How Entrepreneurial is Škoda Auto?


Entrepreneurial management has become a research area of importance not only to start-up firms but also to large corporations as innovation and creativity now plays a larger role than ever to sustain a competitive advantage in a certain industry. An entrepreneurial manager’s role comprises not only being a visionary, a calculated risk taker and opportunity seeker but also a forecaster, planner and coordinator of innovation (Hisrich and Ramadani, 2016). This paper will analyze Škoda Auto’s entrepreneurial stance of its manufacturing operations, efforts to promote diversity, inclusion and innovation in their workplace as well as its steps to digitize and ‘electrify’ its product portfolio. Proposals and their impacts on the business will be discussed in order to mitigate certain issues that might prevent them from achieving their goals.

Business Overview

Since 1895, Škoda Auto has become a leading manufacturer of cars around the world, with € 7.6 billion recorded in revenues in 2020. Owned by the German firm, Volkswagen, and with its recent appointment of Thomas Schäfer as CEO, the company has sold over 750,000 thousand cars in 2020 despite the COVID-19 pandemic (Škoda, 2020a). While its headquarters and main operations are located in Mladá Boleslav, it also has plants in Kvasiny and Vrchlabí, where the company’s workforce consists of more than 30,000 employees (Statista, 2021). As the firm already has a strong brand and market presence in the Czech Republic, it aims to not only increase its sales in Russia, India and China but also to emphasize its appearance in the Northern African market (Škoda, 2020c). Its Next Level Strategy, which highlights: ‘expanding’, ‘exploring’ and ‘engaging’ their business activities will help them achieve their envisioned goals of 8% return sales and becoming a top 5 firm in Europe for entry-level segment cars by 2030 (Škoda, 2021b).

Entrepreneurship Analysis

After the acquisition of Škoda Auto by Volkswagen Group in 1991, radical changes in its level of entrepreneurship changed not only the way they operate internally, but also the way they market and innovate their products (Škoda, 2016). Thomas Schäfer has developed a vision to where the company would become more digital and sustainably aware (Škoda, 2021b). The vision entails strengthening their position in entry-level segments of automobiles, by releasing new models that would be affordable to the general public. Efforts include electrifying 50-70% of their portfolio of cars and reducing carbon emissions by 50%. Škoda’s developed markets in India and Russia may not be ready yet for such transformation. Therefore, they are making sure that they are managing their risk by still fulfilling their customers’ wants and maintaining their company traditions. Functionality has always been part of their brand and they are ensuring that they keep these standards (Mcllroy, 2021).

While it is true that many automobile corporations are entering e-mobility because it may be seen as ‘fashionable’ to do so, Škoda appears to be genuine and isn’t following the ‘herd’ like others. They are investing heavily in electric trucks, by first testing it in their internal logistics and have a digital lab, with currently over 40 projects that are purely focused on e-mobility, AI, and smart cities (Škoda, 2021d; Škoda, 2021c). The creation of a digital showroom to provide solutions to Covid-19 disruptions, through the newly established innovation centre in Mlada Boleslav displays the high level of intrapreneurship in the company (Škoda, 2021c). This also contributes to the decrease in not only their footprint within their distribution channels but also in a reduction of costs in order to become more ‘lean’ in their operations. Škoda Auto further transforms its, to what is known as, just-in-time (JIT) supply chain to just-in-sequence (JIS) manufacturing through automated robot delivery of batteries from the warehouse directly to the production line in the Kvasiny plant (Kannan, 2005; Škoda, 2020b). Digitization of its operations, distribution and logistics are effectively helping it reduce inefficiencies in their supply chain. The implementation of ‘Extreme Fabric Connect’, which combined multiple networks into one, as well as ‘Extreme Analytics’, which allows the IT team to use metrics in measuring user experience in the whole infrastructure are all innovative ways in which Škoda is improving its management through automation and data (Extreme Networks, 2020).

