HYUNDAI MOTOR COMPANY 1
In 1947,Chung Ju-Yung established the Hyundai Construction and EngineeringCompany (Lansbury et al., 2007). Its first model was the Cortinareleased in 1968 by the Ford Motor Company. First forward to 1998,the shakeup was experienced in the Korean automotive industry due tothe overambitious expansion and financial crisis experienced acrossthe Asian countries, which saw the company buy out its competitor,Kia Motors. is headquartered in Seoul, SouthKorea. The company makes up one-half of the Hyundai KIA AutomotiveGroup. It is also the leading automaker in the world regarding profitmargin as of 2014, which stood at 7.6% from previous profit marginsof 4.3% in 2013 (Parment, 2014). The company also comes forth as theautomaker with the most sold units sold of approximately 500,000units in sales in its first six months of model release as of 2004,according to Abo (2010). The company also operates the largestintegrated manufacturing automobile facility in the world in Ulsan,which production close to 1.7 million car units every year (Abo,2010).
In 2000, KiaMotors established a more strategic alliance with theDaimlerChrysler, which severed its merger with the Hyundai Group. Themerger between DaimlerChrysler and Hyundai Truck Corporation wasformed in 2001. However, in 2004, DaimlerChrysler divested interestsin the company (Hyundai Motor) by selling its entire 10% state forapproximately $900 million. Since then, hascontinued to grow and expand globally and in particular with theestablishment of its plant in India (1998), Turkey (1997), China(2002), and United State (2005). A decade later, after its firstplant overseas, in 2007, constructed facilitiesin Russia and Czech Republic by establishing strategic networkproduction lines across six countries.
Currently, is present in 195 countries andclose to 6500 dealerships globally. The company maintains a strongposition in developed nations such as the European countries and theUnited States. Furthermore, it continues with its success in winningcontracts for government and taxi vehicles in most of the emergingmarkets, for example, in Central and Central America, Southeast Asia,and the Middle East, boosting the company`s brand image and sales(Abo, 2010). Through the company`s sales strategy and localproduction, the company plays a crucial role in local economies.
CurrentMission Statement: To create exceptionally valued automotiveproduct for our customers by wholly blending safety, efficiency, andquality. With our diversified team, we will offer responsiblestewardship of our environment and community while achieving securityand stability now and in the future.
Current Vision Statement: Out team offers unrivaled value foryour future.
Specifics: The Company details will be measured in terms ofglobal orientation, customer satisfaction, respect for human values,technology innovation, and cultural creation of its products. To makethese specifics attainment, the company will set its objectives basedon set targets. From a financial perspective, for instance, thecompany`s goal will be to increase the number of sales throughcustomer satisfaction and global orientation (Rhee & Hyŏndae,2003). A crucial part for the company to make money through sellingits product and embracing technological innovation will be embracedto increase demand.
Measurable: This objective is from the customer perspective. will work towards reducing the recall rates.Customers have in the past complained about the recall ratetherefore, the company will increase customer satisfaction tofavorable amounts through reduction of recall rates.
Achievable: Achievability will be based on the internalbusiness operations of the company and the size of the global marketit enjoys based on the management and labor problems. In this regard,the achievability objective for the business will be built on theinternal business perspective that will make a familiar businessenvironment.
Realistic: Hyundai Motors will embrace a green car strategy, astrategy that will be realistic to achieve based on the company`shigh probability for its customers to make purchases. For example, byselling a lot of cars, the company will be required to have a uniquefeature care by developing a new technology (Parment, 2014).Realistically, to increase the level of customer satisfaction, thecompany will be required to keep a strong connection with its clientsfor continuous customer management before considering customer recalland satisfaction.
Timeline: Through its vision 2020 program, Hyundai Motorstargets to attain a majority of its objectives through its vision inthe 4 to 5 years. The projections are also based on core competence,which will comprise of marketing, management, partnership, andtechnology. These objectives will take a considerable amount of time,and target seen to be realistic and in alignment with the company`sprojections and customer demands.
Hyundai Motorsalso operate its business externally with opportunities and threats,making up the external environment with which it carries itsoperations. Through analysis of the company`s opportunities andthreats, the company can determine its competitive position. Thecompany benefits from external factors when it is performedefficiently. The company remains one of the leading automobilecompanies in the industry.
PESTEL analysis, according to Gray (2008), is a tool or frameworkwith which marketers use to analyze and monitor the externalmarketing environmental factors, which impact on an organization or acompany. The results are then used to identify a section of the SWOTanalysis (threats and weaknesses). The following is a PESTEL analysisof the .
In 2002, the South Korean government established an automobile policy aimed at promoting phased integrated and self-sustained growth of the country’s automotive industry.
The government allowed approval up to 100% of foreign equity investment in the automotive industry.
Formulation of auto fuel policy to make sure continued availability of appropriate fuel to attain emission norms.
