There has been increased competition in the business world. This is attributed to existence of different manufacturers producing similar products. Technology has been advancing day in day out with the latest technology winning the market favour.
As any company aim is to maximize the returns and lower the cost of production while still providing efficient services to its customers, regular review of the company’s market strategy is very necessary. One of the key aspects to business growth is marketing. The information about the product to be sold must be presented well to the prospective customer.
The best way to approach it is to indentify the market needs and explain how the product is to fulfil the market demand. This paper seeks to lay a platform for making a platform for marketing plan for motor industry company specifically Hyundai. The paper will provide a marketing description of Hyundai eqqus, its primary benefits to the consumers, the relevant brand issues relating to the company as well as reasons as to why consumers would choose the product over those of other competitors in the motor industry.
Hyundai eqqus
Most motor vehicle buyers buy their cars for different reasons, for example, sporting, commercial, business purposes as well as a sign of social class. The Hyundai show room is furnished with different models of car specifying specific needs as per the requirement.
The cars are categorised into three main categories which are passenger, recreational and commercial (Hyundai 1). Some of the important aspects considered are the suitability of the car for the purpose it was intended, the convenience of the car and the availability of the maintenance service to the customers.
Hyundai eqqus is manufactured in South Korea. The car history dates back from 1970 to date. The Hyundai car manufacturer falls under Hyundai group comprising of different institutions in almost all fields of the economy (Kanda 1).
Due to increased growth of the company since its establishment in the mid nineteenth century, there have been need to establish new branches in different parts of the world. Increased market demand for Hyundai automobiles has also necessitated it. This has had positive effects in that accessibility to any model has been brought closer to the customers.
There have been continuous motor industry improvements which have been used in various Hyundai motor vehicle models. These have been able to meet different customer’s requirement such as speed, fuel consumption and general outlook. The company also gives back to the community through aspects such as environmental conservation and World cup Sponsoring. The Hyundai eqqus has resulted from improved technology and a high class vehicle which is becoming preferred by the upper class.
According to the current world, safety has become a necessity. The Hyundai eqqus has incorporated the necessary security measures. The vehicle is equipped with airbags, safety belts, good suspension, good head lamps, reflectors and very good braking system. The seat belts are now a necessity in any car and must be equal to the number of seats in the car as a rule to the car manufacturers.
The belts help to maintain the person on board in his position in case of a crash thus minimising the extent of the injuries that might be suffered. The existence of well performing head lamps and well placed side mirrors assist the driver to view clearly the road so as to be able to react in time in case of an emergency. The suspensions are strong and made from good material whose research has shown promising results.
These suspensions are designed so as to favour different types of roads by being able to absorb the shock waves (Hyundai experience 1). The airbags ensure the persons on board do not get injuries from objects inside the car in case of an accident (Gilles 3). The steering wheel is hydraulic and is very good. It has good finishes which not only look attractive but also give the hands a firm grip while driving. The dash board is also covered to avoid minor injuries that might occur.
This car can also be armoured to avoid injuries and death when the passengers are attacked by armed gangs who shoot at them. Armoured vehicles have found their market among top executives such as presidents and they can withstand blasts (Living 4). Their numbers are increasing day in day out. This is due to increased criminal activities all around the world.
The physical outlook of any product is of much importance in the marketing of any product. Attractive products usually attract customer’s attention and are found to win in the market. Hyundai have put this into place by making perfect finishes on the Hyundai eqqus model. Despite Hyundai eqqus’ high standard manufacturing for its customers, its price is relatively low compared to that of its fellow competitors.
The main competitors are BMW, Mercedes and Toyota. The Hyundai vehicle allows less external noise into the vehicle and thus provides a conducive environment for working inside the vehicle. Hyundai eqqus is equipped with gadgets that are connected to the internet. These gargets are useful in terms of communication and access of data. This is one of the latest technologies in the motor industry thus pushing it a step ahead (Motor Authority 1).
In the current world, there has been the problem of global warming. This has led to numerous researches on the best ways to minimize the negative impact. Global warming has been a consequence of air pollution. The main sources of this pollution are from the increased number of industries and motor vehicles.
