The Hyundai Motor America Commerce Essay

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In February 1986, Hyundai launched its U.S. subsidiary, Hyundai Motor America, in Garden Grove, California, and sold its first car, the subcompact Excel, in the U.S. market. In the early years, Hyundai concentrated its sales efforts primarily on the west and east coasts, as well as in the southern states. Following are the main four centers of Hyundai:

Problems of HMA

Quality problems in excel car

It did not take long for customers to realize the Excel had severe quality problems. It was not uncommon to see one stopped on the street with its engine blown. They often observed that car bodies rusted fast and air conditioners did not work on hot days.

In 1989, Hyundai's sales fell

In 1989, Hyundai's sales fell to 183,261 units, a decline of 30.66 percent. Such a big drop in sales was a heavy blow to Hyundai's business in the U.S. HMA lost two COOs during the latter half of 1989. Dealer profits plummeted, and a number of showcase Hyundai dealerships closed in 1989.

Difficulties in finding lenders

Difficulties in finding lenders to finance Hyundai consumer loans forced Hyundai to create its own financing arm in 1990.

Hyundai received low quality rating in 1990

To make matters worse, J.D. Power and Associates began to publicize its rating of Hyundai cars in 1990. Hyundai cars received an average quality score of 2.0 in 1990, the minimum possible. A joint edition of The Detroit News and Detroit Free Press reported that the IQS showed Hyundai finished last out of 29 sales divisions, with 230 problems per hundred vehicles. The Excel was among the bottom 10 car models. The Excel models were also rated the worst cars overall for injury claims based on the analyses of insurance coverage and claims data by the Highway Loss Data Institute. The quality ratings provided by Consumer Reports also gave Hyundai cars a bottom score of 1.0 in 1991.

HMC HISTORY AND ORGANIZATION

HMC was established by Ju-Young Chung in 1967 as a subsidiary of Hyundai Corporation, the biggest Korean Chaebol until the late 1990s. HMC increased its size by acquiring Kia Motors in 1998, although Hyundai and Kia continued to operate independently. HMC was the auto sales leader in the Korean domestic market and exported vehicles to over 190 countries. HMC operated the world's largest integrated automobile manufacturing facility in Ulsan, on Korea's southeast coast.

Problems of HMC

Unsuccessful in Canada

In 1989, we built a plant in Quebec, Canada. But it ended in a total fiasco after only five years of operation

Downsize

The most noticeable change in the organization chart was converting from a functional organization to a divisional organization, which aimed for efficient control and evaluation, developing management motivation and ability, improving the capability to cope with market diversification and cost reduction. These changes allowed HMC to downsize.

Labor management disputes

The democratization of Hyundai was also affected by the political democratization movements in Korean society during the late 1980s. Despite the positive effect of this societal change, most Korean Chaebols faced a sequence of labor-management disputes. HMC was not an exception. The HMCs first labor union was born at the Ulsan plant in 1987 and took the main role of conveying employees' voices to the management group. Although Se-Young Chung emphasized that "the stable, constructive, labor-management relationship is the starting point for sustaining growth," HMC was drawn into the unprecedented vortex of labor strikes in 1987 and 1988, which resulted in huge sales losses

Difficulties in implementing its strategic decisions

HMC's labor union had been regarded as the symbol of the Korean labor movement and had always been in the vanguard of national walkouts. This certainly contributed to the advancement of management-labor relations in Korea, but presented HMC with many difficulties in implementing its strategic decisions.

East Asian crisis

The 1997 East Asian crisis dealt a heavy blow to Korean Chaebols. Half of the top 30 Korean Chaebols, including Daewoo, went into bankruptcy in 1997 and 1998.

Liquidity crisis

The Hyundai group also suffered a liquidity crisis. In response to requests from the IMF and foreign companies, the Korean government began to pursue a major reform of the Chaebol system and pushed Chaebolsto improve their managerial transparency and professionalism, and spin off unrelated businesses. The Hyundai group was also pressed into an unprecedented restructuring of its businesses. Almost 70 affiliates of the Hyundai group were spun off in 1999 and 2000

Public criticism

The Hyundai group was susceptible to public criticism because its restructuring was focused mainly on the distribution of property among the Chung family, rather than on the rationalization of management.

Strike

HMC suffered from nearly seven weeks of labor strike in summer 2003 and caved in to virtually all the union's demands to end the strike. In particular, HMC allowed the labor union to participate in key management decisions.

Strategies of HMC

The Best Warranty

In November 1998, right after the promotion of Finbarr O'Neill to president and CEO from COO, HMA launched national commercials for what it called "the industry's best warranty," which offered 10-year, 100,000-mile power train protection to original owners. The U.S. auto industry was perplexed with this "crazy" tactic, but it really turned things around. Sales soared, dealers became profitable, and Hyundai began to get accolades

The Packaging Strategy

Bob Martin said Hyundai also had to come up with a solution to how to avoid the cheap car image." In late 1998, executives in HMA began to suspect that Hyundai cars would not be able to change their cheap car image as long as their retail prices are lower than competitors. HMA faced a dilemma. The solution HMA brought out was to differentiate the standard equipment of its cars from other makers, which was called the packaging strategy by people working with HMA

Central region office near Chicago

In 1987, Hyundai expanded into the central portion of the United States, opening a central region office near Chicago. As Hyundai diversified and upgraded its product line, the company began to build nationwide operations and service networks to more effectively serve the needs of dealers and customers.

