Established in 1967, Hyundai Motor Company has sustained, grown and become the world’s fourth largest automaker in terms of units sold. Automobile manufacturing industry is in the maturity stage and exposed to a lot of difficulties. To survive and develop, the company needs to identify and develop key factors of success such as innovation, technology development, quality improvement, and customer service; associated with cutting costs and diversify products. Moreover, the company needs to take into account the characteristic of forces driving industry competition on the way to success.
If you need assistance with writing your essay, our professional essay writing service is here to help!Essay Writing Service
To sustain competitive, Hyundai needs to maximize its strengths that include advanced technology, valuable branding experience, qualified labor force, cost efficiency, marketing flexibility and experiences. On the other hand, Hyundai also has to minimize weaknesses that are cultural differences, commodity price risk, late entrant, diversity and currency fluctuation. In addition, there are some opportunities for Hyundai to take advantages consist of new segment of hybrid car, governmental support, buyers’ emphasis on low cost & design, competitor’s weakness and potential market. While avoid threats that comprise global economic crisis, new entrants, low market growth, environmental requirement and political instability.
Hyundai must consider strategy for short, intermediate and long term. Firstly, to minimize adverse impact of global economic crisis, company should reduce costs & expenses. Secondly, Hyundai should take advantage of core strengths as advanced technology such as eco-friendly energy to comply with environmental issues. Lastly, the company should target into potential markets from developing countries. In addition, it is important to improve the structure, system and policy. Continuous decentralization of management structures and the strategy of diversification should be applied associated with new system to enhance the availability of back-end data, improving customer service and lowered system management costs. Finally, hiring policy and global environmental management policy should be applied to bring Hyundai to success.
Brief of company:
Since its establishment in 1967, Hyundai Motor Company has grown into one of Korea’s most recognizable and trusted firms. Today, Hyundai stand the world’s fourth largest automaker in terms of units sold and one of the Big Asian. Hyundai Motor is operating globally and provides diverse product portfolio supported by its 6,000 sales points and 23 overseas manufacturing plants and distributors in 180 countries worldwide. The total revenue of company has recorded as 31 December 2008 is US$35,053,637 thousand and return on investment is 3.38%.
Reason for selecting:
From the beginning to recent time, Hyundai has made significant inroads in building its brand from the “Worst Car Ever Made” to a 72nd ranking in the 2007 Best Global Brand survey. Public perception of the Hyundai brand has been transformed as a result of dramatic improvements in the quality of Hyundai vehicles which are sold with reasonable price. While others competitors are facing with losses and struggling with economic downturn, Hyundai still make profit and has come up impressively as a phenomenon in automobile industry.
Main strategic issues facing the company:
Coping with climate change and complying with regulations on CO2 emissions. Decreasing environmental impact and promoting recycling.
Difficult economic environment that restricts number of car consumers and high oil prices.
Company’s contribution to the National Economy:
As of December 2008, automobile industry which is vital to Korean manufacturing industry, accounted for 14.4% in production, 13.4% in export, and 14.3% in employment. Hyundai has created 56,204 employees in South Korea and contribute about 70% to Korean automobile industry and 5.4 % to Korea’s GDP.
Company’s contribution to the regional economy:
There are 22,066 overseas employees under Hyundai Motor Company, comprise of 6,956 employees in North America, 5,101 employees in China, 5,457 employees in India, 4,694 employees in Europe and 218 in other countries.
Recent strategic dilemma:
In applying of “Blue Strategy”, some of its eco-friendly cars were developed to meet environmental regulations set by European Union, the performance of vehicle is meant to deteriorate when he carbon dioxide emission is reduced, it lessen Hyundai’s products’ competitiveness as compared to its rivals.
Recent strategic choice:
Hyundai is taking approach toward increasing quantitative growth through global in combination with quality and brand management to enhance global competitiveness and further raising sales results.
Hyundai applies strategy of “Green Management” by plan of “Blue Drive” as the key toward sustainability approach and to comply with regulation on emission issue.
Source of Information on Company
Hyundai Motor Annual Report
Industry life cycle
Automobile manufacturing industry
Automobile manufacturing industry is in the maturity stage of the industry life cycle. In this period, the industry does not grow as much as last 5 or 6 years. The market is very competitive, many manufacturer offering their products, the producers continue with the product differentiation in many segments and hence, the market result in saturation with many manufacturers offering many models of the product. In this stage, only the best efficient and effective company survives. There are about 806 million cars and light truck on the road in 2007, the number is increasing rapidly especially in China and India. The biggest market currently is in North America which is about 250 million vehicles, following are Asia and Europe market. In 2009, with stable economic growth, China is going to become the largest automobile producer and market in the world.
