Tuesday, June 22, 2010

Sun Tzu - War On Business Part 8 (Skoda Cars)

Part 8 comes back to Singapore again, and James Sun tackles a very “hot” issue amongst Singaporeans – that of cars. With recent news that COE prices have sky rocketed, this has not made it easy for cars to get sold, especially the smaller, lesser known brands. Though I suspect that this episode could have been filmed some time in 2009, when COE prices had not yet increased to such crazy levels. Still, the principles as articulated in the episode still hold true.

For this episode, James pays a visit to Daniel Au, who is in charge of the distribution of Skoda cars in Singapore. Skoda has a 104-year history and their cars consist of top German engineering, yet brand awareness is weak in Singapore. Skoda gives the impression of being a second-tier brand of car even though technically, it is a continental car and other European car brands have enjoyed immense popularity here in Singapore (e.g. Peugeot and Volkswagon). James mentions that “If you are much weaker than your enemy, avoid him” – implying that Daniel should not compete head on with the stronger competitors, but should instead seek to carve a niche out for Skoda in the local market.

Daniel believes that it is a case of lack of brand awareness, which sounds similar to the problem highlighted in last episode on Zak’s Surfboards. A visit to the showroom finds it pretty deserted, and a simple chat with one of the salespeople (Peter Chin) reveals that he is not confident and the car also does not match up to what was seen on the Internet. The reviewer gave the salesman a 2/10 but the salesman complains that there is a lack of product training and they were only given 2.5 months of training, which was insufficient.

Daniel says Skoda is expanding its range of cars and is bringing in 5 new models next year (I would assume this meant 2010), including sporty ones which should appeal to Singapore’s market (this is true as I see a lot of yuppies driving 2-door model European sports cars). James conducted a simple blind testing and let several car enthusiasts try out the Skoda car (with the brand name and logo concealed), and most of them were very positive on the car and guessed it was either Volkswagon or BMW. They showed surprised when it was revealed to them that the car they had driven was, in fact, a Skoda.

Dennis Foo, the owner of Saint James Power Station (a pub cum disco) was invited to be the local entrepreneur to have a look at Daniel’s business. The first impression he got when he stepped into the showroom was that there was an absence of a receptionist. Another point he brought up was the marketing ads which Daniel was running, which are all produced in Germany and which featured families instead of yuppies and young people. Hence, the ads were targeting a different market segment in Europe and weer not suitable for use in Singapore’s context. However, Mr. Foo was impressed with the car itself, and commented that it had the prestige of a European brand but was priced below that of normal European cars. He suggests targeting young singles by stepping outside the comfort zone, and to create a brand new marketing campaign. This new campaign will focus on the target market which is the younger demographic (for the new lines of sporty cars to be released into the Singapore market in 2010).

A branding expert was called in to do demographic profiling, and a suggestion was to design decals from NAFA students to be put on older Skoda models. Social marketing would be used (e.g. creation of a Facebook profile) and the marketing manager (Marie Tang) mentioned that the aim was to look for a design which fits the Skoda’s image in terms of brand positioning.

At the end of the program, we see James telling the audience that Daniel has added a new dimension to the Skoda brand by appealing to the younger generation, but then the program ends too abruptly and we cannot see any effects of this new marketing campaign on whether it had succeeded in improving Skoda’s profile.

Nevertheless, there are still valuable lessons to be learnt:-

1. If you have a good product, tell the world about it – This is basically the same problem as Zak’s surfboards. Skoda is a high performance car and has all the characteristics of good quality and engineering, but all it lacks is marketing and brand awareness. Hence, a strategy to increase brand awareness would do the brand and product a lot of good.

2. The importance of Sales Training – Based on the poor salesmanship of the Skoda salesperson, Daniel would probably need to invest a lot more time and effort into sales training, as a competent sales force is key to increasing sales and driving business top-line growth.

3. Marketing Campaigns differ across continents – It’s important to realize that when you become a sole distributor for an overseas brand, their ad campaigns and banners may only be designed to be catered to their own home country and market. Hence, these materials may be unsuitable for use outside the country of origin and a customized campaign has to be designed to cater to the local market, as they may target different demographic market segments and thus require different positioning.

Basically, the crux of the episode was on the branding and ad campaign, as there was also a competition held by Skoda to bring out the best of the brand in terms of how it should be perceived by the general public. It was an interesting episode on the whole but not as insightful as some of the previous episodes.

Watch out for Episode 9 which brings us to Mumbai, India to have a look at Meru Taxi Company!

For more details on the Skoda competition itself, and the winners, please check out this PDF file.


For information on Skoda Cars, please visit the company’s official website:-



Shud'n said...


I would like to ask a question.

For example, for a listed company's FY2005 to FY2009, how many periods (n) is there that I need to enter into the financial calculator for cashflow growth calculation? I think n=5 as FY2005 is actually 2004 to 2005. However, some books say n=4 so I'm kind of confused. What's your take on this?

Musicwhiz said...

Hi Shud'n,

If you include FY 2005 itself, then it should be 5 years. So n=5.

It doesn't matter when the year-end is, what's important is how many periods you are using in your computation. n = number of periods, not number of years. Thus, if you are finding out compounding half-yearly for 5 years for example, this is actually 5x2 = 10 periods, so n=10.

Hope this explains.


Shud'n said...
This comment has been removed by the author.
Shud'n said...


For Fy2005 to Fy2009, n=5. However, when some companies calculate CAGR, they omit one year and only use n=4. Take a look at http://www.thomsonmedical.com/pdf/
FY2010PresentationSlides9April10(HANDOUTS).pdf and scroll down to pg 8 of 20. In that particular calculation, they used n=4 to get a CAGR of 13.1%. If they used n=5, the CAGR would actually be 10.3%. I also went to compare other companies and they omit 1 year also. So which is the correct way? I'm getting more and more confused....