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<Technological Strategy and Management Term Project 2>

Case Study of
Hyundai Motors

Date : 2009. 12. 21

Inyoung Koh 20061021


Yeonwon Chu 20061018
Kihyeok Park 20071148
Junegak Jeong 20080546

ABSTRACT
Hyundai Motors was founded in 1967. It has grown dramatically and become
one of the biggest companies in the world these days. We will examine the factors
that made Hyundai Motors successful. Moreover, based on what we learned in
Class, we will find sources of innovation factors and classify types. We will also find
Hyundais technological innovation strategies for next generation cars and
collaboration strategies. After grasping these concepts, we will analyze Hyundais
present situation by some tools such as SWOT analysis and Five -force model.
Through the analysis, our goal is to suggest future strategies for Hyundai Motors.

1 Introduction
1.1 Worldwide industry description

1.1.1 Automotive Industry


The automotive industry designs, develops, manufactures, markets, and
sells the world's motor vehicles. In 2008, more than 70 million motor
vehicles, including cars and commercial vehicles were produced worldwide.
Around the world, there were about 806 million cars and light trucks on
the road in 2007; they burn over 260 billion gallons of gasoline and diesel
fuel yearly. The numbers are increasing rapidly, especially in China and
India.

1.1.2 Pressure on Automotive Industries


In 2008, with rapidly rising oil prices, industries such as the automotive
industry are experiencing a combination of pricing pressures from raw
material costs and changes in consumer buying habits. The industry is also
facing increasing external competition from the public transport sector, as
consumers re-evaluate their private vehicle usage.
Roughly half of the US's fifty-one light vehicle plants are projected to
permanently close in the coming years, with the loss of another 200,000 jobs
in the sector, on top of the 560,000 jobs lost this decade.

1.1.3 South Korean Automotive Industry and Hyundai Motors Co.


The South Korean automobile industry is today the fifth largest in the world
in terms of production volume and the sixth largest in terms of export volume.
The Hyundai Kia Automotive Gro up is today the second largest automaker in
Asia, after Toyota.
Korean automotive industry has started in 1955, as Sinjin Automobiles, the
precursor of Daewoo Motors, was founded. In 1968, Hyundai Motor
Company was founded, and Hyundai Cortina, the first model of Hyundai
motors, was released in cooperation with Ford Motor Company. In 1975, the
Pony, the first Korean car, was released, with styling by Giorgio Giugiaro of
ItalDesign and powertrain technology provided by Japans Mitsubishi Motors.
Exports began in the following year to Ecuador and soon thereafter to the
Benelux countries.

1.2 Company Overview

Hyundai Motor Company, a division of the Hyundai Kia Automotive Group, is


the worlds fourth largest automaker in terms of units sold and one of the Big
Asian Four (with Toyota, Honda and Nissan). Headquartered in Seoul, South
Korea, Hyundai operates the worlds largest integrated automobile manufacturing
facility in Ulsan, which is capable of producing 1.6 million units annually. The
Hyundai logo, a slanted, stylized 'H', is said to be symbolic of two people (the
company and customer) shaking hands. Hyundai means "modernity" in Korean.
The companys success is driven by the commitment of approximately 75,000
employees in more than assembly plants, Hyundai vehicles are sold in 193
countries through some 6,000 dealerships and showrooms worldwide.

2 Key Innovation

Quality
2.1 Background & development

Compared with other global motor companies, Hyundai motor company had
no competitive power on technology because Hyundai started car industry more
than a hundred years later compared with Europe car companies. To survive in
car markets, they need some competitive power

in productivity and quality

rather than in technology.


As a result, Hyundai enforced quality innovation for increase of customer
satisfaction,.
2.2 Quality Enhancing Technology

[Figure 2.1] Quality Enhancing Technology

In Hyundai Asan plants quality management, they benchmarked companies


which implemented 6-sigma successfully. The following is five steps in 6 -sigma.
1. Define problem
2. Measure Current Situation
3. Analyze Causes
4. Improve
5. Control the Improvement

Like this, 6-sigma is a process which improves quality. After they benchmarked
companies which implemented 6-sigma successfully, they made their own 6sigma system, Q-star.

