3. Money
3.3. Case studies
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hand, requirements for entering the PRC market are much more sticker – in the past even a joint venture with a Chinese partner was obligatory (Hála 23).
3.3. Case studies
Three cases of Czech business activity in the PRC will be briefly addressed in this chapter. First, the well-known and often described case of the Shentou plant, which since frequently mentioned ad referred to in preceding chapters. The case of the Shentou plant is a well-known and frequently cited example of Czech and Slovak joint project with the PRC for which a lot of political concessions were made. Yet, the project did not translate into the expected financial benefit. Due to high frequency of reference to the Shentou Plant case in the Czech and Slovak literature, the case will not be omitted but will be outlined very briefly. The second case – Škoda Auto is also well-known and is often cited as an example of the Czech success in the PRC market. I have decided to address more fundamental question – due to the changes in the ownership of the company, which now is completely Germany-owned, can it still be cited as the success of the Czech Republic's export? The third case of the Czech export in the PRC – the case of Budějovický Budvar has not been previously cited in the literature. I have chosen this case to illustrate the hardship Czech company must face in its pursuit of success in the PRC market.
3.3.1. Shentou Plant
Negotiations regarding Czech cooperation on the project of Shentou plant, which is situated in the Shanxi province, started already before 1989. For the sake of sealing the deal, many delegations and visits traveled to the PRC. The issue of human rights as well as other
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touchy issues was meanwhile put aside for the fear that it would obstruct the success of completing the Shentou plant contract.
Yet, it is interesting to note that signing of the contract happened during Prime Minister Miloš Zeman's visit in the PRC in 1999, where Zeman's behavior was rather assertive than obliging. Yet, in the following year, the PRC conditioned the project by further requirements including financing of the project and the original price was during the time lowered by more than one quarter. The Czech side remained positive for the possibility of future cooperation which however has not been realized yet.
3.3.2. The case of Škoda Auto
Škoda has been cited as the biggest success of Czech export to the PRC. In 2012, for yet another time Škoda gained the award of the biggest Czech exporter of 2012 (Mareš). It was the eighteenth time that Škoda won this prestigious award. The place of the top of Czech exporter Škoda holds stably, usually followed by Foxconn ("Škoda vyvezla zboží").
Yet, the case of big Czech export success in the PRC market may not been as clear-cut as it seems. First, there is a question asked by many Czechs today – can Škoda cars be regarded as Czech products?28 In terms of the ownership, the Škoda Auto Company is today owned completely by German Volkswagen. The company was privatized in 1991; in 1995, Volkswagen
28The debate over this issue is very extensive, especially because there has been a little effort to define the
requirements for a Czech national brand. In some newspaper articles Škoda is still labed as the Czech brand, see Luňáková, Zuzana. "Česká pýcha: Škoda Auto a pivovary." 28 Apr. 2010. Hospodařské noviny, but these claims are lately increasingly challenged in discussions.
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became the largest shareholder and finally in 2007, the German Volkswagen group became the sole owner. On the other hand, all taxes are reported to be paid in the Czech Republic and in its annual report, the company stated that currently Škoda vehicles are manufactured in seven countries including the Czech Republic and the PRC. The prevailing feeling in the Czech Republic still seem s to regard Škoda Auto as the symbol of Czech success. Yet, it is questionable how the situation will change in case Volkswagen decides not to use the original Czech technology or moves the production outside the Czech Republic.
In 2007, an important milestone in terms of the PRC market was made when production of the Škoda Octavia was launched at Shanghai Volkswagen. Over the past four years, more than 500,000 ŠKODA cars have been built at Volkswagen Shanghai ("The Annual Report" 78). The case of Škoda is even more confusing because as a matter of fact there is not only one company called Škoda. Škoda Transportation, for example, is one of the other companies bearing the name Škoda. In the last few years, Škoda Transportation attracted the attention of Czech media because of its not-transparent transactions and ownership. Since the ownership structure of Škoda Transportation and other information regarding the financing and trade of the company, is not clear even for the Czech police ("Majitelé Škody Transportation"), the author will not include Škoda Transportation and other Škoda related companies into this case study.
The Škoda Auto clearly states that it sees the PRC (together with India and Russia) as its priority and the European market as the thing of the past ("The Annual Report 2010").The PRC has been the world’s most dynamic automobile market for years now – and, since 2009, its largest too, neck-and-neck with the US. For example in 2011, a total of 900,628 Škoda vehicles were manufactured worldwide. This represents a 15% increase compared to the previous year. In
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the PRC in 2011, a total of 223,030 Škoda cars were produced, which equals to a year-on-year production increase of 13.2% ("The Annual Report 2010").
The chart below clearly illustrates that the PRC market creates an important part of Škoda Auto exports and remains to be on the rise. It is interesting to note a rather stagnation phenomena in terms of the Škoda Auto sells in the domestic – Czech Republic's market.
Chart 8
Deliveries to customers – largest markets
Source: "The Annual Report 2010." Škoda Auto. 2011 Web. May 7.2013.
2010 2011
Total ŠKODA brand 762,600 879,184
PRC 180,515 220,089
Germany 113,323 128,011
Russia 45,577 74,074
Czech Republic 58,033 58,202
3.3.3. Budějovický Budvar
Famous Czech beer Budějovický Budvar has been sold in the PRC under the name of Bai de fu (白锝福) since 2008. The name was changed both to denote positive meaning and to avoid pronunciation problems of the original Czech name. The beer entered the Hongkongese market in 2006 and for a long time was attempting to enter the mainland market as well. The road to the PRC market was blocked by the dispute concerning the brand name that started in 1997 ("Budějovický Budvar dnes"). After successfully winning the dispute, Budějovický Budvar
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needed another two years before they completed all the procedures to ship their first products.
Thus, as a matter of fact, only the entry to the PRC market required a total of nine years.
The price of the beer puts it among the higher price goods – the recommended price was set to 26.00 元 for a bottle ("捷克原装百得福小麦白啤酒"). Local beers and foreign beers produced in the PRC are often half the price and hence, the competitiveness of the Czech beer in terms of price, is not very high. This is mainly due to the fact that in contrast to the international beer, Budvar is not produced in the PRC and is imported to the market. The future of the brand therefore seems to lie in front of the crossroad – it will either remain a rather high end goods or move its production to the PRC and thus, to easier attract a mass consumer.