for holding any say in the affair. SAB Miller, in its portfolio refers to Pilsner Urquell as its flagship trade name and this reflects the company’s importance ( Prazdroj, 2007 ) . Value Innovation in Czech MNCs: Harmonizing to Kim and Mauborgne ( 2004 ) ‘ Blue Ocean’ scheme is about doing the competition redundant by making new and advanced market for its merchandises, while maintaining costs low and at the same time driving value up for purchasers. In the instance of Pilsner Urquell, there wasn’t much grounds of SABmiller bring forthing a bluish ocean scheme. The ground could hold been the fact that Pilsner is a market leader in the Czech Republic and holds considerable clout in the universe beer market every bit good.

Johnson and Scholes ( 2006 ) argue that the parental developer seeks to use its ain competency to add value to its concern unit. Volkswagen has been successful in this respect in altering the customer’s perceptual experience of Skoda, through it’s innovate fabrication, design and procedure scheme. But apart from that, there was no grounds of any value invention in this instance every bit good. Hence one could reason that Volkswagen has in fact followed the conventional logic and has leveraged its bing assets and capablenesss ( Kim and Mauborgne, 1997 ) . But a place grown, to the full Czech owned transnational, ZVVZ a.

s, had utilized its strategic strength as an industry equipment maker, to make new, advanced market for itself by concentrating on making equipments to cut down environmental pollution. A extremely differentiated cost leader, it provides complete cost effectual solutions for its clients, while allowing travel off its bing industry-equipment patronages. They therefore have been able to make, yet uncontested, market infinite for itself in the Czech Republic and Eastern Bloc states.

This was the lone company which related, in kernel, to Kim and Mauborgne’s ( 2004 ) thought of Blue Ocean scheme and value invention. Culture: International companies and Czech Republic. Hofstede states that Culture is more frequently a beginning of struggle than of synergism and that Cultural differences are a nuisance at best and frequently a catastrophe ( Hosfstede, 2008 ) . Though there were no major grounds of cultural struggle between South African SABmiller and Pilsner, both civilizations exhibit a medium power distance. The SAB civilization makes it a proud proprietor of the Pilsner trade name which has deep roots and more than considerable pride in the Czech tradition. This might rather be an country of concern and struggle, but due to similarities and common aims, focal point can be maintained. However they have been able to develop an consciousness and grasp of cultural differences and encourages version of organisational behavior, merchandises and civilizations in their key markets ( Rugman and Collison, 2006 ) .

Following Kolman et al’s, ( 2002 ) research on the cross cultural difference in cardinal Europe 1 could reason that there are similarities and synergism between the German company Volkswagen and its Czech opposite number Skoda. Germany has lower power distance and Czech Republic has medium power distance, but it was noted that the achievement orientation is high Its besides of import to observe that both states were historically linked and this helps in better apprehension. To reason the writer is of the sentiment that the coming of Multinational companies in the Czech Republic has decidedly paid immense dividends to both parties involved. These companies have been able to bridge cultural differences, and convey in technological, concern and economic revolution to Czech Republic. The turning strength of the Czech Economy is declarative of this dynamic alteration.

The companies have benefited from early mover advantage into this gap market, and besides have been able to determine their competitory advantage on the footing of the abundant resources in the state. But it is besides of import to observe that, as frequently in the instance of internationalisation, there have been a batch of local concerns that had to shut store. However following Adam Smith’s theory of free markets, this is so a windfall season for Czech consumers.