Question No.

2
In terms of factor proportions theory, what
abundant factors does Hyundai leverage in its
worldwide operations?
How Hyundai exemplifies it?
In what ways does Hyundais success contradict
the theory?

Factor Proportions Theory

1. Products differ in the types and quantities of
factors (labor, natural resources and capital)
required for their production

2. Countries differ in the type and quantity of

production factors they posses. Each country
should export products that intensively use
relatively abundant factors of production and
import the otherwise goods

Koreas abundant Factors

Cost effective labor Cost effective
knowledge Workers
high technology Center of new technology
development
Capital High saving rates and massive
inward FDI

Key Location Specific Advantages

Exemplifies of the Theory

Exporting Excel, an economy car to U.S
Benefitted from weak Korean Won

The Contradiction

International trade is complex and cannot be

fully explained by a single theory

Hyundais Theory contradiction

Uses Outward FDI to develop key operations
around the world.
Built Car factory in Turkey Key markets in Middle
east
Opened a plant in india best selling brand imported
car in 2002

Hyundai Employs inexpensive high quality labor.

Engines, tires and other key inputs are sourced
from low cost suppliers
Partnered with DaimlerChrysler overcome
government imposed obstacles

 Launched factory in China Gaining the low access

to low cost, high quality labor in emerging markets
Has RnD Centers in Asia, Europe and North America