The South Korean government established an international hub for the manufacturing of affordable, small cars, two wheelers, and tractors.
Ensured a well-balanced transition to open an automotive trade at minimal risks to the South Korean economy.
The level of inflation per capita at which the company operates on is right.
The economic pressures in the automotive industry are causing related companies to adopt a traditional sales process.
Weighted tax deduction of close to 150% of all in-house research activities.
The South Korean has grown at double-digits.
Changes in peoples lifestyle results in increased number of automobile sales resulting in a large customer base.
In South Korean, a family averages four members making it favorable for a four wheeler.
Growth in urbanization.
Rise in household income levels.
Global market emphasizes on automotive testing.
Customized solutions with the proliferation of technology.
The evolution of Internet services makes it easy for the company to gather and analyze customer feedback.
Major global companies like BMW and Audi have set up manufacturing units in South Korea.
Physical infrastructure, for example, bridges and roads, affect automobile use.
Technology solutions assist with the integration of supply chain, thus reducing losses and increasing profitability.
With continuous entry of global brands into the South Korean market, improved technologies, in terms of product quality and production process have developed.
Few global brands have established R&D centers in South Korea.
There are legal provisions in relation to environmental population by automotive.
Presence of legal provisions in relation to safety measures.
Confirms the South Korean government’s intention to harmonize regulatory standards with other parts of the world.
According to Abo (2010), every company or organization operates notonly within its context of the product market, but also the overallbusiness environment and other times in a global environment. As aresult, the company in question affected by these trends occurswithin particular broader contexts. These macro-environmental trendsare outside the enterprise`s control, but can impinge on the successof the company. Additionally, it is imperative that the firm inquestion monitors these particular trends for purposes of adjustingtheir operational programs by focusing on available opportunities inthe marketplace.
The macro-environmental trends for includeeconomic trends, technological trends, and political trends.
Economic trends: These trends include changes in disposablepersonal income, inflation, interest rates, and exchange rates. Thesetrends impact the company – Hyundai Motor – both positively andnegatively. For instance, drop in disposable personal income willadversely affect the company since the total amount of revenuereaching potential customers will not be enough to invest in theautomobile. High inflation rates will inflate the auto prices in theenterprise, and as a result, the number of sales will drop. Jeong(2004) noted that exchange rates between South Korea and the rest ofthe world will also determine the amount of money the customers willbe willing to invest in the company. For instance, high exchangerates will inflate the automobile prices in the company, and thusreduce the number of sales. Low exchange rates will result in anincrease in auto sales in the enterprise.
Technological trends: The creation of new technology canimmensely impact on the needs and wants of the customers. Forexample, Internet evolution will entirely change the manner in whichpeople communicate. If one walks in the company – Hyundai Motors –he or she will be able to see different automobiles, which were as aresult of growth on the Internet. The shift in technological growth,Internet involved, will result in needs and wants of the customers.As a result, changes in technological trends will open the door for to take advantage of opportunities for thebetter. Additionally, technological trends will positively impact onthe company by continually providing opportunities for automotiveproducts.
Political trends: According to Lansbury et al. (2007), thepolitical environment is the least predictable components in abusiness setting. In South Korea, the political trends are nodifferent, for instance, the kind of government in the country isstructured in a manner that requires elections to be carried outevery few years. These kind of external elements that companies willlikely to face are the effects of pressure groups, and willnegatively impact on the company`s operations including a drop insales.
Parment (2014) noted that while the political systems in differentareas differ, the nature of impact it would have on the business willvary. For instance, political situation affects the setting of theeconomy, which in turn affects the company performance. Again,political trends are characterized by political stability orinstability and political mitigation of risks. The aggressivetakeover may result in riots, general disorder, looting, anddestruction of property, something that would affect Hyundai MotorCompany and its operations negatively.
KeyIndustry Pressures in Automotive Industry
ExcessCapacity: The estimated global production capacity in theautomotive industry for light vehicles, about 73 million units,significantly rose above the global production of trucks and cars (59million units) as of 2004. In Europe and North America, where themajority of profits and revenues are earned, there was excesscapacity by 13% and 17% respectively. In the automotive industry,excessive size is an essential pressure, which impacts on HyundaiMotor Company regarding its production levels and distribution.Excess capacity means the company is under pressure to maintainproduction while taking into consideration the number of units in themarket.
PricingPressure: Excess capacity added with a proliferation of theintroduction of new automotive groups in relevant sections by theindustry, ensures manufacturers increase unit prices on their vehicleunits. Additionally, pricing pressure is incremental in the size ofproduction and sales by foreign manufacturers in different countries,including South Korea. According to Rhee & Hyŏndae (2003), theso-called "transplants" in the automotive industry have inrecent years contributed to severe pressures on pricing in themarket.