The automobile industry crisis and oil shock in 2008 is a part of global financial recession. It affected Asian and Europe automobile manufacturers but it is primarily felt in American automobile manufacturing industry. With rapidly rising oil price, automobile industry is experiencing high pricing pressure from raw material costs and changes in consumer buying habits. Also, there is an increase in external competition from public transport sectors and consumers are re-evaluating their private vehicle usage. Moreover, the social expectation and related concerns regarding carbon emissions had lead to the restricted standard setting that automakers have to be fulfil in order to penetrate into these high requirement markets.
In addition, customers now are seeking a car with higher quality demand, more functional and price is crucial factor. In combination with the challenging economic environment, the companies’ strategy has to be more effective, innovative, cost reduction as well as making product differentiation and improve customer services. Also, automobile companies have to implement more creative marketing strategies to lure consumers as most of them are experienced decline in sales.The response to climate change may have a greater impact on the automobile manufacturing industry than all the other factors. It leads automaker to develop toward “green technology” and alternative fuel and material to lessen impact of automobile industry to environment.
Key factors of success (KFS)
The factors listed above are some of the most important factors that company needs to achieve in order to be successful in the industry. Nowadays, Toyota is the most successful company in automobile industry because they achieve key factors successfully. Among all factors, innovation is the most important factor contributes to the success of company. In contrast, Nissan had average performance. Hyundai is in the middle, growing stably and strikingly. As we see from above, the total weighted score of Toyota is highest, following is Hyundai then Nissan. Among all of the factors, technology is the most important as automobile industry is under pressure of high competition and the issue of climate change. Technology is not simply satisfying customers with a simple car, it need to bring a car with more functions, more model and technological. Also, technology needs to enable the company to develop car in combination with new material and fuel. Leading technology with above average rating of 4.5 enables Toyota to be more successful than Hyundai and Nissan.
Innovation is second important factor that lead to the success of company. As customers concern more about the appearance of the car, more innovative is needed. New models are required to have more impressive design and that will help company to gain market share and increasing sales value. In term of innovation, Hyundai has launch new models with remarkable improvement of design that is more attractive to the customers over the past few years. It helps Hyundai gaining more market share in compare with less innovative Toyota and Nissan. So the company need to keep up this advantage, more skilled workers are needed and necessitate of a breakthrough idea.
In addition, Quality and safety is one of important factor that customers always bear in mind when making buying decision. Hyundai has done it well since the past few years. They receive good signs from customer’s perception of company’s brand that is improvement of quality & safety. Price is crucial factor; an impressive design only attracts customers if it comes with reasonable price. Thereby, company always need to develop strategy toward cost reduction. Company should have diversity of product to compete with others and to enjoy economy of scale and scope. To be more successful in improving brand of company, not only design, quality and price but also customer service needs to get betters. Customers want a good after-sale service that they can rely on. Company has to take these factors as a basis in combination with economic situation to develop suitable strategy in order to grow successfully and stably.
Threat of new entrants:
Sluggish state of economy
Requirement of high R&D and fixed cost
Difficulty in accessing to distribution channels
Few newer with low competition
Relative power of other stakeholder
Internal stakeholders: shareholders, management, employees and creditors
External stakeholders: government, partner firms, clients and potential investor
Provide feedbacks & opinion
Force Driving Industry Competition
Rivalry among existing firm
Rivalry among existing firm
Rivalry among existing firm:
Highly competitive of technologies, costs and services
High number of competitors
Diversity of products
Slow growth, high fixed cost
Threat of substitute:
The cost of automobiles and environmental issues lead to many transportation options
Bargaining power of buyers:
Require improvement of quality.
Nice design & better service requirement
Impact of cars to health and environment
Need for alternative fuel
Bargaining power of suppliers:
The automobile supply business is quite fragmented
Suppliers have little responsibility
Rivalry among existing firms (High)
Hyundai dominates the Korean automobile market and has low domestic rivalry. However, in global competition, rivalry among existing firms is high. Rival companies compete on prices, quality and customer service; a company watches very carefully every movement of rivals in order to adapt appropriately. There are high numbers of competitors and they diversify into many market segments. Company earns lower profit when cost of competition is high. To be more successful, Hyundai has to keep working their competitive advantages, launching strategy to reduce cost, better service to suit with this sluggish economic condition, keeping up with developing of new design, quality and especially looking answer for technology toward “Green Environment” that I predict it will be a crucial factor in near future.