This pollution interferes with the Ozone layer which plays a major role in protecting the earth from harmful radiations. The Hyundai Company has incorporated technology in its motor vehicle models such as Hyundai eqqus to increase efficiency which is inversely proportional to pollution. This is a great move that should be encouraged since it helps in the conservation of our environment.
Conclusion
Considering the current increase in the number of car purchases around the globe, the customers are left with a decision to make as to which car fits them. Different manufacturers have put into place the technology available to them. In the case of Hyundai eqqus, the technology has been incorporated to bring forth the good features it pocesses so as to sail well in the modern market.
Another important thing in this car is its fair price compared to those of equivalent vehicles from competitors. The Hyundai eqqus car is also environmental friendly as the good mechanisms have been put in place to take care of the exhaust products. Thus taking into account all this factors make the Hyundai eqqus one of the best car available for purchase in the market.
Hyundai hired Ted Chung as its new chief executive officer at a time when it was facing serious problems. Chung diagnosed the problems of this firm and realised that it lacked focus in the market. He led his team to identify a market segment and then he launched an aggressive market campaign to reach this target market. He also increased salaries of its employees to motivate them.
Background
Ted Chung Joined Hyundai at a time when the company was facing serious management problems. As the newly appointed chief executive officer at this firm, he quickly diagnosed the issues affecting the firm and realised that Hyundai was poised to lose about $ 2 billion within the next financial year. The firm’s problems were created by having a customer base that had no capacity to sustain the firm’s growth among other issues. He had to act very fast to save his company. He had to find a way of bringing the firm back to profitability and sustainable development. Chung decided to start by reviewing the management structure of the firm. Some of the firm’s management team could not deliver the results he wanted. They were used to doing things in a particular way, always avoiding strategies considered disruptive.
However, Chung came up with a raft of changes that had to be implemented to overcome the imminent crisis that the firm would face in case the current trend continued. It was a relief to see his strategies deliver the expected outcome. In fact, the firm’s market share started growing at 0.5% per month, something that phenomenon given that the industry was very competitive. He turned around the company, from one that was making huge losses to one that was making sustainable growth at unprecedented rates. He also managed to create a team of highly loyal and effective employees who understood the market dynamics and his unique management strategies.
Issue
When Ted Chung joined Hyundai, there were a number of problems that this firm was facing, making it difficult for it to achieve sustainable growth. First, he realised that the firm was poised to lose about $ 2 billion within that financial year he joined the firm. If that happened, then the firm would automatically be faced out of the market. It would be difficult to survive under such massive losses. He moved very fast to conduct a comprehensive review of the firm to determine where the firm had made wrong moves that led to such serious losses. He noticed that the firm had clients who could not sustain the firm’s grow in the market.
Most of them were people who rarely used their credit cards quite often. Another major issue that this firm was grappling with was the specific target market that would sustain its growth. The firm had no specific target market. It did not define the specific customers that it would target in its operations. In fact, the firm did not even know how to how to position its products in the market. According to Knight (2006), when conducting a promotional campaign, a firm must clearly define the target population. It must know the tastes and preferences of the targeted market in order to design a message that is suitable for them. These are some of the issues that were crippling this firm.
Facts and Information
This case study brings out specific facts about Hyundai and how its new chief executive was able to save it from an eminent fall. Ted Chung, the new chief executive officer of Hyundai, joined the firm in 2003. At this time, Hyundai had registered a massive growth in the market, but the growth was not sustainable. A careful review of the firm revealed that the outgoing managers had focused on acquiring a massive number of clients without carefully reviewing their quality. According to Pforr and Hosie (2009), having a huge customer base is one thing. Making them purchase the firms’ products is another thing.
Credit card companies operate in a market that is unique from other markets. The clients must be engaged in active use of their card for a firm to make sustainable profits. Chung realised that the growth that the growth that Hyundai had registered prior to his entry into the firm was only hypothetical. It was true that the number of people holding their credit cards had increased considerably. However, they were low quality clients. Most of them did not have the actual capacity to pay the necessary payments needed after using their cards. The firm lacked a clear strategy on how it could recover its money from these debtors. This meant that the much talked about growth in market share that the firm had registered was only a means that would lead to serious financial losses to the firm if care was not taken to address the issues at hand.