They started Q-star from 1999. In 1999, Hyundais goal

was to raise 16 gold stars. Gold star is an expert in quality improvement. It


means that if company has lots of gold stars, quality would be improved. In 2000,
they

expanded Q-star to direct-quality sections and indirect-quality sections

including foreign partners and local partners adding two hundred gold stars every
year.
As a result, in 2003, they completed their 6 sigma Q-star. They also
increased first pass yield from 90 percent to 99 percent and reduced 50 percent
of claim cost.
2.3 Advantage
In 2000, Hyundai cars income was 18.23 trillion KW and net profit was about
667 billion KW. In 2003, they recorded sales 25 trillion and net profit about 1 ,740
billion. This improvement was because the profit from exportation is much larger
than the profit from domestic sales. In same period, domestic sales was from 10
trillion 468 billion to 10 trillion 646 billion. It was slightly increasing but exportation
was from 7,762 billion to 14,321 billion. It was surprising increase.

This increased income due

to exportation

was because of quality

managements success. In the past, foreign country evaluated Hyundai car as


cheap car. However after they had innovated Q-star, they gradually decreased
IQS index. The most influencing quality facility, J.D power, examines IQS (initial

quality study) during 6 years. IQS is the response on quality satisfaction from
consumers purchased car 3 months ago.
It means that if IQS index is low, it would have the better quality. In 1998,
Hyundais IQS was 257 point. In 2000, after Hyundai Motors innovated Q-star,
IQS recorded 189 point. In that year, average car companys IQS recorded 157
point and they promoted Q-star the next every year.
As a result, in 2003, Hyundai cars IQS recorded 143 points. In that year,
average car companys IQS was 133 points. They could record around average.
In this year, Hyundai cars IQS record 102 points, numerical value that exceed
car average IQS, and Toyota record 101 points. . Comparing with global car
company Toyota, it is just 1 point difference. This was surprising results and
connected to sales increase.

[Figure 2.2] Graph about IQS and Number of Sales

This chart is quality-sales graph. In 1998, they recorded 97 thousand


dollars sales and in that year, IQS was 257. In 1999, they recorded 163
thousand dollars sales with IQS 224. In 2000, they recorded 244 thousands
sales, with IQS 189.
In 2001, they recorded 346 thousands and in that year, IQS was 175. As
this chart, when IQS decreases, it would be directly connected to sales
increasing.

Productivity
2.1 Background & Development
Hyundai car judged that they couldnt survive the 21 st-century car market with
Ulsan manufacturing system so they benchmarked balanced lean-manufacturing
system in Kyushu. After the benchmark, they built Asan plant.

2.2 Technology

Comparing to Ulsan plant, Asan plant had some advantages.


Asan plant:
1. Has short assembling lines
2. Uses buffer to reduce error
3. Manufactures automatically
4. Has information networks over all manufacturing steps
Short assembling lines and manufactures automation mean that the computer
had more power to judge. This makes Asan plant more automated, causing the
enhanced productive efficiency.
2.3 Advantage

Ulsan plant was larger than Asan plant so it was meaningless to compare
productive volume so lets consider operating ratio.

[Figure 2.3] Operating ratio of each plant

Operating ratio is a ratio that shows the efficiency of a company's management by


comparing operating expense to net sales.
In 2004, operating ratio of ulsan plant was 87.7%, much lower than operating
ratio of Asan plant(about 97.5%). In 2006, operating ratio of Ulsan plant was about
89 percent which was much lower than operating ratio of asan plant which was
about 107 percentage.
In this level, operating ratio will coutinue to increase in ne xt years.

3 Innovation
3.2 Sources of Innovation
3.2.1 Quality
3.2.1.1

Benchmarking

Q-star is innovation on quality based on Six Sigma. Six Sigma is a


method for improvement which was implemented in various companies
worldwide. Benchmarking some successful companies which made
innovation using Six Sigma, Hyundai consulted to firms and successfully
developed their own innovation system, Q-star.