The company’s growth has been so significant and successful, that trade unions have expressed their concern of Volkswagen attempting to boycott employees’ designs to, instead, match those of their low-cost competitors. While both organizations have denied these allegations, this could put the company’s corporate and innovation strategies in jeopardy. Not only could this impact employee morale but also places constraints to how far employees can innovate. This would then lead to problems in recruitment of talent as the image of the company would demotivate new employees to work for the company. All the efforts that Škoda is implementing to promote innovation and creativity in their workplace could be offset by changes in their corporate culture (Ishak, 2017). However, the goal of making diversity and inclusion an integral component of creating a more open-minded and transparent corporate culture should help combat this issue through higher employee engagement (Adams, 2021; CMI, 2019).


Škoda’s recent commitments to promote diversity and inclusion in the workplace will play a prominent role in how the company promotes creativity and innovation and thus tackles its problems through lateral thinking (Reynold and Lewis, 2017). If implemented and executed correctly, this could lead to the management solving problems more quickly and creatively, therefore reducing costs and increasing profit in the long run. Having different views on the same issue will allow a team to approach a problem from a different angle and this will not only increase creativity and innovation but also higher employee engagement. As employees are happier with their workplace and the way colleagues are treating them, Škoda is expected to have higher retention rates, which would mean lower expenses for recruitment and retraining for new employees (CMI, 2019).

Škoda’s HR are also joining the efforts to increase corporate intrapreneurship and innovation by implementing programmes to attract new employees and recruit new talent in the company. Student interns that are writing their Master’s or Bachelor’s thesis on Škoda Auto and its operations receive a higher wage than those who don’t (Škoda, 2021a). Student talent pools, career pathways, and providing training programs to current employees give an opportunity for individuals to learn and take responsibility for their actions. Such career developments then positively influence human productivity in the company as it motivates employees that they can grow inter-personally (Hughes, 2019, p.g. 47-80). As the increase in the number of employees since 2015 have coincided with the enforcement of these strategies it would be expected that the workforce will continue to rise in the near future. However, the increase in fixed costs for wages must be accompanied by increases in revenues and growth. Therefore, with innovation-promoting strategies set in place, profit margins are also expected to grow.

Figure 1: Number of Škoda Auto Employees from 2005 to 2018 (Carlier, 2021).

Figure 2: Profitability of Škoda Auto from 1998 to 2019 (Helgi Analytics, 2020).

With the implementation of JIS in addition to the JIT techniques already set in place, this gives space for Škoda to replace work that can be automated and increase efficiency in the production system through reductions in processing time and ‘motion’, which is one of the ‘seven wastes’ of JIT (Johnsen et al., 2019, p.g. 206). Reduced costs through changes in their supply chain as well as using e-trucks for their internal logistics and distribution channels to dealers in the country should increase profitability for the firm in the long-run. Turning to renewable resources in their supply chain will help them achieve their goal of reducing their carbon emissions by 50-70% by the year 2030. Alternating to a single virtual IT infrastructure that connects its assembly warehouse and its manufacturing base will reduce ‘waiting’ times through the reduction of human errors. Additionally, the IT team can focus on innovating the system even more instead of putting their energy into repairs that can instead be automated or otherwise decreased.


While Škoda has now become a member of the Pride Business Forum and has signed its EU Diversity Charter in 2019, its real results will only be achieved if their goals are verbal, measurable and time-bound (Medina, 2019). While Škoda might be more ‘diverse’ in numbers, it doesn’t mean that all individuals are going to get treated well, which is equity, a core need of our brains. Our limbic system makes us naturally and unconsciously look at people that are different to be a threat to us for survival (Medina, 2019; van Wolkenten et al., 2007). Instead of stating, simply, that they “value diversity in their workplace”, they should set specific aims and dates by when they would want to achieve them. For instance, they could set “achieving racial and gender equity in our hiring process in 3 years” as a suitable goal. In order to achieve this, they can hire third-party auditors to collaborate with the organization’s HR department in order to identify equitable-related issues in the workforce. This will reduce the tendency of HR to commit certain biases such as confirmation or optimism bias (Hunziker, 2021). However, not only is this costly but also may receive certain criticism from the department as they might believe that they do not require the help of external auditors and that they do not exhibit such biases in their work.