Threat of new entrants (Low)
Automobile industry is highly capital and labour intensive, it require very high fixed cost as well as R&D, so threat of new entrants is low. It is not easy to enter automobile industry and it is harder since the economy downturn is happened that decrease the demand of customer. Brand loyalty of customer is also an obstacle; there are wide choices for customer. Moreover, the requirement of innovation, technology and product diversification makes it more difficult to enter the market. Established in 1967, Hyundai has a long time experience and enjoying benefit of economies of scale through operation all over the world so new entrants are not a pressure for a company.
Bargaining power of buyers (High)
The bargaining power of buyers is high. The manufacturers depend on them to stay in business. Buyers purchase a significant proportion of output. If manufacturers cannot keep their buyers satisfied then they will lose their buyers to competitors. Nowadays, there are various brand and models that buyers can choose, buyers have many choices so that their requirements are high. The factors that affect buyers to make buying decision are: the design, quality, price and environmental effect. Especially, current time is under economic recession and climate change issues, decrease in buyers’ demand and their consideration of impact on environment creates more pressure on company.
Threat of substitute products or services (Low)
It is true that there are many of transportation that can be a substitution of an automobile such as bus, train, bicycle, motorbike, etc. Substitute products depend on geographical location. In some cities such as Singapore, New York, having a car is not necessary because those cities has good infrastructure of public transportation and there are policy to reduce number of car in order to reduce heavy traffic, avoid traffic jam and protect environment. However, the need of automobile is always great. Developing countries are potential market and the need in those countries is getting greater.
Bargaining power of suppliers (Low)
Hyundai had a good supply chain management system and had long relationship with suppliers. Suppliers have little power in automobile industry because there are numerous component suppliers that help company to avoid shortage of material and selecting suppliers with lower cost. Automobile companies work to maintain cost strategies so that suppliers must compete on price with one another to acquire contracts with them. Since it is very competitive among number of suppliers, an automobile company could easily switch to other supplier along with high requirement of price and quality.
Relative power of other stakeholders (Medium)
The internal stakeholders of Hyundai include the shareholders, management, employees and creditors. The external stakeholder of the company is the government, partner firms, clients and potential investors. Internal stakeholders help company to apply strategy in proper way while external stakeholders helping with feedbacks, opinions and require responsibility of company. As the company is very large, it has great effects to stakeholders. In response to them, company develops strategy of “Blue Drive” that represents commitment to develop environmental-friendly vehicle along with enhancing basic features of products.
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.View our services
Internal Factor Analysis Summary (IFAS Table)
Hyundai has core strength of innovative technology and becomes a leader in developing environment friendly technology to compete in the recent time when the impact of cars to environment are highly concerned and high requirement of buyers on innovation, quality and design. Along with innovative technology, Hyundai is well managed on costs and expenses that enable company to compete on price with its rivals; it is such a significant advantage especially in this economic downturn condition. Qualified labour force helps Hyundai to gain competitive advantage, manage and operate company effectively. Hyundai has strong corporate philosophy that focus on “customer first”, flexible marketing strategy and rich experience of producing car for export market. Finally, its value of global branding experience is raising that enable Hyundai gaining more market shares.
On the other hand, there are some weaknesses that need to be taken into consideration. Drawbacks occur due to differences between national and business cultures. For example, the national culture of Korea is collective while it is highly individualist in America. Hyundai commodity price risks arise from changing price effect of inputs such as steel, glass, plastics and rubber. As a global company, Hyundai is also exposed to the risks related to fluctuations of currencies in countries where company doing manufacture. When making buying decision, customers seek information and feedbacks from previous buyers; late enter into market means lesser information and feedback, hence provide drawback. Finally, Hyundai has limited ability in adding new models in order to diversify products and compete in many automobile segments, especially in luxury automobile segment.
External Factor Analysis Summary (EFAS Table):
Strong research & development and advanced technology leading in producing car in hybrid segment enable Hyundai to take advantage to expand market share and gain more profits. As high tax contributor, Hyundai enjoy governmental supported policy in domestic market, thus enjoy less competitiveness from competitors and spreads its wings to enfold domestic market. Sluggish economic condition makes buyers focus more on low cost & design in which Hyundai has reputation of improvement of quality & design associated with lower cost of products as compare to other competitors. Moreover, crisis of key rival – Toyota on quality create big opportunity to Hyundai focusing on quality improvement and reputation. The company should put more emphasis on potential markets from developing countries provide promising opportunity for the company to expand and gaining profit in the future.
