International Market Example: Hyundai Motors

The following example essay on “International Market Example: Hyundai Motors” is about the South Korean automaker, which is the largest automaker in the country and the fourth largest in the world.

Hyundai Motors, one of the affiliates of Hyundai Corporation, started as a Joint- venture company with Ford. Before introducing more about Hyundai Motors, a man who founded the company should come first. Joo-young Jung was an entrepreneur, businessman and the founder of all Hyundai Groups of South Korea. Joo-young Jung was born in 1915 toa large impoverished family of peasants during the time when Korea was under Japanese rule.

He dreamed of becoming a school teacher but his dream was cut short because the restrictive environment at the time kept the family tuck in poverty, and that kept him away from the opportunities of higher education. Despite of the situation he was in, he did not stop learning. He thought he would never success if he is stuck with his family so he attempts several times to run away from home, but every time he ran away from home he got caught by his father.

At last, he succeeds at his fourth attempt.

He got a Job as a deliveryman at the rice store in Seoul and soon he learned to manage the store’s accounting – the experience helped Joo-young thoroughly gain his business sense. After making some fortune, he urchased service garage to start A-do Service Garage and he founded Hyundai Automobile Industry in 1946. At first, its main business was repairing U.

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S. Army vehicles or Japanese cars, but thanks to Joo-young Jung, his wide knowledge of car mechanism helped the company to secure customers by providing high quality services.

For 17 years, it remained as repairing company but when Korean government designated automobile as a main export product in 1962, Joo-young Jung waited his time and founded Hyundai Motors(HM) in 1967. At that time, no companies had technology to produce automobiles by themselves and it was same or HM either so they needed a partner. It was either GM or Ford, and HM choose Ford because GM tends to intervene deep down to the company’s management even tor the toreign affiliated company. It may nave starte as M manutacturing company but with the strong will of exporting, HM also puts efforts developing its own automobile model.

HM had the capital and the government support but the greatest obstacle was lack of technology. Nowadays, HM produces wide variety of automobiles from compact cars to SUVs. Among those various models, three main products would be Avante, Sonata, and Genesis. Avante and Sonata helped HM to be a leading company in the industry domestically and with Genesis, HM started to differentiate itself in the global market. Avante has great advantage of fuel efficiency and it was originally developed as ‘global market targeted’ model but appealed to the domestic customers who are quite fuel conscious.

These days, Avante is considered as most beloved model by Korean all time and it’s also the most exported car in HM history. Sontana, first introduced in 1985, is the model which gave HM its distinguished position in automobile industry in Korea. It has been produced in ifferent designs and features through six generations for more than 25 years and one of the most popular models in domestic midsize car market. The main slogan for Sonata is ‘The car with innovative performance, high technology and reasonable price. ‘ Most recently developed model, Genesis, is a luxurious sedan and the first full- size car developed with the originality of HM.

It’s also the first luxurious car to export aggressively in HM history. Domestic car industry is literally overwhelmed by Hyundai Motors ever since it became Hyundai-Kia Motors after taking over the Kia Motors in 1998. Hyundai Motors(HM)’ market share is approximately 80% but as the tariff is getting lower, the growths of foreign automobile companies are not ignorable. In 2013, it is expected that the imported cars from Europe or America will come in to market aggressively and competition in mid-size and full-size car market will intensify.

As import cars come offensively into the market, domestic automobile companies lead by HM will spur domestic market while invigorating the export. The forecasted analysis of domestic market of demand and supply is that in spite of internal and external negative facts like increase in households debts, economic ecession in Europe, and slowdown in China ‘s economy effecting the domestic economy, positive facts such as base effect, low interest rate, low oil price stabilization and additional decrease in individual consumption tax due to FTA will increase the demand.

On the other hand, due to the HM’s new double shift plan in their domestic plant, without any additional plan to increase the productivity, the whole production quantity will decrease by 15% than before. Even though decreased working hours and double shift will increased the UPH(Unit per hour), the total production will decrease. By the rules of supply and demand, since the supply will decrease while the demand is expected to increase, the price will also increase to reach the market equilibrium price. HM is almost dominating the domestic market but in international market, the situation differs country to country.

When HM first exported its Pony Excel to America in 1986, it was quite a success for a first export to the country which has one of the biggest automobile market. In 1987, proportion of Pony Excel in whole automobile demand in America was 2. 6%, which is 7% of imported automobile market and of compact car market in America. In that year, Pony Excel came top of Centra from Nissan and Civic from Honda. But the glorious days did not last long. In fact, Pony Excel was inadequate to export. At first, it had its competency over price but soon when Yen value dropped, it lost its strength.

Despite of crash of Pony Excel, HM did not give up and started to regain reputation by ’10 year-100 thousand mileage warranty in 1998. At first, it had to face the critics saying that the new plan it came up with is nothing but a marketing experiment or a cheap plan to attract the customers. American customers are considered as the most ational customers around the globe. They do not buy the car because it is guaranteed to be repaired free for 10 years. Americans accepted the HM’s plan as a confidence and it worked. The market share rose from 1 . 1% to 3. 2% by the end of 2001. It’s an explosive increase of 330% in Just 3 years.

The market share kept rising gradually and peak its highest at 5. 1 in 2011. With the sum of market share with Kia Motors, which is part of HM, it’s 8. 7% of whole American automobile market and placed them sixth place among the domestic and foreign automobile producing companies in America. Compared to Toyota, the company placed third in automobile market in America, HM still has long way to go but considering the time of market entry and technology advancement, the progress HM made is remarkable.

Unlike the domestic situation, even though HM’s new double shift plan decreased the quantity of production units, it seems like there will be not much change in price for the HM automobiles in the international market. The reason is that the domestic market is dominated by HM – if considered Kia Motors as part of HM – and that means HM as a main supplier, it will determine the price. But in international market, for example in American market, the proportion of demand for HM is not that large compared to other companies.

Furthermore, HM sells cars at the price of 90% of domestic price. No matter what, the price for the HM cars in American automobile market will be less than domestic market. As stated above, HM’s first strategy to be a globalized company was to have competency in price. HM ‘s strategy seemed successful at the beginning but after all, it only gave them a shameful title, ‘cheap car with low performance and technology. HM tried its best to get rid of the standardized image y improving the performance, design, technology of the car and they succeeded.

They still have the image of cheap car but now, relatively cheaper with great performance compared with the cars of similar features. Not only changing the image but HM improved their foreign plant and aggressively advertised its products also. The foreign plant in Alabama, U. S. A. , is run by robots during the whole process and it helped HM to produce same quality of cars throughout the production process with low rates of flaw. As a marketing plan, Hyundai Motors also placed its TV ads on ix national broadcastings, forty-one popular cable TV shows, and more than thirty magazines as well.

If HM keeps concentrating on improvement of quality and brand image, it will give the competency in quality and price in a global market. Other example would be the strategy HM used in Chinese automobile market. China automobile market is expected to grow as a second largest around the globe. The market entry was easier than the other countries because the current chairman of HM, Mong-goo Jung, has a close relationship with China ‘s high-ranking government officials. This relationship is crucial for the business. If he keeps good relationship with them, with the geometric advantage, HM can lead the Chinese automobile market.

First, Sonata was a big success by being selected as an official model of taxi and it became a huge advantage for HM to spread its name in China. Avante also succeeded in the market because HM changed Avante ?s teature atter thorough research of road condition and customer preference in China. Especially, gold plated handle and other upgraded features attracted Chinese middle class greatly. If HM had competency of low price with fine quality in America, HM has competency of uite high price with guaranteed performance and quality.

Expansion of local production plant in China is also helping the boost of sales. Current growth in international market does not mean HM will surely keep growing in the future. HM still needs to come up with new strategies to stabilize their sales and improve the brand image. Three main competition strategy can be issued – R&DE(Research Development & Design Engineering), safety, and environmental performance. Each strategy point means enhancing brand value and power by improving design, securing safety that satisfies the global standard, and developing new generation of conomic and environmental power source.

These three strategies will reinforce the selling capability by enhancing brand value and power to eliminate the possibility of over production and at the same time, move on from mass production company, to distinguished luxury brand. Automobile industry is all-around machine industry and those three issued I brought up is essential elements that cannot be weight one sided for the production of machine called car. If HM fails, company will fall behind and all the efforts it had put would be useless.