3.2.2 Productivity
3.2.2.1

Benchmarking

Hyundai Asan Plant is process innovation benchmarking Toyota


Kyushu plant. Adopting the lean-type manufacturing process from Toyota
plant, Hyundai adjusted the system

3.3 Types of Innovation


3.3.1 Product / Process
3.3.1.1

Q-Star: Process Innovation

Type of innovation is determined by whether the object of innovation is a


product or a process. Q-Star can be classified as process innovation
because it is innovation on training experts in quality, Gold Stars. By
training gold stars, Hyundai could improve the quality of producing
process.
3.3.1.2

Manufacturing Process, Lean: Process Innovation

It is not the innovation on product itself, but it is totally focused on the


manufacturing system, called Lean. By constructing new manufacturing
plant in Asan with innovative lean system, Hyundai could be improved in
terms of its process.
3.3.2 Radical / Incremental
3.3.2.1

Core Machinery Components: Radical Innovation

Whether innovation is radical or incremental depends on degree or


creativeness of innovation. It is determined by circumstances and
durations of the innovation. Innovation in Hyundai Motor Co can be
considered as radical in terms of its core machinery components.
Through lots of research and development, Hyundai invented new
engines and core components.
3.3.2.2

Q-Star: Incremental Innovation

On the other hand, their core innovation, Q-star is incremental as it is


rather long-term oriented. Plus, it is directed based on Six Sigma, the
already-existed innovation method. In this aspect, Hyundais innovation
is incremental.

3.3.2.3

Hyundai Asan Plant: Radical Innovation

Hyundai Asan Plant, the new manufacturing plant with lean-type system
is radical innovation to Hyundai itself. The system is totally different from
the original system in Ulsan plant and it was selected in Hyundai Asan
Plant for the first in Korea. Lean-type system allows self-control of
workers by shortening the manufacturing lines and allowing buffers. It
was radical challenge for Hyundai.
3.3.2.4

Lean-type Manufacturing Process: Incremental Innovation

Although it was radical innovation, the lean-type manufacturing process


itself is not radical worldwide. It was already tried in other companies
worldwide and Hyundai benchmarked it. In this aspect, this innovation
could be classified as incremental either.
3.3.3 Competence-enhancing / Competence destroying
3.3.3.1

Quality and Productivity than Technology: Competenceenhancing Innovation

Whether an innovation is competence enhancing or competence


destroying depends on perspective of a particular firm if it builds on the
firms existing knowledge base. Rather than developing technology,
Hyundai innovated in terms of quality and productivity. Hyundai focused
on innovating quality and productivity instead of their relatively lower
technology due to their short history, enhancing their competences.
3.3.4 Architectural / Component
3.3.4.1

Core Machinery Components: Component Innovation

The innovation on engines and core machinery components could be


considered

as

component innovation. Component innovation is

innovation on parts of product, not the innovation on the whole system or


product.
3.3.4.2

Q-star: Architectural Innovation

Q-star is architectural innovation because it is innovation on the whole


quality division.

3.3.4.3

Manufacturing Process: Architectural Innovation

Q-star is architectural innovation because it is innovation on the whole


manufacturing system, not on the portion or part in process system.

4 Technological innovation strategies


4.2 Choosing innovation projects
Car Concept Innovation Project
In the near future, Car would not be used just for transportation. Vehicles in the
future will offer diverse information and entertainment for drivers and greater
safety features than ever before. This car would be called Smart car. Smart cars
with infotainment systems will also offer the latest electronic technologies and
equipment so that driving will be more comfortable and enjoyable as well as
safer. Hyundai is the first company in Korea which is trying to adopt infotainment
technologies in their cars. To achieve this technology, Hyundai needs not only to
develop their own technology but also collaborate with other companies such as
a Mobile company for telematics and software company for other electronic
devices.
Infotainment systems

The word, infotainment, is came from combining of two word, information and
entertainment. It offers drivers information about driving condition, car condition
and also music player, game and so on. The best known infotainment system
today is telematics (telecommunications and informatics). Telematics enables us
to use computer system with interne t. So we can send or receive e-mail and
search some information in car.
On-star which is the joint-venture company between General Moters(GM)
and Motorola, is the first mover in this field. They already develop GPS(global
positioning system) by using a artificial satellite. And there are several early

automobile company movers which is trying to collaborate with mobile


companies for example Ford Qualcumm and Bentz Deutsche Telekom.
In Korea, Hyundai collaborates with LG telecom to develop wireless
information service and Daewoo collaborates with Korea Telecommunication
Freetell(KT) to provide dreamnet service which is combination of mobile and
positioning service.
Hyundais Infotainment Innovation Technologies
Hyundai Kia Motors became the first company in Korea
to offer an integrated telematics system (Mozen) to enhance
driving pleasure and convenience.