Parts distribution center in Ontario

In 1988, HMA opened a $21 million, 300,000 square-foot parts distribution center in Ontario, California.

Complex and parts distribution center in Aurora, Illinois

A year after that, HMA opened a $16.6 million, 342,000 square-foot office complex and parts distribution center in Aurora, Illinois.

New 18-acre site in Fountain Valley, California

In 1990, it moved its national headquarters to a new 18-acre site in Fountain Valley, California. In addition to corporate offices, this headquarters also housed HMA's western regional office. As of 2002, Hyundai had four regional offices and approximately 600 dealerships nationwide

Comparative production system

Hyundai began to face increasing global competition both at home and abroad from the 1990s onwards. Since the late 1980s, Hyundai has adopted a comparative production system, namely lean production system, in order to improve quality and productivity.

Reorganized logistics

Hyundai started to rationalize their reorganized logistics with the help of modern information and communication technologies for example value added network. They made validation of logistics in 1994 that belonged to 329 firms of their suppliers. With the development of this system Hyundai can completely control the logistics chain therefore they will increase the elasticity of the logistic plan. Due to which vitalization of just in time delivery the time-unit of delivery scheduling was fundamentally concentrated from months to days and then to hours. Average inventory of 0.6 days of production

Full-line automotive importer/distributor

The company took a major step to becoming a full-line automotive importer/distributor in 1989 with the introduction of its midsize sedan, the Sonata. In 1995, after 10 years in the U.S. market, the Excel was replaced by the all-new subcompact Accent. The compact Elantra sedan debuted in 1991 as a 1992 model, and it quickly became Hyundai's best-selling model in the U.S. In 1997, Hyundai introduced the sporty Tiburon coupe, which emerged from the Hyundai California Design Center's two concept roadsters, HCD-I and HCD-II. In the fall of 2000, HMA added two new vehicles to its lineup: the Santa Fe sport utility vehicle and the XG300 sedan. For 2002, the engine displacement of the XG300 moved from 3.0 (XG300) to 3.5 liters (XG350).

Hyundai in Canada

In cooperation with Mitsubishi, HMC opened its first overseas plant in Quebec, Canada, in 1985, for the purpose of to assemble the mid-sized front wheel drive Sonata model. The objective was to profit from HMC original achievement in Canada in 1984. When HMC became the largest auto importer in the country. Sales to Canada accounted for 30 per cent of HMC production that year. By establishing a presence in North America, HMC wanted to boost its sales and avoid the imposition of import quotas.

Hyundai in India

In 1996 HMC recognized a 100 per cent owned supplementary, the Hyundai Motor Company of India to manufacture cars in India. It showed an investment of more than USD 450 million. Construction of a plant with the capacity to produce 120,000 passenger cars per year was finished in Chennai. In 2000 the Chennai plant was producing 100,000 vehicles per year and had captured 14 per cent of the Indian market. Hyundai in India produced two models in Chennai: Santro and Accent both of which achieved approximately one quarter of their respective market segments during the first four months of 2000. Hyundai in India started its operation in Chennai with a workforce of 1400 operating in a one shift production system in 1998. It had become one of the fastest growing auto manufacturers in India

Centralized strategy

HMC was born under the authoritarian, charismatic leadership of Ju-Young Chung, the founding chairman of HMC, and consequently with a unified and centralized management structure. Since the initial ownership structure was totally controlled by Ju-Young Chung and his heirs, the management and ownership of HMC completely overlapped. Its strategic goals and decision-making processes were dominated by the Chung family's centralized dominance and emperorship. However, such a patriarchal ownership and management structure allowed HMC to pursue more autonomy over its external relationships. For example, when HMC entered into a strategic alliance with Ford, Ju-Young Chung declined to transfer his managerial authority to Ford. Also, in 1974, HMC picked Mitsubishi, rather than a member of the U.S. Big-3 or Toyota, as its joint venture partner because this made it easier for HMC to secure strategic autonomy over its own technological and market development. In addition, the full financial and personnel support from HMC's mother company, the Hyundai Engineering & Construction Company, which was also owned and managed by the Ju-Young Chung, provided him with leverage to steer HMC his way.

Low cost leadership

Hyundai was not sure about whether it could retain such momentum. First of all, Hyundai's competitors such as Chrysler and Mazda had begun to emulate its 10-year, 100,000 miles warranty and devised a variety of promising marketing strategies. It seemed that the advantage stemming from the warranty would disappear soon. Also, although Hyundai's packaging strategy helped it outgrow its cheap car image, this could be regarded as another version of price cutting strategy and amount to no more than short-term tactics.