While the UK branch has its own annual gender pay gap report that takes into account Volkswagen as a whole, specific details about the Czech Republic, where the headquarters of its operations is located, is not published (Volkswagen, 2020). In consequence, producing and publishing such a report just for the Czech Republic would not only incentivize Škoda to actually achieve their goals due to public awareness but also become a tool in the way they measure their progress. Corporate bureaucracy and budget constraints might not only increase the time to assemble a team for this report but also inhibit it from actually happening if the upper management is not convinced that it is essential. As a result, implementing this proposal will help achieve the diversity and inclusion goals outlined in the paragraph above.
The implementation of inclusion and diversity, and innovative-promoting strategies to promote growth have little impact if their creative corporate culture is not a driver of that innovation and creativity (Fiordelisi et al., 2019). Škoda’s subordination, under Volkswagen, dictates a low-cost segment in which they should compete under (Pavlinek, 2010, p.g. 111). Changing the vision of where Škoda should be competing in, even if it takes away sales from Volkswagen’s portfolio of other car manufacturers, will help achieve the wanted change in corporate culture. Even though this will receive controversy regarding Škoda’s political position in the car industry, creativity, which already is exhibited in the people, will become a driver of that wanted growth through implementation of those ideas—innovation.

Proposal Validation

Specifying their goals in their efforts to promote diversity and inclusion will increase productivity of their workforce through increases in employee engagement, creativity and innovation, better problem-solving and decision making, better reputation and consequently profits in the long run (CMI, 2019). Increases in these factors will lead to further increased profit margins (through reduction in product costs and materials), just like the implementation of JIS and JIT in their production lines (Kannan and Tan, 2005). The more diverse Škoda is, the more customers it can reach, the more quality output, and the more creativity in the team (Dennett, 2021).

This will, especially, be of importance to the company as it expands its operations to Northern Africa, where cultural differences will be most apparent (Škoda, 2020c). Once the company attains its verbal, measurable, and time-bound goals, the company will have a more diverse team that might require not only cultural awareness but also re-training. Czech Republic has a more individualistic culture than those of its business counterparts in Northern Africa. This means that countries in the North African region might have a bigger tendency to work in groups and emphasize team-work than Czechs. Additionally, power-distance, which is the extent to which the “less powerful members of a society accept and expect that power is distributed unequally”, is lower in the Czech Republic and higher than that in Northern Africa. Hierarchy and isolation between lower and higher management positions is mostly expected in the new expanded region, unlike in Czech Republic (Hofstede, 2011).

Figure 3: Cultural Dimensions of Czech Republic (Hofstede Insights, 2021)

Figure 4: Cultural Dimensions of Egypt (blue), Algeria (purple), Morocco (green), and Tunisia (orange) (Hofstede Insights, 2021)

Creating a gender pay gap report specifically for Škoda will help it become a more socially aware firm and become more reputable in international markets, for where it wants to enter. Helping its reputation will help its brand and thus the sales of its products. While this may increase wage costs in the short run, this will be covered by the talent acquired to increase growth in the firm. Creating equitable pay standards for both males and females will make it more attractive for either side to apply for positions in the company, especially in the STEM industry (Beede et al., 2011).

