technological strategy and management te

8/18/2019 Technological Strategy and Management Te

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Case Study of

Hyundai Motors

Date : 2009. 12. 21

Inyoung Koh 20061021

Yeonwon Chu 20061018

Kihyeok Park 20071148

Junegak Jeong 20080546


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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

Hyundai‟s technological innovation strategies for next generation cars and

collaboration strategies. After grasping these concepts, we will analyze Hyundai‟s

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.


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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 Group 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 Japan‟s 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 world‟s 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 world‟s 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 company‟s success is driven by the commitment of approximately 75,000employees in more than assembly plants, Hyundai vehicles are sold in 193

countries through some 6,000 dealerships and showrooms worldwide.


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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


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In Hyundai Asan plant‟s 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 6-

sigma system, “Q-star”. They started Q-star from 1999. In 1999, Hyundai‟s 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.

2.3Advantage

In 2000, Hyundai car‟s 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 largerthan 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

management‟s 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


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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,

Hyundai‟s IQS was 257 point. In 2000, after Hyundai Motors innovated Q -star,

IQS recorded 189 point. In that year, average car company‟s IQS recorded 157

point and they promoted Q-star the next every year.

As a result, in 2003, Hyundai car‟s IQS recorded 143 points. In that year,

average car company‟s IQS was 133 points. They could record around average.

In this year, Hyundai car‟s 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.

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.

[Figure 2.2] Graph about IQS and Number of Sales


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Product iv i ty

2.1 Background & Development

Hyundai car judged that they couldn‟t survive the 21st-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 let‟s consider operating ratio.


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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 next 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 Si x Sigma, Hyundai consulted to firms and successfully

developed their own innovation system, Q-star.

[Figure 2.3] Operating ratio of each plant


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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 beconsidered 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, Hyundai‟s innovation

is incremental.


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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 i tself. 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: Competence-

enhancing Innovation

Whether an innovation is competence enhancing or competence

destroying depends on perspective of a particular firm if it builds on the

firm‟s 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 InnovationThe 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.


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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 internet. So we can send or receive e-mail and

search some i nformation 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


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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.

Hyundai’s 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 informationsystem that provides easy control ofmultimedia, navigation and telematics

functions, which are displayed on themonitor.

Smart Cruise Control (SCC)

SCC uses radar to help maintain a safedistance from other vehicles. Thus, the

device helps prevents collisions with thecar in front and is not affected by weatherconditions

Adaptive Head Lamp A separate motor attached to the

headlamp is connected with the steeringwheel. When the car goes around acorner at night time, the headlamps light

up the section of the road ahead where

the driver is looking, instead of straightahead.

Hologram HUDThis futuristic technology places varioususeful information in front of the driver onthe windshield using a 3D hologram


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Human Machine InterfaceHMI is an interface that utilizes theinteraction between man and machine forgreater safety and convenience.

Biometric Smart Key SystemGoing beyond the current button-typeignition, Hyundai is developing a smart-key system for the future using

biometrics so that the car recognizes adriver's face, handprint or veins.

Auto-pilot DrivingHyundai is researching a car that

features an automatic parking system,

cruise control and sensors formaintaining a safe distance from other

cars to prevent out of lane driving.Ultimately, the goal is to create a car thatcan assess the traffic situation and

operate without any manipulation fromthe 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. Somany car companies are apprehensive of next generation‟s 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.


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Hyundai started world‟s 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 produceno-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.


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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 Chrysler

and so on. Hyundai had collaborated with Daimler Chrysler, but it wasn‟t 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 didn‟t 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 Kia‟s high technologies. Kia gave importance to

technology and engineering. Kia developed several technologies such as world‟s


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first small sized SUV, sportage, mechanical direct spread engine of Carnival and

so on. Through collaboration, Hyundai could absorb Kia‟s 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 company, 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 generation‟s 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 wi ll 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 Hyundai‟s 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.


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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 69th rank which

is similar to rank of Audi(65th 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 Kia‟s high

technology several years ago, and now Hyundai has the highest technologies inengines, breaks and mobile technologies in Korea. And they especially have

strength in green vehicles. For example, Hyundai started world‟s first mass

production of LPI hybrid electric vehicles.

High market share

Hyundai Motors has 43% market shares in domestic market. If they consider

about Kia‟s market share, they would have around 75% market share. So there‟s

no competitor for Hyundai in domestic market. And these days, they gradually


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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 didn‟t 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 Hyundai‟s frequent recall. He complained about this kind of Hyundai

Motors‟ policy. This kind of Hyundai‟s recall is more frequent in over sea m arket.

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


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Confrontation between the Labor and the Management is one of the

Hyundai‟s 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.A‟s 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 customer‟s satisfaction) from

JD Power Associates‟ research. Their brand awareness has been increased

around 26% compared with in 1998.

Threat

Decreasing world automotive brand value

World‟s 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.


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Foreign cars imported in cheap prices

In 2010, lots of low priced foreign car will be entered in domestic market.

Moreover, Hyundai‟s new models‟ prices have been slightly raised. So from next

year, there‟s 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 Hyundai‟s

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 Kia‟s market share is combined, it is around 75%. So, until now in domestic

market, there‟s 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 can‟t 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 Porter‟s 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 aspeople consider about environment and energy cost, more people use to take


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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 don‟t 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 Motor‟s Buyers are Korean buyers and foreign buyers. Bargaining

power of buyer is high in car industry. Because there are lots car companies,

customer‟s choices are very wide. Until now, even though there are lots of

choices, Hyundai could occupy around 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 SupplierSuppliers 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


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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 innovationand learning perspective, they need to develop hybrid cars and fuel-cell cars.


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[Figure 4.1] Balanced Scorecard of Hyundai Motors


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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 doesn‟t 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 car‟s 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.


25/25

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-and-

rust-issues-affect/

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

[Figure 5.1] Strategy based on SWOT analysis
http://worldwide.hyundai.com/http://worldwide.hyundai.com/http://www.wikipedia.org/http://www.wikipedia.org/http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-and-rust-issues-affect/http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-and-rust-issues-affect/http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-and-rust-issues-affect/http://www.interbrand.com/best_global_brands.aspx?year=2009&langid=1000http://www.interbrand.com/best_global_brands.aspx?year=2009&langid=1000http://www.interbrand.com/best_global_brands.aspx?year=2009&langid=1000http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-and-rust-issues-affect/http://www.autoblog.com/2009/04/20/multiple-hyundai-recalls-for-brake-lamps-and-rust-issues-affect/http://www.wikipedia.org/http://worldwide.hyundai.com/

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