The Best Warranty

In November 1998, right after the promotion of Finbarr O'Neill to president and CEO from COO, HMA launched national commercials for what it called "the industry's best warranty," which offered 10-year, 100,000-mile power train protection to original owners. The U.S. auto industry was perplexed with this "crazy" tactic, but it really turned things around. Sales soared, dealers became profitable, and Hyundai began to get accolades

The Packaging Strategy

Bob Martin said Hyundai also had to come up with a solution to how to avoid the cheap car image." In late 1998, executives in HMA began to suspect that Hyundai cars would not be able to change their cheap car image as long as their retail prices are lower than competitors. HMA faced a dilemma. The solution HMA brought out was to differentiate the standard equipment of its cars from other makers, which was called the packaging strategy by people working with HMA

Expansion strategy

Hyundai needed an expansion strategy until the late 1980s in order to be the #1 Korean automakers and this strategy fitted well with what we call "Chung's mode of bulldozer leadership." But it also seems to be true that we learned that projects initiated through personal ambition lead to poor preparation

Diversified strategies

In April of 2002, Hyundai broke ground in Montgomery, Alabama for its first U.S. automobile assembly plant, a $1.14 billion investment scheduled to open in 2005 and employ 2,000 people. The facility, to be built on 1,600 acres, was expected to produce 300,000 vehicles per year at maximum capacity. Hyundai planed to increase the capacity to 500,000 by 2010. This plant was regarded by Hyundai and outsiders as a key element in Hyundai's plan to become one of the world's top five manufacturers by 2010.

Decentralized Strategy

After successfully seeing HMC enter the North American market, Ju-Young Chung handed over the Chairmanship of the Hyundai group and HMC to his younger brother, Se-Young Chung, in 1987. The new leadership infused HMC with a different organizational culture from Ju-Young Chung's regime. Se-Young Chung tried to inspire HMC with the new spirit of "harmonious human relations, autonomous management, responsibility management, and equal opportunity, "and thus drive out the previous owner-oriented emperor leadership by delegating responsibility and authority to professional executives and managers. The change in leadership also led to a change in strategic focus.

From 1987 to 1988, Se-Young Chung redesigned the HMC organization with the goal of "improvement in production efficiency" by reshuffling or merging the division of job functions. The most noticeable change in the organization chart was converting from a functional organization to a divisional organization, which aimed for efficient control and evaluation, developing management motivation and ability, improving the capability to cope with market diversification and cost reduction. These changes allowed HMC to downsize

Following are the technologies used by Hyundai

Aiming for world-best chassis

Hyundai deploy cutting-edge materials and new technologies in the development of chassis parts to secure unrivalled riding comfort, driving performance and safety. Chassis parts that have undergone advanced virtual analyses and passed numerous tests and standards deliver world-best performance.

Suspension

The suspension works to alleviate any atmosphere or shocks from the road while driving to provide a comfortable ride and ensure that the vehicle drives, brakes and turns according to the driver's will by improving handling performance

Steering

The steering system is directly controlled by the driver and acts as a two-way communication system between the driver and the vehicle. The system relays accurate information on the road to the driver, and the driver's intention to the vehicle. This enables the vehicle to nimbly respond to the driver's steering inputs for optimal driving convenience and handling.

Brakes

Kinetic energy of the vehicle in motion is twisted into heat energy using friction to decrease the speed of the vehicle. There is a rising number of brake applications linked to electronic systems to make sure better safety. The Anti-lock Brake System improves braking safety while Electronic Stability Control enhances vehicle stability.

Active Geometry Controlled Suspension

When the vehicle rolls because of unexpected rotating. The vehicle speed and information from the steering wheel angle sensor actively control the angle of the outer rear wheel to improve cornering stability.

Variable Rack Stroke

The Variable Rack Stroke system uses the space typically set aside for snow chains to considerably reduce the turning radius of the vehicle and improve driven convenience while parking.

Eco-friendly exhausts systems

The idea of power train center is to improve combustion efficiency, reduce weights, develop low friction and improved motor efficiency technologies, and accelerates the development of power trains for hybrid vehicles in order to obtain better fuel efficiency and minimize air pollution caused by gas emissions. And a highly efficient drain gas cleaning system is being developed, which reduces harmful gases emitted from low pollution engines one more time, which not only responds to the rising limits on emissions but also leads the way in the production of eco-friendly vehicles

Driven State Monitoring

Driven State Monitoring employs facial recognition engine technology to decide the driver state by monitoring changes in the driver eye movements and facial muscles with an infrared camera installed inside the car. By measuring the driver blinking and facial direction patterns, it sounds an alarm sound and relays strong vibrations to the seat when abnormal states are detected

Self-healing scratch shield

Scratch Recovery Clear uses the elasticity of special chemically composed matters in a clear paint that has self-healing properties. Scratches are automatically fixed over a period of time.

Pre-crash headrest

Pre-crash headrests help avoid driver neck injuries by detecting possible stern collisions with the help of rear-facing camera that is made into the vehicle. When a potential crash is detected, the cushion mechanically moves earlier to the driver's head for added protection. Once the risk has passed, the headrest then returns to its normal position after a convinced period of time.

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