Changing the subordination inflicted by Volkswagen will create independence for Škoda and allow it to compete in segments that, otherwise, is dictated not to enter. As the team is not constrained to just make their models better but also allows them to use their lean and efficient supply chains to create products that would compete with other luxurious automobile brands. Additionally, after the corporate culture is changed in order to allow lateral thinking processes to occur, this will allow Škoda to approach problems from a different angle to gain a competitive advantage. Creating a culture, in which it is not only ‘okay to fail’ but also implements lateral thinking will help the organization to look for better models, instead of trying to make the current ones work better (Fiordelisi, 2019; Reynold and Lewis, 2017). If Škoda enters the luxurious segment of the car industry, this creates additional competition in the market, which incentivizes other manufacturers to either be more innovative or decrease their prices for their products—both benefiting the consumers.


Škoda Auto’s growth has been significant since its acquisition of Volkswagen 30 years ago. Its promotion of intrapreneurship was displayed through its DigiLabs and innovation centers for employees—which then led to digitization of its marketing operations and further improvements in their JIT and JIS supply chains and IT infrastructure. Its drive to improve diversity and inclusion in the company should help further promote creativity, however, must be careful of Volkswagen inhibiting innovation as new designs might compete with more expensive segments of its portfolio. Lateral thinking will only occur if its management does not constrain employees to implement their ideas into innovations. Its recruitment and training programs will further increase diversity in the workplace and increase productivity and profitability of the firm in the long-run. Hofstede’s cultural dimensions should be taken into consideration as the level of diversity in the company will increase. Proposals include: making their goals more verbal, measurable, and time-bound, producing a gender pay gap report just for the Czech branch, and managing Škoda’s subordination to not inhibit growth and creativity in the firm. 


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Flat Rate VAT on All Goods?

A number of necessary goods in the UK have zero VAT and an analysis of applying a flat rate of 20% tax on such commodities should be conducted in terms of welfare. A value added tax [VAT] is a percentage tax on value added at each stage of production. However, price elasticities of demand of such commodities, which is the absolute value of the percentage change in quantity demanded to the percentage change in price (Rosen and Gayer, 2014), ought to be taken in consideration to assess improvements in efficiency and greater inequality. A Pareto improvement in welfare can occur if there is some action that can be taken to improve the utility of one individual without worsening the situation of the other. Efficiency, in this context, would refer to the loss of welfare above and beyond the tax revenues collected or the excess burden.

Imposing a VAT would cause a shift of the supply curve from  S to S1, which would then change the equilibrium point of the market from (Q*, P*) to (Q1, P1). This occurs for both figures 1 and 2. However, the efficiency differences reside within a lower deadweight loss when demand for the commodity is inelastic when compared to the demand being elastic. The deadweight loss is indicated in the shaded area of the triangle. A price elastic demand for a commodity would create a bigger behavioural response to the tax as a result of a larger decrease in quantity demanded in figure 2 compared to figure 1. Consumer tax burden in figure 1, of an inelastic demand would, however be larger than the producer’s, this is the opposite in figure 2.

Linear and nonlinear commodity taxes attempt to address the progressivity and regressivity of tax policies. Figure 3 presents impacts of different tax systems on income tax paid. As commodity VAT taxes are consumption taxes, they are deemed regressive to lower income households. This is because as the propensity to consume decreases with the rise in income, lower income families spend a larger proportion of their income on necessities and consumer goods (Carlson, 1989, pp. 339). Intuitively, exempting food and necessities is one way to reduce the regressivity of the tax system. However, a study in Japan concluded that even though an exemption of VAT on such necessities under both a tax credit and subtraction method reduced the tax burden across all incomes, it did not reduce regressivity (Tamaoka, 1994). Yet, this argument is weaker when consumption is considered from a lifetime view, if people consume all their earnings at some point in their lifetime (Mirrlees, 2010, pp. 275-422).

Adam Smith’s Four Canons provide a basis into the assessment of changes to the UK taxation of commodities (Rosen and Gayer, 2014). Efficiency in this context would refer to the tax policies ability to enforce small costs of collections and avoid distortionary effects on taxpayers. Measures such as the inverse elasticity rule would regard that for efficient taxation the ratio of the tax rates applied to two commodities should be inversely proportional to their elasticities. The second canon of equity, which attempts to address rising inequality is fairness with respect to contributions. Cross price elasticities are also taken in account through Ramsey’s rule, which states that efficient taxes would be set such that the percentage reduction in the quantity purchased of each good would be the same (Atkinson, 1976).