New automotive electronics technology for customers


Driver Information System(DIS)
DIS is a comprehensive information
system that provides easy control of
multimedia, navigation and telematics
functions, which are displayed on t he
monitor.

Smart Cruise Control (SCC)


SCC uses radar to help maintain a safe
distance from other vehicles. Thus, the
devic e helps prevents collisions with the
car in front and is not affected by weather
conditions

Adaptive Head Lamp


A separate motor attached to the
headlamp is connected with the steering
wheel. When the car goes around a
corner at night time, the headlamps light
up the section of the road ahead where
the driver is looking, instead of straight
ahead.

Hologram HUD
This futuristic technology places various
useful information in front of the driver on
the windshield using a 3D hologram

Human Machine Interface


HMI is an interface that utilizes the
interaction between man and machine for
greater safety and convenience.

Biometric Smart Key System


Going beyond the current button -type
ignition, Hyundai is developing a smartkey system for the future using
biometrics so that the car recognizes a
driver's face, handprint or veins.

Auto-pilot Driving
Hyundai is researching a car that
features an automatic parking system,
cruise
control
and
sensors
for
maintaining a safe distance from other
cars to prevent out of lane driving.
Ultimately, the goal is to create a car that
can assess the traffic situation and
operate without any manipulation from
the driver.

Energy Innovation Project


Present vehicle energy, fossil fuel, has many problems. It would be
exhausted in 200~300 years and it causes many environmental problems. So
many car companies are apprehensive of next generations energy which is
unlimited resource and pollution free.
In terms of energy technology, Hyundai is one of the most developed
companies in the world. Now, Hyundai develop both hybrid electric vehicle and
fuel cell electric vehicle. We will look into their technologies respectively
Hybrid Electric Vehicle

Based on their own accumulated know-how in


hybrid technology, they introduced a new standard
of green vehicles in 2009 when Hyundai Kia
Motors begins commercial mass production of the
Elantra(Avante) LPI hybride. This model runs on
LPG, a fuel with low pollutant emissions.

Hyundai started worlds first mass production of LPI hybrid electric vehicles
in July 2009. They expect that higher vehicle cost can be recovered after
approximately two years of driving.

Operating principle of hybrid electric vehicles


Only the motor is engaged when
the

ignition

is

started.

During

acceleration, the engine drives the car


forward with the motor. While cruising,
the engine works within the scope of
maximum fuel economy and surplus
driving power is saved in the battery.
When the vehicle slows down, surplus motion energy is converted into electric
energy to be stored in the battery, and the engine is shut off at traffic lights to
curb fuel consumption and exhaust emissions.

Fuel Cell Electric Vehicle


Hyundai is trying to develop fuel cell electric
vehicle to accomplish zero-emission to reality. Fuel
cell electric vehicles are powered by the electricity
created when hydrogen comes into direct contact
with oxygen in the atmosphere and forms a chemical reaction. Vehicles produce
no-emissions except water, thus it prevents from producing pollutant gas and
moreover the amount of energy is unlimited. Hyundai focused on developing fuel
cell sportage vehicles. Hyundai-Kia has been selected as a participant in the US
FCEV fleet operation project (2004~2009) and now supervises pilot operations of
66propretary fuel cell electric vehicles in Korea and abroad.

Operating principle of hybrid electric vehicles


When hydrogen is supplied to the fuel cell batteries, hydrogen molecules (H2)
are converted into hydrogen ions (H+) and electrons. The electrons move into an
external circuit, where they create the energy needed to drive the motor. The
ions pass through a proton exchange membrane and meet up with oxygen
atoms and electrons from the external circuit to form water molecules. Water is
then the only emission from fuel cell electric vehicles and is expelled into the
atmosphere with the remaining air.