On the other hand, the company is facing with some threats indicated above. Global economic crisis and oil price shock have adverse impact to automobile manufacturing industry as well as the Hyundai, reducing investment and raising cost of fuel and raw materials. Also, the brake on worldwide auto demand has created low growth market, decrease sales and profits. More pressure of competition when there are some new entrants enter into market, targeting into some specific segments and acquire market share portion. Additionally, environmental requirement puts more pressure to the company to technological change toward eco-friendly energy. Finally, economic implication of political instability increases transaction costs and insurance cost associated with security and flow of capital, goods between many countries.
Strategic Factor Analysis Summary (SFAS) Matrix:
The global economic crisis and oil shock affect the company in short term. It put brakes on automobile demand, increasing cost of fuel and raw materials, reducing investment and R&D cost while putting pressure on cutting price of products hence require strategy of the company toward reducing operating expenses and workforce. In this situation, well manage costs and expenses become the core strength of Hyundai in competing with other competitors and attracting more customers. In addition, the crisis of key competitor as broken top-quality image creates opportunity to Hyundai by launching campaign focusing more on quality improvement, gaining reputation and boost sales value.
Hyundai can take advantage of advanced technology in intermediate term as well as in the long term. Advanced technology is core competency of company to compete on quality and functions of products that are more interested from customers nowadays. Late enter into automobile manufacturing industry making less information and feedbacks of Hyundai products so that the company need to launch strategy of marketing brand value, raising level of perception of customers. Furthermore, potential markets from developing countries should be considered and prepared in intermediate term in order to expand business and gain market share.
Environmental effect is the most concern of all people and society and it affects all industry, not just automobile manufacturing industry. Therefore, advanced technology toward eco-friendly energy is the most concern of the company in long term as well. Not only improving quality, design and function of products but also company needs to put more emphasis on reducing impact of car to environment as a means of sharpening its competitive advantage. Moreover, the company should be able to create more new models to compete with competitors especially in luxury and hybrid car segments which are less competitive areas but very profitable areas. Similarly, targeting into potential market from developing countries should be considered for long term strategies as they have such a lot of potential demands and providing valuable source of profitability.
S1 Advanced technology
S2 Branding experience
S3 Qualified labour force
S4 Cost efficiency
S5 Flexibility marketing & experiences
W1 Cultural difference
W2 Commodity price risk
W3 Late entrant
W5 Currency fluctuation
O1 Hybrid car segment
O2 Governmental support
O3 High emphasis of buyers on low cost & design
O4 Competitor’s weakness
O5 Potential market from developing countries
Focus on research and development
Build up strong brand image.
Expand business to potential market
Set up more distribution channels & plants
T1 Global economic crisis
T2 New entrants
T3 Low market growth
T4 Environmental requirement
T5 Political instability
Use eco-friendly fuel
Cutting costs & expenses
Focus on marketing and public relation
Reduce ineffective distributor to minimize costs
Improve market research
To strengthen company’s survival ability, company need to use its own strengths to take advantages of opportunities. Firstly, Hyundai should focus on research and development to reach out the potential hybrid car segment trend by taking advantages of its own advanced technology. Furthermore, Hyundai needs to know the competitors and how they operate, as well as exploit their weakness. For example, exploit weakness of Toyota that has been facing a crisis of quality. With flexibility marketing and organisational experience, Hyundai may identify the problems and avoid same mistakes that can be made; hence building up new and strong brand images associated with lower price. With a branding experience and qualified labour force, Hyundai may gain a large market share from these potential markets.
To take advantages of opportunities to overcome weaknesses, Hyundai can set up more distribution channels and plants in new markets and segments. One of Hyundai’s weaknesses is the lacking competitiveness in luxury car segment. Thereby, strategy which should be applied here is globalization; they may aim to export their products to developing countries, where customers mostly have an average income that put high emphasis on low price & design and willing to purchase an affordable car instead of a luxury car. Moreover, late entrance to the market can be covered by the appearance of innovative products, which are hybrid car segment which Hyundai has focused and developed.
Company always faces various threats from both internal and external factors. There is a need to cover the threats using company’s’ own strength. Nowadays, environmental requirements from customers are getting higher since they are starting to concern about health care and impact of cars to environment. By using their advanced technology, Hyundai should develop technology toward eco-friendly energy such as bio-diesel, liquefied petroleum gas and electric energy to combine their engines and social expectation. By making advantages of cost efficiency, Hyundai may cover their low market growth; however they have to manage their capital and expenses wisely and effectively. New entrant is always a big threat facing a company. However, by having a good brand experience and flexible marketing, Hyundai can surpass their competitors by focusing on marketing and public relations to gain more market share.
