I'll tell you what you have to do to survive:
1.concentrate your troops on the border with czechoslowakia, wait until you'll get all your troops up to full strenght(especially the so called "reserve army" corps), get some of them upgraded too.
2.Take care to replace mediocre commanders with some of the more promising ones.
3. As soon as you're ready, invade czechoslovakia. But take heed and try not to destroy their tank corps! Rather than that, pound them into submission, then annex slovakian part of the country and leave the Bohemia and Sudetenland as your vassal - they will need some IC to keep their troops in shape.
4.Continue to upgrade your obsolete divisions, together with building some(a few will sufice) additional ones. Specialist are good, e.g. mountain infantry, as you've got a lot of "commando" commanders. Maybe a squadron of interceptors or CAS planes. Concentrate your troops on the border with Germany and launch an assault! Just don't wait too long: the spring of '39 at the latest. You might try and conquer Hungary beforehand, if you think you can handle splitting your forces. Just watch out for Italy declaring war.
5.Keep modyfing your domestic policies towards the free market - it really pays off in the future.
6.Once you engage in war, the GB and France wll most probably declare war on Germany too. Join their alliance then, which will give your vassal's forces at your command.
7.Destroy Germany with the help of Czech tanks and infantry. Watch out for the Soviets, as they will most likely attack you as soon as you'll conquer the Reich.
8.As soon as you're ready, start building factories(IC) in your home provinces. If you think you can handle it, start doing it at the beggining of the game - it will be a great asset in the future. Once you get your economy growing, keep building those IC no matter what.