Strategic Audit of Hyundai Motor Company

IntroductionHyundai Kia Automotive Group is a parent company of Hyundai Motor Company (HMC). In Korean, Hyundai means modernity. Hyundai is the largest car maker in South Korea after took control of Kia and ranked world fifth largest automaker in terms of sales. Hyundai’s vision is to provide value to the future of customers. In addition, their mission is to provide excellent automotive value for customers by the combination of safety, quality, efficiency, stability and security. On the other hand, Hyundai is concerned about environmental problems which are increasing nowadays (Hyundai Motor Company, 2008)

DiscussionInternational strategic management process within the global environment contains various elements however there are five parts which considered as most important elements while international business is performing , which are home country, supplier country, customer country, partner country and competitor country. Through Star Analysis, there are few essential useful strategic recommendations. It overcomes its demand and supply limitations by utilising the strength of company’s home country through international transactions.

In addition, it appoints appropriate supplier countries that matched with the firm’s strategy. In order to maximise net profits from trading, targeting at the right customer countries is important. Besides, complementary of demand-side and supply-side are provided by the right partners. Lastly, it hopes that competitors are well-performed in their home, supplier, customer, and partner country locations (LEE, 2005).

COMPANY PERFORMANCE:

SWOT Analysis is an effective method of identifying internal Strengths and Weaknesses and for examining the external Opportunities and Threats facingHyundai. SWOT of HyundaiStrengthsBrand name recognitionHigh quality of carsHighly innovativeDiversity of products, services and management style

Weaknesses

Strong competitionExposure of weakening world economy

OpportunitiesLow cost labor in Asian marketsNew productsDifficult for new competitors to enter the marketLow bargaining power of suppliersNo real substitute for carsBaby boomers, the potential profitable segments

ThreatsContinuous technological innovationsSuppliers integrating vertically to provide manufacturers with all the auto parts, thus increasing their power Increased competition among existing firmsGovernment legislation,Change in consumer demands

StrengthsHyundai has acquired a brand name that is known and sold worldwide. They have also established a reputation for producing high quality cars. Diversity has enabled Daimler and Hyundai to share information with one another that can strengthen their business. With innovative products they have become one of the most successful and respected companies in the world. Hyundai is the world’s third largest car manufacturer, a global company with strong brand portfolio available to different customer segments. The company’s products range from executive sedans to heavy trucks to finance services providing cover from individual market risk.

Accord, one of the group’s strongest brands, enjoys a high level of customer loyalty. The Accord and Smart brands performed well during a difficult economy in 2008, operating profits increased by 38% (Hitt et al, 2009). Size is a major strength because it enables them to buy in bulk, thus reducing costs and achieving competitive advantage and is able to exercise control over suppliers.

WeaknessesThe language barrier between the Germans and Americans can cause the company to have problems communicating on how the business should be maintained. Hyundai group performance has been disappointing over the last few years. Hyundai face strong competition in all its business segments. Globally, General Motors and Ford provide the biggest challenge to the growth of Hyundai. Individually, Hyundai also faces tough competition from BMW, Audi and Jaguar.

Being a global company, it is always exposed to the economic downturn. In 2001, the company commercial division lost 10% of its sales due to the negative effects of US economy (Hitt et al, 2009). Home Country

South Korea is the world third automotive exporter at the year of 2004. There are few main automotive producers, namely, Hyundai, Daewoo, Kia, Samsung, and Ssanyong. The companies mainly export their automotive products to U.S. They are using the strategies alliances for the industry. For example, DaimlerChrysler and Hyundai Motor Co have formed an alliance in which DaimlerChrysler will acquire 10 % equity in Hyundai.

South Korea has the competitive advantages in terms of relationship between government and automotive industry, strategic alliance in the industry, political and legal system of the country. In 1962, the governments introduced the new law of Automotive Industry Protection Law. “The law exempted the import of parts and components for assembly production from tariffs while prohibiting the import of complete cars, and parts and components, not for assembly production.” (LEE, 2005) The economy of Korean was still underdeveloped and export industry oriented at 1960s. Secondly, the pattern of globalisation for major car makers can be divided into three stages. First of all, the companies export their products to be fit into the worldwide market.

Afterwards, they will set up the plant in the major market region. The final stage is to complete up with the local transplants and establish to the global market. In order to be success they should use the strategy of internationalisation which consists of developing the joint venture with advance foreign car makers which will allow them to develop the world market sale. Finally, the political system of the South Korea, the executive power is controlled by government and legislative power is apply to both government and National Assembly (Hoskisson, Michael & Ireland, 2008).

CustomerThrough out the years Hyundai has grown massively and expanded their company worldwide. The Korean based company began exporting their cars outside of Korea since 1976. Hyundai has two other plants in India and China which increased their production level.