In production efficiency, it would be optimal not to affect the prices of goods and services used in production—such that there should not be taxes on transactions between producers within a supply chain. Atkinson and Stiglitz (1976) note that it may be better to address equity concerns through the benefit and income tax system, where it exists, than through commodity taxation. This could suggest an argument for the commodity tax system to be neutral, which could avoid the inefficiencies linked with tax exempt goods. Mirrlees Review proposed several reforms to the UK tax system, one of which addressed how broadening of VAT for a flat-rate tax can be carried out in a non-regressive manner (Mirrlees, 2010, pp. 216-230). It was found that applying uniform rates to commodities would increase consumer welfare through a decreased distortion of their spending choices. Although its reform package would raise the cost of living, certain compensations through the direct tax and benefit system would be distributionally neutral and would not worsen work incentives.

A Hall-Rabushka flat tax is, in essence, a modified VAT, yet takes advantage of its administrative convenience. It would comprise businesses paying a flat rate VAT on their sales minus any purchases from any other firm and also subtracting their wage payments to employees. There would also be a family-level exemption, which would allow for some degrees of progressivity, yet raising the same amount of revenue as a standard VAT would. An important element is that capital income and corporation profits are not taxed (Rabushka, 1985). It has strong investment incentives considering consumption taxes do not put taxes on investment.

Atkinson and Stiglitz (1976) work on uniform commodity taxation suggests that upon the possibility of the government redistributing income through income taxation, and if the “utility function is weakly separable between goods and leisure”, then commodity taxes to be optimal should be uniform. Production efficiency findings by Diamond and Mirlees (1971) contribute to these findings in a way that suggests a progressive (non linear income taxation system) is enough for inequality measures and redistribution. Governments should keep the commodity market efficient. However, a reexamination of these studies presents that if the production side of an economy is taken into consideration, a Pareto improvement in welfare is still possible under nonlinear commodity taxation and a nonlinear income tax system (Naito, 1999). 

Assessment of tax commodities in the UK may not only reside within its impacts on welfare in terms of its price elasticities but also in terms of efficiency. Hall Rabushka and reforms in Mirrlees Review provide some possible implementations to decrease the regressivity of current tax systems. Their findings are supported by Atkinson and Stiglitz, yet, may lack further research into the role of production efficiency in commodity taxation.


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Lockdown vs. No Lockdown

The ongoing pandemic has brought concern over whether or not certain policies should be implemented to combat the growth of COVID-19. Certain textbook and classical economic measures have been used as a benchmark to evaluate the effectiveness of a lockdown across Europe and most of the world. While some such as Norway and Sweden differ in the way they have enforced these policies, the evidence is clear that more research into the trade-offs between economic activity and health should be conducted.

A cost and benefit analysis [CBA] of a lockdown in terms of welfare would have three implications (Rosen and Gayer, 2014). One of which would interpret costs and benefits as social costs and benefits. Appropriate social prices would be taken in consideration as it may not be the same as a market price, however, as it is apparent with the lockdown, there may be no specific price to begin with. Lastly, it is vital to identify an appropriate discount factor, yet this is clear that doing so for a national lockdown, isn’t so practical. The group of individuals that are clear to ‘lose out’ from a lockdown are the younger generation and those who are less vulnerable to the COVID-19. This is due to certain losses of liberty and even employment opportunities. Those that are struggling within quarantine confinements, or are experiencing increases in domestic violence, or depression are also part of that group. On the contrary, vulnerable groups who are mostly the elderly or those with preexisting conditions are benefiting from a lockdown.

