Hyundai Case Study
The Hyundai Motor Company (HMC) is the largest South Korean automobile manufacturer, which is the fifth largest automaker in the world. In 2006 and occupied the 10th place in the world ranking of OICA.
In 2007 Hyundai again have excellent grades in initial quality survey by JD Power, one of the indicators of the industry most respected and that measures the performance of cars and customer satisfaction during the first 3 months of use. In Korean, the word Hyundai means “modernity”. The brand was created in 1947 by Chung Ju-yung, the dominant figure of the Korean economy from 1960 until his death in 2001.Hyundai built its first car in 1968, the compact sedan Cortina, under license from Ford.
In 1975, he made his first own model, the Pony, in collaboration with Mitsubishi. Currently, Hyundai has one of the research and development centers most respected in the industry having factories in the United States, India, China, Czech Republic, Venezuela and Brazil. In the ’90s, South Korea suffered from severe financial crisis also affected the automotive industry involving the bankruptcy of Daewoo (now part of General Motors).Hyundai, overcame the crisis, but was forced to divide its many operations (construction, banking, petrochemicals, logistics, shipbuilding, etc. ) and one of them, the most internationally known, is the Hyundai Automotive Group which now includes the Kia Motors.
However, in 2004, Hyundai CEO has charges that he campaigns finance law managerial negligence and also the Government fined HMC with $25 million for alleged unfair market practices, finally, Chung Mong Koo received a 3 years jail term for embezzling more than $100million which it damage the company image and reputation.In 2009, even with decreased image and reputation of Hyundai, with Hyundai CEO’S embezzling case, Hyundai was the only major global manufacturer increased its sales in the U. S. , while its competitors Toyota, Honda and General Motors has dropped down.
Similarly, another historic success was the South Korean company Hyundai Genesis Award for the best car of 2009 in North America, the first time carried out by a South Korean manufacturer. Case Analysis In the automobile industry there are many factors that provide comparative advantage such as labor, knowledge, technology, capital, climate and land.In this case, as a natural advantage, South Korea has strong force of Human Resource with high level of education which leads to have grater knowledge comparing other countries. It also acquires comparative advantage with cost effective labor, high technology and high rate saving and constant inward foreign investment which provides another advantage to the nation with strong capital to supply. Furthermore, the high technology and the innovations in design, features, production and product quality are the nation’s competitive advantages confirming that South Korea has unique sense of innovation and unbeatable high technology.
Also some government policies such as import restrictions has made home-grown auto maker such as HMC to occupy more than 90% of car market in the domestic which means that high rate of tax is imposed to other car makers who endeavor to make inroads into Korea car market. In the context of Porter’s Diamond Model, the strong presence of international competitors and intense rivalry in the domestic auto industry puts pressure on HMC to innovate and improve the quality.As a demand conditions, South Korea’s car industry is highly demanding. It is a small country with large number of population; therefore the transportation is one of most important local issue. In addition, South Korea is home to a substantial industrial cluster for the production of cars and cars part, for example, Gyeonggi province is most rapidly emerged center of auto parts industry and also this effect is strongly benefited when the suppliers are strong global competitors.The position of HMC in global market is to attain the economies of scale needed to remain competitive in a tough industry.
HMC had become the world’s fastest-growing major automaker and it is about third of its sales from North America and 10 percent from Europe. Moreover, HMC and Shell have been working together since 2005, which have supported the development and execution of various local marketing, promotion, service programs and activities.Shell runs a number of programs with Hyundai dealerships and workshops to increase customer satisfaction and loyalty. These include the Before Service program, a free car health check for customers and the Quick Service Program, which provides a quick and convenient oil change and service for Hyundai car owners. Hyundai’s alliance with Shell enables them to extend their reach and network across the global automobile system and provide world class service to their partners.
Table 1 SWOT Analysis Strength: |Weakness: | |Return vehicle free of charge within first year purchase. |the risk of high failure rate of family businesses because of its | |Won high scores in many product evaluation and consumer surveys |complexity, informality and discipline | |Strong product quality and adopting marketing strategies |Problems between labor and management. |Opportunity: |Threats | |possibility of Connection with IT technology | | |Growth of emerging markets such as India and China with high |Combustible and fuel price increases. | |possibilities of constant growth until 2020. Market entry by low-cost competitors, especially the Chinese | |The contract of FTA is expected that Korea will be given a lot of |automobile company BYD.
| |opportunities of expanding into the U. S market and high growth of |Improving public transport services. | |car industry. |Availability of credit for purchase of used vehicles. | | |New safety and environmental trend for different markets.
Conclusion and Recommendation In nowadays, The South Korean automaker Hyundai Motor has become a major threat for major automobile industries to because it has used the situation to increase its global presence. Hyundai has taken advantage of the crisis of the motor to increase participation in their preferred areas and also it is gaining market share especially at the expense of Japanese competitors such as Nissan and Honda.The improving high technology and the innovative design was crucial for HMC to continue competing internationally, for example, Models like the new Sonata and the Genesis have become serious rivals for Toyota and Honda, while South Korea expects to submit in 2012 a hybrid version of Sonata to deal with the Prius. As a recommendation, Hyundai should continue with global strategy such as FDI, for the future and focuses on increasing its presence in emerging countries like China and India, where its sales is growing at double digit rates, or Brazil, with growing purchasing power.Moreover, HMC should continue building strong competitive advantage from other international competitors with already recognized high technology and innovation.
Finally, Hyundai is one of biggest family owned company in South Korea, which the damage of image and reputation could be more critical if the management is still controlling by family member, such as case of Kim Dong – Jin, therefore, it is recommendable to set the management with industry’s expertise as it does in many developed countries.