Based on the past and present records, Chung realised that of the credits extended to its clients within the past and current financial year, about $ 2 billion might not be recovered. The management may be forced to right them off as bad debts because the clients were not making the payments as was expected. This financial problem was serious. The chief executive officer realised that the solution could not be in cutting down the cost of operations because that was not the source of the problem. The problem was brought about by having clients who could not honour their promises and make payments at the right time. This was the area that had to be addressed to find a lasting solution to this problem.
The strategic action taken by Chung Ted to address this problem surprised everyone at this firm. It was a move that no one had anticipated. What most of the stakeholders at this firm expected was that Chung would tighten the firm’s expenditure to help reduce the expected loss at this firm. He did the opposite. He started by increasing the salaries and commission of all the employees as a way of motivating them and ensuring that all the best talents were retained within the firm.
That came as a surprise to many. He then went ahead to increase the budget for products and brand promotions by $ 50 million. That also came as a shock to many stakeholders in the firm. The increase in expenses meant that within the coming financial year that Hyundai was expected to lose $ 2 billion, Chung increased the expenses by $ 100 million. To him, there was no difference between $ 2 billion and $ 2.1 billion if the firm was to go under.
Chung then focused on the management as another area that needed immediate redress. When he came to the firm, he engaged all the top managers of this firm responsible for all the departments. He noticed that most of them were used to a given pattern of addressing tasks within this firm. They were slow to change and would constantly oppose new approaches that Chung proposed. They claimed that there were specific ways of addressing tasks within the firm. He immediately realised that he could not work with them because he had planned for a raft of changes that would help this firm to come out of its current problems. He made the decision to replace them with more dynamic employees who were ready to take risks and embrace change within the firm. These measures that the new chief executive officer put in place proved successful. Chung helped Hyundai to come out of its financial woes to a path of economic prosperity.
Analysis
This case study brings out a number of critical issues about crisis management within a firm. According to Regester, Larkin, and Regester (2008), crisis management may not be very easy, especially when handling a large firm that is poised to lose about $ 2 billion within a single financial year. Many large firms such as Lehman Brothers and Enron collapsed in the face of major crisis. Others are forced to go under receivership as was the case with Kodak. However, Hyundai made a turn-around from the path of failure to a path of economic prosperity, averting a disastrous outcome that was expected within the coming financial year. In this section, the researcher will analyse a number of factors about the leadership style of Ted Chung and how he managed to rescue this firm.
Leadership styles displayed by CEO Ted Chung in overcoming the crisis
Ted Chung demonstrated unique leadership styles when he was faced with a serious crisis at Hyundai. He comes out as a visionary leader, a person who was able to see a different future for Hyundai that other stakeholders could not. As a visionary leader, he quickly realised that the employees of this firm would soon start looking for alternative jobs as soon as they realised that the firm was facing serious financial woes.
He knew that the problems of this firm would soon be known to the employees within a very short while, and this would cause them panic. He was not ready to lose some of his best talents in the face of the trying times ahead. That is why he put a brave face and increased their salaries at a time when most of them expected a pay cut. As a visionary leader, he knew that this move would pay off within a short while (Ray, 2009). This was not only meant to reassure these employees that everything was okay, but it would also help them remain focused in all that they were doing.
Ted Chung displayed principles of transformational leadership at this firm. According to Bernstein (2011), a transformational leader should always be a ray of hope in the face of despair. He should be seen to be leading the followers to conquer a battle that cannot be won under normal circumstances. Above everything, he should challenge the current trends within an organisation and convince employees that they have the capacity to achieve greater outcome if they put more effort.
This is exactly what Chung did when he entered this firm. First, he informed all the employees of this firm, including the managers, that there were changes that had to be made in the way things are run. He informed that that they had to b ready to deal with new management strategies that will help save this firm. He then gave everyone opportunity to adapt to his new style of leadership and the new trends dictated by the emerging market forces. However, some of the mid managers felt that they could not change the traditional methods they were used to within an organisation.
