Is diversification a Strategic Advantage? The Example of Automotive Components in the Czech Republic

Mohelský, Lukáš; Machková, Hana

doi:10.18267/j.cebr.16

Cited by 4 publications

(2 citation statements)

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“…Likewise, the significance of the automotive industry in the Czech economy was studied, e.g. by Mohelský and Machková (2012), who pointed out potential caveats of automotive overdependence. The topic of the economic dependency on automotive sales was partly addressed by Sedláček (2013) but mainly in the context of the global economic crisis between 2007 and 2010.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

The Reliance of the Czech Economy on Its Automotive Sector

Mareš¹,

Janíčko²

2022

CEBR

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This paper explores the relationship between the performance of the Czech automotive industry and the performance of the Czech macroeconomy with an objective to fill in some existing gaps in the research on this topic. An overreliance on one sector could have harmful consequences for the competitiveness of the entire economy but sometimes also for the sector itself, particularly in the long run. We test several hypotheses in this context using two frameworks: a vector autoregression model with exogenous drivers and a vector error correction model, both built on quarterly time series data in the period ranging from 2000 to 2017 and validated out-of-sample on the 2018 and 2019 data. The results suggest that the macroeconomy appears to some extent forecastable by the performance of its automotive sector. This is further supported by the fact that the forecasting performance of the selected models looks reasonable. Likewise, the results show that the key variables proxying the performance of the automotive industry tend to converge to a long-run equilibrium or at least exhibit a long-run relationship with and/or vis-à-vis the selected macroeconomic indicators. This finding is in line with the fact that the automotive sector has an important position in the Czech economy also from a longer-term perspective. Yet, we have not found that the macroeconomy would be overreliant on automotives in general terms. Implications for Central European audience: The text brings potential value for the Central European audience by drawing attention to the palpating discussion among policymakers, scientists, and the media about the reliance of the macroeconomy on the automotive sector. Hence, it suggests how independent individual economic policies may ultimately be, also depending on the share of the automotive industry on total output. It is also useful for the top management of the firms in the large automotive firms, be it producers or suppliers, as they may observe how the interconnections with the outer economy might look like. Likewise, for the banking sector, the paper disentangles potential issues with concentration risk and conveys information about industry-specific lending. Finally, the paper provides the Central European readers with information about how the linkages in the automotive industry can be viewed as a whole.

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Section: Theoretical Backgroundmentioning

confidence: 99%

The Reliance of the Czech Economy on Its Automotive Sector

Mareš¹,

Janíčko²

2022

CEBR

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“…Based on the existing literature, Dunning (2000) argues that firms "will diversify their portfolios to minimize their risks exposures, which include exchange, political and economic risks". According to Mohelský and Machková (2012), the geographical diversification is particularly important, as it allows companies to take advantage of uneven development and different phases of the economic cycle in a multiple countries and markets. Mergers and acquisitions are useful for diversification, but still, they may be associated with several risks related to poor timing or knowledge about the assets that are acquired (Dunning, 2000).…”

Section: Theoretical Framework: International Business and Mergers Anmentioning

confidence: 99%

An Analysis of French Mergers and Acquisitions in Different Sectors of the Czech Economy

Thivant¹,

Machková

2017

CEBR

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Market Entry Strategies of Passenger Carmakers - The Case Study of the Czech Republic

Machková¹,

Collin²

2015

CEBR

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In 2014, the Czech automotive industry had a record-breaking year with 1 278 000 motor vehicles manufactured. This was a result of the investment of three major carmakers, who entered into the Czech Republic, because they believed in the industrial capacity of the country and its strategic location in Central Europe. The goal of this article is to analyze the diff erent entry strategies into the Czech market and to compare the results of diff erent strategic approaches for both foreign private investors and the recipient country. The main research method used in this article is a case study. In our case studies, we will analyze the cases of the Volkswagen group and its acquisition of the manufacturer Škoda, the greenfi eld investment of Hyundai, and the strategic alliance of the French car producer PSA with Japanese Toyota who had founded the TPCA joint venture in the Czech Republic. All three case studies show examples of good practices and prove that foreign direct investment (FDI) has the potential to generate employment, raise productivity, transfer skills and technology, enhance exports and contribute to the long-term economic development of the country.

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Is diversification a Strategic Advantage? The Example of Automotive Components in the Czech Republic

Cited by 4 publications

References 1 publication

The Reliance of the Czech Economy on Its Automotive Sector

The Reliance of the Czech Economy on Its Automotive Sector

An Analysis of French Mergers and Acquisitions in Different Sectors of the Czech Economy

Market Entry Strategies of Passenger Carmakers - The Case Study of the Czech Republic

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