4.3 Collaboration strategies


Hyundai Kia
In March 1999, Hyundai Motors absorbed Kia Motors. And by union with two
rival companies, Hyundai took a lot of advantages from Kia Motors and
consolidate its first position in domestic market. There were three advantages
that Hyundai got from collaboration.
First, Hyundai established a constituency for their overseas expansion.
Around 1990, many car companies tried to collaborate with others. For example ,
there are GM-Fiat and Saab, Ford-Volvo and Jaguar, Daimlerbenz and C hrysler
and so on. Hyundai had collaborated with Daimler Chrysler, but it wasnt a solid
relationship. Car industry needs to spend lots of development cost for new car,
novel engine, plant and etc. And there are two ways to get high revenue. First
one is to sell lots of car, thus expect effect of economy of scale, or secondly, to
get high revenue by producing small amount of high quality car. Because
Hyundai didnt have high technologies at that time , they had to choose first
choice. By collaborating with Kia, in 2003, Hyundai sold 2.69 million cars and
took 9th place after Honda in world car market
Second, Hyundai got Kias high technologies. Kia gave importance to
technology and engineering. Kia developed several technologies such as worlds

first small si zed SUV, sportage, mechanical direct spread engine of Carnival and
so on. Through collaboration, Hyundai could absorb Kias technology and also,
reduced R&D cost.
Third, Hyundai could restrain foreign companies from holding domestic
market. Foreign company had problems in supply chain and brand value in
Korea market. But they could solve these problems by collaboration with Kia. So
if foreign company absorbed Kia, probably Hyundai would meet a big rival in
domestic market. If Kia were absorbed by foreign co mpany, probably domestic
market situation would be changed a lot from present. Hyundai - Kia
collaboration was a very successful case.
Hyundai Microsoft
In May2008, Hyundai collaborated with Microsoft to develop infotainment for
next generations car together. They had discussed about diverse aspect of
cooperation and long term vision since 2006. Through this collaboration,
Microsoft will focus on developing software platform for car and Hyundai will
adopt those technologies in car for the first time in the world. Car infotainment
technology

will

enable

drivers

to

experience

innovative

information,

entertainment and communications and so on.


First of all, they will start to develop audio system for North America market
in 2010 and will expand to domestic and Europe market. And they will
aggressively advertise their product by CES(Consumer Electronics Show) and
Motor show. Moreover they contracted about establishing Car IT Innovation
Center with National IT Industry Promotion Agency. They will promote car IT
venture companies to advance global market by market network.
This collaboration between two companies will raise Hyundais brand value
in the world car market and give Microsoft a chance to expand market share in
Car IT market. Hyundai plans to invest around 166million dollars for next five
years and expects that they will make sure of their high position in car industry
and contributes to developing high quality products and increasing employment
through fostering IT venture companies.

Hyundai- LG telecom
In Dec 2005, Hyundai collaborated with LG telecom to start navigation
service, telematics, based on cellular phone. Service provided various
information, such as road guidance, dangerous region information, and famous
restaurant. It would also provide voice recognition to prevent driver from danger
caused by using cell phone during driving. Through service, Hyundai and LG
telecom would like to gather new customers.

5 Analysis of the present situation


5.2 SWOT analysis

Strength
High brand awareness
In 2009 World best 100 brands which is Researched by Interbrand, the
English rand consulting company, shows that Hyundai Motors is 69 th rank which
is similar to rank of Audi(65 th rank) and even higher rank than Porsche(74 th rank)
and Ferrari(88th rank). It says that Hyundai Motors brand awareness is very high.

High quality and technology


Hyundai has high quality about car manufacturing. They absorbed Kias high
technology several years ago, and now Hyundai has the highest technologies in
engines, breaks and mobile technologies i n Korea. And they especially ha ve
strength in green vehicles. For example, Hyundai started worlds first mass
production of LPI hybrid electric vehicles.

High market share


Hyundai Motors has 43% market shares in domestic market. If they consider
about Kias market share, they would have around 75% market share. So theres
no competitor for Hyundai in domestic market. And these days, they gradually

expand their market share in Europe, U.S.A and other countries.

Diverse vehicle types


Hyundai has lots of vehicle models, such as small car, sportage, truck, and
sedan and so on. And it makes Hyundai could hold variety customers. And if
Hyundai could grasp customers propensity, it would be easy to choose which
model would be sold in other countries.

Customer value program


In the early stage, one of the biggest problems for Hyundai was customers
dissatisfaction about their quality. As a result, they got lots of trivial recall
problems. So, they adopt customer value program which is to manage customer
continuously even after selling car. In the past, sales people didnt care about
their customer after selling cars. But through Customer value program, customer
could get after services and their dissatisfaction has been decreased.