As Cook (2005) says, when a transformational leader is bringing change within an organisation, resistance is always expected. There are some employees who will always feel that they cannot conform to the new trends. Others may even try to sabotage the change process. A leader must be firm and ready to deal with such forces (Ashgate, 2009). If necessary, a leader may be forced to lay off some of the employees who may be a bad influence to others in the process of bringing positive change within an organisation. That is exactly what Chung did. He fired some of the employees who were not ready to embrace change. This enabled him to remain with a lean efficient and very dynamic workforce that could adapt to the emerging market trends.
Decision-making process adopted by the CEO Ted Chung to coordinate with his team
The decision-making process that Chung has taken is also unique. According to Temporal (2010), when a new chief executive officer takes control of a firm, most of them will always try to dictate how things should happen. However, this was not the case when Chung joined this firm. He embraced dialogue when it came to making decisions. His move to fire some of the employees may be seen as being dictatorial in his decision-making process. However, it is important to note that they were fired after they failed to take opportunity presented to them to change their strategies and approaches. He engaged them at first, and realised that they were too rigid to accept the changes as he proposed.
Chung demonstrated that he cherishes principles of strategic leadership when it comes to making very important decisions that may affect many stakeholders within the firm. As a strategic leader, one must understand the current situation of a firm and come up with effective strategies that would ensure that the future is a success. Sometimes this may involve taking risks and engaging in activities that other normal managers would want to avoid. A strategic leader may use simple strategies to solve very complex problems. When coming up with such decisions, it is important to engage everyone to ensure that there is unity.
These are some of the actions that Chung made when he joined Hyundai. Increasing the advertising expense was seen as a strategy that would increase expenses at this firm. While the former head of this firm considered this move an additional expense that was unnecessary, Chung realised that this was a golden opportunity to transform this firm. He used this simple strategy of increasing the firm’s promotional campaign to change the future of Hyundai for the better. Everyone knows that a small raise of the salaries of the employees may lead to impressive output they display because they will be motivated. He used this simple strategy to bring success in this firm. At every stage of making these important decisions, he ensured that everyone was actively engaged in helping to save this firm.
Change strategy adopted by the CEO Ted Chung
The researcher strongly agrees with the change strategy that was adopted by Chung Ted to transform the prospects of Hyundai. Chung first understood the problems that were affecting this firm. He realised that the firm had no clear sense of direction in terms of its target market. He then identified the appropriate target market that would enable the firm to achieve the much needed sustainable growth. This chief executive than reviewed its workforce.
According to Aaker (2009), after defining the path that a firm needs to take, the next most important thing is to identify a team that would be ready and capable of walking along the path of success despite the expected challenges. This is what Chung did by firing some of the employees and hiring others to ensure that he created a workforce that would enable him to achieve success. He then increased their salaries as a way of motivating them and assuring everyone that the future is bright if every stakeholder addressed his or her task effectively. Finally, he launched an active promotional campaign to inform his new target audience about its products and why they were superior to that of the existing market rivals. The outcome was an impressive performance of a firm that was almost collapsing.
Comments
The solution that Chung came up with to help Hyundai to come out of its problems, as discussed above, was very effective. This firm was faced with a crisis that was going to render it unsustainable in the near future. At the time when he joined the firm, Hyundai was faced with a major threat of financial loss. He immediately realised that some of the best employees of this firm would consider getting other jobs as soon as they realised that their employer was faced with serious financial problems. He also had to deal with this threat of loss of important employees with the right skills and knowledge in this important industry.
He made major decisions that many people would have avoided given the situation in which this firm had to operate. Under normal circumstances, a leader would be expected to use non-monetary policies to motivate employees and ensure that they do not consider quitting the firm. However, Chung noticed that these employees needed more than just a reassurance. They had developed fear after noticing the dwindling revenues of the firm. They needed a stronger reassurance that their future at this firm was not under threat. To do this, he increased their salaries. He then went ahead to increase expenses. This created the confidence in his employees that he so much desired. His approach was unique and very effective.