There are some strategies Hyundai may use to minimize weaknesses and avoid threats. Firstly, global economic crisis has affected many industries and companies, Hyundai is not the exception. Under economic crisis, minimize unnecessary and ineffectively costs plays an important role to maintain company business. At the same time, company should increase advertisements to gain more reputation and build up their brand images. Last but not least, Hyundai should do more market research if they are planning to expand their business to other countries, in order to avoid unwanted political instability and cultural differences.
Review of strategic options available to company:
There are several strategic options which are currently available for the success of Hyundai. Firstly, Hyundai should focus on short term strategies, such as operational efficiency program and globalization. The company is facing a low market growth compared with their competitors due to late entrant to the market. Hence they need to manage their capital and expenses effectively by cutting all unnecessary costs, operating expenses and other utilities costs. Moreover, globalization strategy should be concerned to gain more market share from potential market in developing countries. However, they need to be aware of the cultural differences and political instabilities which may occur during the plan.
On the other hand, Hyundai must concentrate on long term strategies. Nowadays, the hybrid car segment has become the new trend in automobile market. Thus research and development department should be improved to reach the potential market trend, based on its existing advanced technology. From the improvement of R&D department, a new innovative product may appear to distinguish Hyundai from other companies. Furthermore, health care and impact of cars to environment are being concerned by customers. Hyundai need to come up with new green and eco-friendly fuel such as bio-diesel, liquefied petroleum gas and electric energy to follow the trend.
Recommend for future direction:
For future direction, Hyundai should pay attention to improve their brand images, by running more marketing programs such as offering loyal customer’s reward system and new advertisement campaign. These advertisements should be located at all available media which are being concerned by public, like newspaper, television, radio and over the internet. They need to learn useful strategies from their competitors as well. One way to the success is to increasing more options of products along with improving online ordering services. Hyundai may also offer more options available to customers through online service to maximize their customers’ satisfaction.
Assessment of company’s performance:
Despite sluggish domestic sales amid the global economic downturn, Hyundai Motor expanded its global market share last year and the 2009 net profit was an all-time annual high. Hyundai had achieved 2.96 trillion won ($2.57 billion) in 2009, compared with a net profit of 1.44 trillion won in 2008. In 2009, Hyundai sold a record 3.1 million vehicles, up 11.7 percent from 2008. In 2008, Hyundai has jumped up to fifth in the global standing of the world’s largest automobile manufacturers. However, latest sales figures in 2009 that place Hyundai to the world’s fourth largest automaker in terms of units sold.
Hyundai has implemented many strategies to increase company’s effectiveness. Hyundai is seeking reductions of as much as 20% in consideration of supplier, volume and parts involved. The company is cutting costs not only by rationalizing its domestic plants, but also more and more by manufacturing in areas with lower production costs in oversea countries. As a result, company completed a 3 trillion won ($2.2 billion) cost-reduction program in 2008. Possessing about $7.1 billion in assets including Hyundai Motor share, Hyundai is very aggressive in spending as R&D and marketing. In general, Hyundai is implementing its strategies effectively.
Return on investment:
Hyundai has raised its global share in recent years, even as it has maintained a stable position in Korea and well balanced market portfolio and currency settlement. However, in 2009, there are some decreases in term of return on investment due to the negative impacts of sluggish economic condition. Total dividend payout was KRW235.7 billion, down 14.6% from the previous year. However dividend payout level was maintained at the 16%. Hyundai enjoyed a rise in market share as the result of innovative marketing and successful launch of new models. In the first three months, the company’s global market share rose to 4.7%, compared to 4% a year earlier. The company is expected to continue its’ success along with improved performance in key markets.
Recommendations for Implementation of Strategies
The current economy is under sluggish condition that requires the company to make judgements and a need of improving organizational structure. Company’s structure needs to work toward operational efficiency in association with quality and technological improvement. Continuous decentralization of management structures and the strategy of diversification of output helped the company in coping with economic crisis. Hyundai needs to establish R&D centres to take advantage of research infrastructure, so that the company can develop its products to satisfy the requirements of the environmental and safety regulations effectively.
Hyundai is multinational automobile manufacturing company; customers demand high-quality, customized services and they also look for different types of information when mak
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: