Managing for Competitive Advantage at Hyundai Motors – Strategic Analysis approach

Critical Issues of Hyundai Motors

Kindly follow the guidelines provided by course coordinator, this paper consists of 4 questions. - Guidelines provided for all questions - Please answer the question according to guidelines 

Read the case study given below and answer all the questions that follow.

 

Managing for Competitive Advantage at Hyundai Motors – Strategic Analysis approach

 

 

Hyundai Motor Company known as ‘Hyundai’ was founded in 1967 in Korea. Hyundai is one of the respectable automobile manufacturers in the world. Their operations exist in UK, US, China, India, Czech Republic, Turkey, Brazil and Russia. They sold 4.05 million vehicles in 2011 and they also have the world’s largest car plant in South Korea (Hyundai, 2007). In addition, their market share in the UK is %3.31 that corresponding 81,986 total Hyundai car sales in the UK (Pollard, 2015). Hyundai recorded $78.3 billion revenue the financial year of 2013. Their net profit was $7.68 billion (Marketline, 2016). Hyundai’s FTSE global ranking is 182, 150, and 269 respectively since 2013 to 2015 (Financial Times, 2016).

 

In identifying critical issues of Hyundai, excessive rates of vehicle recalls: One of the main issues of Hyundai is the frequent recall rates of vehicles, especially over the 883,000 mid-sized Sonata model that produced between 2009 and 2014 were recalled by Hyundai because of engine assembly problem in 2014. In addition, the company was made 419,000 vehicles recall in different actions (Marketline, 2016b). This situation affected to Hyundai leaving current market position and brand value from first fifth to thirteen between the 2006 and 2014 (Beene, 2014). Vehicles are lasting goods, customers’ needs to examine every stage of these goods because of continually costs. These costs are fuel, maintenance, repair, depreciation and financing (Busse et al., 2009). When we consider these costs and current issues of Hyundai, to gain a competitive advantage understanding these issues and developing effective strategies for Hyundai have a crucial importance.

 

Certain demand on a product is commonly connected with the demand for another product. That means changes on a product affects another product that related to this product. (Nitisha, 2015). When considering current decreasing rates on oil prices, car owners will have more income to spend on different goods such as buying a new vehicle. In the example, gas-guzzler automobile sales in the US increased because of lower oil prices but sales of hybrid, electric and energy efficient cars affected negatively from this situation (Johnston, 2015). According to this issue, Hyundai has a variety of vehicle segments to avoid business risks with taking advantage of using the cross-selling opportunities (Marketline. 2016b). But declining rates on oil prices are going to affect sales of hybrid and energy efficient vehicle segments of Hyundai.: Hyundai and Kia penalised by U.S. Government because of deceptive information about their fuel economy and greenhouse gas emissions on a different type of car models in 2014. Due to this, both company fined by government $100 million for wrong information and $200 million for avoiding a new type of issues (Goldenberg, 2014). This fine affected Hyundai to divide less financial asset to spend on other strategic activities.

 

To create better research scope for internal and external issues of Hyundai, ESCO framework will be useful for this study to see misalignments between micro and macro level strategic sections of a company (Paroutis et al., 2013). Every section of ESCO will be examined from macro to microenvironment to create broad perspective with the analysis tools such as PESTEL and VRIO etc. The main purpose of using this model is evaluating firm’s critical issues in scalable strategic viewpoint (Paroutis et al., 2013).

 

First of all, the new technological improvements on automobile market are important. The main reason of these, new product types occurred in a global industry such as hybrid and electric cars because of declining reserves of petroleum and global climate concerns (AFDC, 2016). Considering this issue Hyundai and its affiliated company Kia planning to develop 7 new electric cars and at least one of them will be fuel cell car (Shelton, 2015).

 

Hyundai’s excessive recall rates of vehicles led lots of crucial problems for firms brand image and financial structure for future investments and sales. In example, according to one of the surveys that related histories and sales records of most famous 15 automobile companies in last 30 years, Hyundai got the worst ratio about getting with 1.15 vehicles recalled for every model of company since first entry to U.S. market in 1986 (Gorzelany, 2014).

 

In relation to these, Hyundai designated their strategy as ‘’Brand Innovation- Based on Quality’’ For this strategy the company aims:

• Consolidation of essential principles of company with qualitative developments and controlling future competitiveness of company.

• Targeting the best quality with delivering of customer satisfaction with controlling the every processes of these sections.

• Strengthen technologic competitiveness of company with investments on eco-friendly vehicles and electronic control systems. (Hyundai Worldwide, 2013).

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According to these Hyundai’s new strategies are suitable because of the company addressing the critical issues that have been identified for strategic position of the company (Johnson et al., 2008). It’s also acceptable due to these strategies meeting stakeholders’ expectations of Hyundai (Considine, 2016).

 

According to resource-based perspective that assumes a firm have abilities to use outstanding resources and capabilities to improve its industrial structure to gain competitive advantage (Frynas and Mellahi, 2011). Considering current resources and capabilities of Hyundai they have the competence to decrease rates of vehicle recalls and focusing on new technologies with powerful physical and financial resources.

 

Hyundai’s strategies are consonance, suitable, acceptable and feasible.  To clarify that, considering figure 7, the firm needs to improve their existing knowledge to generate new knowledge that helps them in positioning in new or existing markets (Bharadwaj et al., 2015). For example, Hyundai started to work with Infor learning management and training software to manage knowledge management that one of the main steps of core competencies (Infor, 2013). In addition variety of research and development centres of company focuses on technology and process management (Hyundai Worldwide, 2016). To develop resource-based analysis for business, The tool named as VRIO that have sections named as value, rarity, inimitability and organisation will help to understand Hyundai’s current situation of resources (Chapman, 2012).

 

To create better organisational evaluation, advantage of the cultural web will be taken. The main reason of this, cultural web illustrates behavioural, physical, and symbolic evidence of organisational culture (Johnson et al., 2013). According to cultural web Hyundai’s organisation is consistent, consonance, acceptable and feasible depend on critical issues of the company. Reasons of these as follow:

 

Paradigm is the set of formulations with a combination of specific approaches and models (Automotive Fleet, 2016). In example, if there is a common problem in technology firm, this company has a tendency to focus more on technological developments (Johnson et al., 2013). Considering these, Hyundai Motor has some movements about increasing their capabilities such as technologic cooperation between Cisco and Hyundai to improve technological infrastructure of company’s products (Automotive Fleet, 2016). It shows the relation of consistency and advantage because the company is doing effective movements that depend on their strategies.  

 

It’s the persuasive ability of organisation to support individuals or groups for specific purposes (Johnson et al., 2013). Hyundai’s main management strategies are; realisation of possibilities, unlimited sense of responsibility and respect for humanity ((Hyundai Autoever, 2016). These strategies are feasible because considering current effects of critical issues of company, Hyundai is creating better power structure to increase brand value and creating better innovative organisation.

Competition-based and bureaucratic control systems created main organisational success factor of Hyundai. The firm applies team-based approaches to gain establish the competitive internal environment. In example different teams regularly vie against to other groups to identify exact product or services for current and potential markets. This strategy is leading more successful results but nonetheless it’s also creating mistrusts in units and employees (Walcutt, 2013). This movement can be seen as acceptable for competitive advantage considering supporting organisation to creating value.

 

Nevertheless, Hyundai has higher level of centralization to control and examine every step of organisation. This situation creates more disruptive environment in company. Due to that, this issue is affecting to suitability that related about addressing strategies the opportunities and threats of organisation (Johnson et al., 2013). Considering labour issues (See figure 3) that one of the main weaknesses of Hyundai, it will create only more problems in future at organisational structure and this situation will decrease effectiveness of organisation.

Source: https:///32893786/Managing_for_Competitive_Advantage_Hyundai_Motors_

 

Question 1

 

Define what are the problems with predicting how the market and the competition will change over the next few years for Hyundai and what are the implications for Hyundai’s strategy development?

                                                                                                                    (25 marks)

 

 

Guide

1. Enlist the Three major issues affecting Hyundai. For each state the implications

a) Faulty product design – impact: recall, brand value/image (5th to 13th), market position

b) Price drop of gas – impact: sales of hybrid, EV affect Hyundai marquee of automotive sales, impact to R/D and demand forecasting (subsequent company resources)

c) Business risks – (state clearly what others – all in text para)

 

· State based on the issues above, what has (or how) Hyundai has reacted?

· Critically assess the pro/con of the impact. Your assessment of the situation

· You may also add more perspective of your own research

 

 

 

Question 2

 

Describe the lessons other companies can learn and adopt from Hyundai’s strategies over the years?

                                                                                                                    (25 marks)

 

State the important two (or three) Hyundai Strategies here. For example

1) Internal strength assessment – VRIO

State what had Hyundai done?

State the implications – Identify scalable strategic items

2) Quality and Brand Innovation

State the details Hyundai strategize on the development cycle, quality target for customer, controls at processes, technology advancement on eco-friendly vehicles, electronic control systems

3) ?? (identify DIY)

 

· Critical analyze and articulate how other companies should learn from Hyundai strategies.

· You can state implications, actual results and practical aspect of the competitive advantage gain

 

 

Question 3

 

Critically evaluate Hyundai’s FOUR (4) ‘practical’ side to the strategic planning process.

You can choose/select/identify any FOUR from the article

1) Internal control - Quality at Design & Processes

2) Training & Knowledge management

3) Joint venture (or cooperation) Cisco/Hyundai

4) Organization culture – support for individuals, groups, responsibility, respect, internal competition (resource based theory)

5) Centralization of control – pro/con

 

For each of the strategies

1. State what has been done

2. The advantage of the strategy – why and what specific strategic competitive advantage

3. The disadvantage or risk of the strategy – justify your claims

4. Limitations and Your recommendations

5. You may research and state your findings (additional)

 

 

Question 4

 

The main issue of Hyundai is the inefficient use of innovation in internal structure. Based on your opinion, advice Hyundai’s on future recommendations to sustain in the industry.

                                                                                               
 

1. Analyze the statement “inefficient use of innovation in internal structure”

2. Did you spot any evidence of the statement in the text: If yes – elaborate

3. Are you able to relate more evidence from your external literature search – If yes state your findings

4. What has Hyundai did differently to stay relevant from 2014/2015 until now (2020)

5. Now, critical analyze and provide top 3 recommendations for Hyundai to stay relevant and competitive in the industry beyond 2020 to next 5 year