Initially the company exported car to neighboring countries and in the mean time they expanded throughout the world. Hyundai’s customer countries consist of countries in Europe, America, Middle East, Asia, Africa, and in the Pacific. This clearly shows that Hyundai has a good demand from people all over the world. In India, there was an explosive demand for Hyundai cars in 2006.

To address to this problem, the chairman of the company went all the way to India and announced that they will be expanding the plant there to accommodate the booming demand of HMC. Frequent visits by the chairman to all the branches all over the world helped ensure that the operations of all the companies all over the world are running smoothly (Linsu, 2009). Partner

It is important to choose a right partner for one’s company as the partnership would combine both the companies’ capabilities to achieve competitive advantage. Hyundai is attracted to Microsoft Auto software platform because it provides the advanced capabilities, flexibility and low price system. The two companies planned to introduce its first product in North America in 2010 which would provide voice-controlled connectivity between mobile devices to a car stereo system based on the Microsoft Auto software platform.

The goal of this establishment is to promote innovation and to discover the new technologies for automobiles by the supporting development activities and research of small and medium IT enterprises based in Korea. As the car-based infotainment system is growing rapidly, Toyota and Honda have collaborated together to develop the future safety technology which is vehicle-to-vehicle communication systems. This system includes the prevention of vehicle collusion and traffic monitoring system which will inform the driver of the optimal speed at which to sustain a continuous traffic flow, as defined by Jeremy Weber (2008).

CompetitorBased on the 2007 global sales ranking, Hyundai has risen to world fifth largest automaker which is behind Toyota, GM, Volkswagen AG and Ford. Toyota, being the world largest automaker, is Japan based and it mainly exports to all over the world. Japan has some comparative advantages that make Toyota become dominant in the world.

The factor that leads to Japan’s comparative advantage in automobile production is importing the necessary technology for manufacturing, building labour and management skills and developing a home market for Japanese vehicles. Domestic demand conditions such as high gasoline prices helped companies to produce smaller and fuel-efficient cars. As the petroleum prices increased, Toyota is now focusing on Hybrid car and aims for environmental friendly. Another reason why Toyota becomes so successful is because Japan’s technology.

RecommendationEven though South Korea has some of both competitive and comparative advantages, they still have to improve on it. Such as national trade policies of the South Korea toward to the automotive industry by minimise the cost, and size. Since Hyundai already has the strong market in their home country and as well as in the international market but they have to be more focus on the global market in order for them to maximise their profit margin. In order to be happen like that they have to focus on the factors like what the customer really want from the company, specialization toward to the local demand.

In order to compete with the competitors, Hyundai should join the vehicle-to-vehicle communication systems in this few years time. With the combination of Microsoft Auto based system and vehicle-to-vehicle communication system, Hyundai will be better than other competitors by making cars more fun and safer to drive (Jeremy, 2008).

Beside that Hyundai should have a partnership like Ford and Mazda. In terms of production development, they share the base-line design and engineering expertise but they made difference between product and satisfy customer needs. In addition, in terms of manufacturing, the two companies have increased cooperation on strategies to maximize existing resources. Moreover, in terms of distribution, both companies expect improve in sale and profits from reduction of cost associated with distribution (Chosun, 2005).

ConclusionHMC’s performance in the global automobile industry as the international economy is changing (although may not necessarily big changes) every time, strategic management and strategic audit are efficient to help HMC, in which HMC should analyse their own home country’s component (such as their competitive and comparative advantage, home market, political and legal system), their supplier countries (choosing the appropriate suppliers), their customer countries (targeting customer countries to maximize revenue), their partner countries (enhancing efficiency of the business and achieves economies of scale), and finally their competitor countries (competing with their competitors locally and globally). International strategic management applies to all kinds of international business and it covers almost all scopes of an international business.

ReferencesHyundai Motor Company (2008) [online]LEE, H. (2005) Strategic Alliances and Trade Dispute in Automobile Industry. From the Perspective of the Relationship between government and industries in Japan and Korea

Jeremy Weber (2008), Toyota and Honda start testing vehicle-to-vehicle communications systems [online]. Chosun Ilbo (2005), Hyundai to Partner with LS Group and LG Chem on Hybrids

Hitt, Michael et al (2009); Strategic management: competitiveness and globalization : concepts & cases; Cengage Learning, ISBN0324655592, 9780324655599

Hoskisson, Robert; Hitt, Michael & Ireland, Duane (2008); Competing for Advantage; Cengage Learning, ISBN0324316666, 9780324316667

Linsu Kim (2009); Learning and innovation in economic development; Edward Elgar, ISBN184064026X, 9781840640267

Prasad (2008); Strategic Management; PHI Learning Pvt. Ltd; ISBN812033809X, 9788120338098