A CBA should be considered under a “with” or “without lockdown” manner rather than “before” and “after lockdown” to ensure correct features are captured. Any economic costs of a lockdown should be taken in comparison with alternative policies (Harford, 2020). In other words, alternative measures should be compared in a time frame where the “fear” of the virus already existed, as to make this the status quo—this is what Wren Lewis was attempting to elaborate (Lewis, 2020).

Figure 1: Policy Frontiers of Lockdown and Relevant Measures (Initiative, 2020)

Figure 1 depicts policy frontiers and bundles in which a government can choose between welfare preserved against lives saved. Any movement to the right of the policy frontier shows an improvement in the policy proposed, and vice versa. This presents policy makers with a “menu of policy options”. Although it quantifies the relative better bundles of each frontier and their constraints, the model doesn’t take into account [VSL], the value of a statistical life. This is in order to determine not only consistency in the decision-making process of better policies but also respective desirability of different points on the frontier (Initiative, 2020). The concept of VSL is incorporated into OECD economic policy analyses as a measure to determine the benefit of relevant measures, and the amount the society is willing to pay in order to prevent an infection (Coast, 2020).

Tim Harford (2020), states that, “if an economic lockdown in the US saves most of these (2 million) [vulnerable] lives and costs less than 20$tn, then it would seem to be value for money”. The usual approach resides within focusing on the valuation of lives that are “statistical” or unknown. However, this may not hold in policies relating to COVID-19 because of the different effect it contains towards varied age groups. Lockdown as a policy, has impacts, “on lives and life expectancy more broadly across the population”. Therefore, the value of a statistical life year [VSLY] than simply a VSL can help address these distributional factors. This, in return, might alleviate weight in terms of importance to policies preventing COVID-19 deaths and more significance to policies that target the general population’s health instead (Coast, 2020). Covid-induced uncertainty in the market causes loss of business confidence, which in return impacts consumption and investment components of GDP (Baker, 2020). CBA analysis may, in tangency, also address implications in the contribution of an individual’s life to GDP growth. It may be perceived that the younger distribution, those who are less vulnerable, may consume more and therefore increase economic growth. However, this wouldn’t then support the aims of a social welfare economist, that doesn’t measure success through increases in gross national income (Initiative, 2020). 

Intuitively, it is possible to say that those who benefit and those who do not can be both compensated through the fact that lockdown measures prevent them from infecting one another. While one is better than the other, the second person may be compensated through an increased likelihood of a healthy life. Is it possible to use VSL to assess the benefits and compensations of those who lost out? A simulation by Adler (2020), attempts to determine whether or not the use of social distancing policies can prevent fatalities caused by COVID-19. Under 3 versions of VSL, it is clear that social distancing measures (with lockdown) would be better than the status quo (without lockdown). However, flawed guidance in the use of VSL-based CBA proves methodological deficiencies. VSL-based CBA can deviate from the Kaldor-Hicks criterion as the approximation of an individual’s willingness to pay becomes larger as a change in fatality risk from a given policy increases. Therefore, such methods used to assess policies that involve significant changes to a person’s risk, are favourable to policies that are not Kaldor-Hicks efficient (Adler, 2020). 

Due to the high degrees of uncertainty and complexities, some economists now believe that a full CBA is not the most appropriate measure of analyzing lockdown measures. Instead, it is believed that it is more efficient to adopt the approach to recognize the key trade-offs between the two extreme outcomes as a method to guide public policy. In this way, the compensation may be more vivid and visible to the general public, reducing the uncertainties that arise from the ‘fear’ of the virus. Some interventions discussed include workplace rotation schemes, subsidized workplace testing and even reopening schools (Initiative, 2020).

While classical CBA provides a benchmark into analyzing lockdown measures to address the spread of COVID-19, such as in a “with” or “without lockdown” manner, methodological changes should be optimized to further enhance the credibility of an assessment’s findings. Time as a constraint, a combination of different policies could be the future to sustain not only the health of the general public but also the economy.


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