Weakness
Frequent recalls
Hyundai has been recalling over 500,000 times. Some blogger in U.S. posted
about Hyundais frequent recall. He complained about this kind of Hyundai
Motors policy. This kind of Hyundais recall is more frequent in over sea market.
Needless to say, recall is good policy, but frequent recall could occur lose of
customer and it would become weakness.

Bankruptcy of middle/small sized companies supplying components


In January, 2009, there was some article about Hyundai Motors primary
supplier bankrupted and Hyundai Motors had faced crisis of production line.
Searching the past news, we can find more information about bankrupt crisis of
supplying components that support Hyundai Motors. Hyundai should need to find
counter plan.

Opportunity
Solved Labor & Management problems

Confrontation between the Labor and the Management is one of the


Hyundais most weaknesses. After, IMF relationship became worse because of
firing, reducing salary. They frequently had problems until now. But, now, it
seems like their relationship would be solved. And it will make Hyundai stronger.

Risen demand of small cars


Generally, Korean automobile companies have strength in small car
technologies. And Hyundai is especially good at making small cars. Fortunately,
U.S.A or EU has poor technologies in small cars and the demand of small car
market is dramatically rising because of high price.

Removed customs (KOR-US FTA)


Korea and United State of America contracted about FTA in Jun, 2007. After
that trade agreement, Hyundai aggressively sold their cars and tried to establish
their brand value in U.S.A. Thanks to FTA, Hyundai could sell cars in cheap price.
As a result, While U.S.A automobile companies could sell 7,000 cars, Hyundai
could sell around 700,000 cars and hold 5% of U.S.A automobile market.

Increased brand awareness in foreign countries


In spite of economic crisis, Hyundai increased their market share in EU and
USA market. The crisis of U.S.As big three companies, Ford, GM, Chrysler, was
opportunity for Hyundai. Based on their quality improvement, Hyundai cars took
first and second grade in APEAL index (degree of customers satisfaction) from
JD Power Associates research. Their brand awareness has been increased
around 26% compared with in 1998.

Threat
Decreasing world automotive brand value
Worlds car market has been slightly decreased since economy crisis, in 2008.
So many car companies in U.S.A went bankrupt. And this market situation would
be critical threaten for Hyundai. Until now, Hyundai could use this crisis for their
opportunity to expand their market power. But if this situation will be last longer,
then Hyundai would get serious damage, too.

Foreign cars imported in cheap prices


In 2010, lots of low priced foreign car will be entered in domestic market.
Moreover, Hyundais new models prices have been slightly raised. So from next
year, theres no big price difference between foreign car and domestic car. This
situation will change the domestic market share. Until now Hyundai hold around
75% of domestic market, but these days, customers complains about Hyundais
monopoly and price policy. And now, they have other options, so if Hyundai
wants to hold their customers, they have to come up with new strategies.

5.3 Five-force Model


We analyze Hyundai Motors 5-force model. In our analysis, bargaining power
is sight on suppliers and customers.
Intensity of competitive rivalry
Hyundai occupies more than 43% in domestic market. Moreover, if Hyundai
and Kias market share is combined, it is around 75%. So, until now in domestic
market, theres no competitor for Hyundai Motors. However, now a day, the price
of foreign cars has been dramatically dropped. The price of domestic car and
foreign car is almost same. Probably, if Hyundai cant suggest an alternative plan,
it would make a big change in domestic market, sooner or later.
On the other hand, Hyundai Motors has raised their market share in the world
market rapidly. They got a chance from global economy crisis and record high
growth in several countries such as China, U.S.A and Europe. Competitive
rivalry in industry is relatively high, but Hyundai Motors established their positi on
in Market quite well.
Threat of Substitute Product
Second factor of Porters five forces model is threat of substitute product.
Vehicles are very common transportation in Korea and the world. And probably,
there would be no adequate transportation to replace cars for a while. But as
people consider about environment and energy cost, more people use to take

bicycle. So bicycle can be a substitute for short distance. In terms of long


distance, train such as KTX or airplane can be a substitute for cars. There is also
subway. However, it is only in big cities so we dont consider so much. So until
now, there would be no sudden change in demand for cars. If we consider
private car market, then public transportation could be considerable substitute,
too.