Design for Safety: Safe systems in the motor industry arecrucial. The process of protection is not by lookouts, not throughlegislation since laws are easy to formulate but difficult toenforce therefore, security measures should be through designs,something that is a key factor in the industry. In automobiles, forinstance, there is pressure to develop and integrate user interfacesto enable its users to focus solely on the truck. As a result, theforces are bound to be generated with respect to global competition,the Hyundai Automotive Company involved.
Competitive/IndustryAnalysis – Porter`s Five Forces
The Intensity of Competitive Rivalry: occupiesclose to 44% of the domestic (South Korea) Market. Again, if HyundaiMotor and Kia`s domestic market share could be combined, it isapproximately 74%. Therefore, Hyundai Motor, as of now, has no solidcompetitor. However, in foreign markets, foreign car prices havesince dropped. In comparison, domestic care costs and those frominternational dealers is approximately the same (Gray, 2008). IfHyundai Motor cannot suggest another plan, there will be biggerchanges in the domestic market, sooner rather than later.Additionally, continues to raise the marketshare more rapidly across the world. There is also a chance for theglobal economic crisis and high growth in nations such as the UnitedStates, Europe, and China. In the automotive industry, competitiverivalry is relatively high however, Hyundai Motors established andcemented their position as one of the leaders in the global carmarket.
The Threatof Substitute Product: The second factor making up the Porter`sFive Forces is the threat of substitute product. Across the world,vehicles remain a standard feature in transportation in the two Koreacountries. And probably, there may be no adequate transportation as asubstitution for vehicles. As people continue to consider the energyand environmental cost, a lot of people may opt for bicycles.Therefore, bicycles may be substituted when using it for shortdistances, but for long distances, airplane or KTX train can replacevehicles (Abo, 2010). But until then, there are slim chances thatthese substitutes would drastically replace vehicles. If forinstance, there is much consideration of the private market for cars,then public transportation may be considered as a reasonablealternative.
Potential Entrants: In the company`s domestic market (Koreancountries), except some of the Chinese car companies that are goingto enter the Korean market. The automotive industry by far is largelydependent on the economic scale of the market in question. Therefore,it was difficult to identify new car company in Korean. It is also abig challenge to do the same in the world market (Jeong, 2004). Thereis also a possibility that some of the developing countries couldestablish automotive companies by assisting the respectivegovernment. However, there were still small chances of new entrants.New entrants into Korea market from Japan and China would be a threatto Hyundai Motors. There are also barriers to resources.
Bargaining Power of Buyer: `s customersare both Korean and foreign. The buyer`s bargaining power is veryhigh in the automotive industry. Since there are a lot of automotivecompanies, choices from the companies are wider. Until now numerouschoices would mean that could occupyapproximately 74% of the Korean market due to the merit, quality, andprice established in the market by the company. Therefore, comparedwith the automotive industry, the company had considerably littlebargaining power in Korea. However, as international automotiveprices drop the bargaining power dramatically goes up.
Supplier`s Bargaining Power: Suppliers in Hyundai MotorCompany are made up of both the Korean and Foreign automotivecomponent companies. Due to the existence of a lot of automotivecomponent firms, suppliers` bargaining powers tend to be low(Lansbury et al., 2007). On the automotive infotainment, if thecompany, Hyundai Motors, embrace new technology, it tends to be highbecause it depends on the software company. Based on the company`ssituation, there is a determination of the supplier’s bargainingpower.
Easier and faster movement of people and goods is cherished byhumankind across countries, regions, and continents. The automotiveindustry has potential for ensuring smooth mobility is achieved. Thisindustry is responsible for ensuring the wheels of developmentglobally are facilitated. Business environment, therefore, helps thecompany to take advantage of opportunities for quick exploitationinstead of being taken advantage by its competitors. Hyundai Motorcan make use of the Korean business environment to identify warningsigns and threats. Again, apart from the strategies, the company cancontinuously study its market environment, while opting to adoptfavorable business practices that not only will be used to improvethe current performance, but also on market successes of last longeramid new entrants and competition from rival firms.
The Porter`s Five Forces were used to study the company, which arenecessary to determine its survival strategy in the kind of marketthat is stiff. remains one of the leadingautomotive companies in the world however, it ought to takeadvantage of its strengths, which include its diversified operations,its firm financial position, and admired leadership role. Takingadvantage of its strengths will be in designing fuel-efficientvehicles to combat challenges associated with quality. There is alsoa need for Hyundai Motors to focus on quality and its brand image.The future of the company in both local and international marketappears bright.
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Lansbury, R. D., Suh, C.-S., Kwŏn, S., & Hyŏndae ChonghapSangsa (Korea). (2007). The global Korean motor industry: The`s global strategy. London: Routledge.
Parment, A.(2014). Auto brand: Building successful car brands for the future.
Rhee, M., & Hyŏndae C. (2003). Hyundai motor company.Stanford, CA: Stanford Graduate School of Business.