Potential Entrants
In domestic market, except some china car companies which are going to
enter the domestic market, there would be no new entrants. Car industry largely
depends on scale of economy and high technologies. So it is very difficult to
found a new Car company. It is also same in world market situation. It is possible
that some developing countries establish a car company by helping from
government. But still, generally there is a very low possibility of new entrants.
Bargaining Power of Buyer
Hyundai Motors Buyers are Korean buyers and foreign buyers. Bargaining
power of buyer is high in car industry. Because there are lots car companies,
customers choices are very wide. Until now, even though there are lots of
choices, Hyundai could occupy aro und 75% of Korean market because of their
domestic company merit, price and quality. So actually, compared with car
industry, bargain power was relatively low in Korea. But as foreign cars price go
down bargaining power gradually goes up these days.
Bargaining Power of Supplier
Suppliers in Hyundai car are Korean or foreign car components companies.
Because lots of car component companies are existed, bargaining power of
supplier would be low.
But like car infotainment, if Hyundai car develop new technology, it would be
high because they depend on a software company. Finally, According to situation,
bargaining power of supplier is determined.

5.4 Balanced Scorecard of Hyundai

Hyundai Motors have some vision. Global orientation, respect for human
values, customer satisfaction, technology innovation, cultural creation are that.
For making these kinds of vision succeed, Hyundai Motors set objectives in
some perspectives. First, in financial perspective, their objective is increasing
sales amounts. In financial field, the most important thing is earned money from
selling product. So, increasing sales amounts can occur to increasing earned
money. Next perspective is customer perspective. In this perspective, reducing
the recall rate is their objective. We already saw Hyundai Motors frequent recall
problem in SWOT analysis part. Customers are complain in that problem, and if
they reduce the recall rate, then customer satisfaction would be increased. In
internal business perspective, they care about labor and management problems.
For that reason, their objective in internal business perspective is making familiar
business environment. We can easily find the news that Hyundai Motors effort to
find solution about labor and management problems in recent news. Last
perspective is innovation and learning perspective. In this perspective, their
objective is green car strategy. Because of fuel shortage, develop green car has
high probability of purchasing.
For reach the objectives, in each perspective, they find the critical success
factors which are called targets. For selling lots of amount of cars, they need
special feature of car. It needs to develop the new technology. To increase
customer satisfaction, they need to keep connection with customer, so they
should do continuous customer management, and then they would consider
about recall and customer satisfaction. In labor and management problems, well
employees management is only solution, for that reason, they should manage
employees well then rate of strike in a year would be decreased. In innovation
and learning perspective, they need to develop hybrid cars and fuel-cell cars.

[Figure 4.1] Balanced Scorecard of Hyundai Motors

5. Suggestion for strategies


From above analysis we suggest some strategies which is based on SWOT
analysis.
S - O(strength and opportunity) strategy
Hyundai Motors doesnt need to pay tax due to FTA and also it has strength
in various car models. Therefore they should occupy US middle-classed
consumers by releasing various small cars. They also have high brand
awareness and it is increasing. Using this kind of merits, they could apply
premium price on their hybrid or fuel cell vehicles.

S - T(strength and threat) strategy


In domestic market, though foreign cars price is get cheaper, Hyundai Motors
can take advantage of high market share. For preventing foreign cars threat,
they should have stable growth focused on domestic sales. Because of their too
low rate of research, Hyundai Motors should establish policy to widen chance to
select car models, developing new products. At least 5% of Hyundai Motors
revenue should be invested in R&D.
W - O(weakness and opportunity) strategy
Because of bankrupted part supplying company, Hyundai Motors have
weakness about supply-chain, they should supplement their weakness in supply
network by adding additional supplying companies. And they also should
decrease strikes and labor conflicts building stable relationship.
W - T(weakness and threat) strategy
Unprofitable items are always reducing the net revenue. Therefore, they
should quit producing unprofitable models and should minimize their export to
unprofitable foreign markets.

[Figure 5.1] Strategy based on SWOT analysis

Reference
-

Strategic Management of Technological Innovation, Melissa A. Schilling, 2nd Edition,


2008, McGraw-Hill International Edition,

http://worldwide.hyundai.com/

ZD net Korea News

http://www.wikipedia.org

http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-andrust-issues-affect/

http://www.interbrand.com/best_global_brands.aspx?year=2009&langid=1000