Conclusion
Hyundai credit card’s case demonstrates how extraordinary leaders may use ordinary ways to solve extraordinary problems within a firm. Hyundai Credit Card business was under a serious threat. The firm had clients who were not sustainable and something had to be done to save it. Chung came and resigned the products of this firm to target a specific market segment. He then launched an effective marketing campaign that target the specific segment of the market. Internally, he was forced to lay off unproductive employees and hire others who were dynamic and ready to face the challenge ahead. He then increased their pay to motivate them further. The outcome was a success of this firm.
References
Aaker, D. A. (2009). Strategic Market Planning. New York: John Wiley & Sons. Web.
Ashgate, R. (2009). Strategic communication in crisis management: Lessons from the airline industry. Westport: Quorum Books. Web.
Bernstein, J. (2011). Manager’s Guide to Crisis Management. McGraw-Hill. New York: McGraw-Hill. Web.
Cook, J. (2005). Understanding Marketing Strategy and Differential Advantage. Journal of Business Strategy, 49(2), 137-142. Web.
Knight, G. (2006). Entrepreneurship and Marketing Strategy. Journal of International Marketing, 8(2), 12- 32. Web.
Pforr, C., & Hosie, P. (2009). Crisis management in the tourism industry: Beating the odds. Farnham: McMillan. Web.
Regester, M., Larkin, J., & Regester, M. (2008). Risk issues and crisis management in public relations: A casebook of best practice. London: Kogan Page. Web.
Temporal, P. (2010). Advanced brand management: Managing brands in a changing world. Singapore: John Wiley & Sons. Web.
Hyundai decided to build a new automobile assembly plant in Alabama
Globalization and international trade have increased competition among different players in the automobile industry; different companies are innovating and inventing technologies to strengthen their competitiveness. The decision by Hyundai Motor Company to build an assembly plant and Alabama is a strategic decision by the company, which was triggered by several factors both internal and external.
Hyundai targets the regional and international market for its products thus when choosing a location for an assembly, it must consider the available transport infrastructure; Alabama has good transport and communication network that links the region to the world through water, sea, and road transport; this is one reason that Hyundai considered.
Alabama population is mixed with both highly learned and semi-educated population, the large population in the area will offer much needed skilled and non-skilled labor to the factory. On its own, the region population will offer the market to Hyundai products. The government of Alabama has enacted legislation that supports new ventures; such incentives include tax holidays on income and capital deductions.
Who benefits and who loses from the new plant in Alabama?
One of the obvious beneficiaries of the new development is the factory itself since it will have an additional facility to produce more commodities. The commodities will also get to international markets fast because of efficient transports and communication networks.
The people of Alabama will benefit, as the plant will offer employment opportunities; the government also stands to benefit from taxes and facilitated trade by the company, which will earn the country foreign exchange.
The environment is the main loser in the venture since when the factory is producing; some wastes will injure the environment; however, Alabama has efficient environmental policies to curb damage from production plants. Competitions in the automobile industry will also lose some of their customers to Hyundai.
Is the firm’s decision to build the new plant consistent with Dunning’s eclectic theory?
The expansion is consistent with Dunning’s eclectic theory since the company is targeting the market and aims at riding at its reputation and strong brand name. The expansion is likely to be successful since the market is aware of Hyundai products thus they are likely to accept the venture fast. This will lead to an advantage for the company.
Why is inter-industry trade not predicted by country-based theories of trade?
Inter-industry trade means that a country does not specialize in importation and exportation of one commodity; however, it uses a mixed approach to have the best out of the market. International trade is the exchange of goods, services, or/and capital between different countries; It has continually strengthened economically, politically, and socially with many countries’ participation. International trade plays a very important role in ensuring the continuity of globalization.
International trade rides on policies made by international bodies like the World Trade Organisation regulating and defining some processes in the trade. Some countries fail to implement the set policies and the result is un-predictability.
Another factor that makes Inter-industry trade unpredictable is the existence of trade barriers among countries; trade barriers take the form of governmental policies, fiscal and physical barriers. Some governments impose trade restrictions, which bars the importation or exportation of goods or services from/to certain countries. The uncertainty of the direction that international trade will take makes Inter-industry trade unpredictable.
Since its inception, Hyundai Motor Company has encountered numerous challenges both in the local and foreign market. The company was established under the authoritarian leadership of Ju-Young Chung. Consequently, the Chung family assumed the responsibility of making all the decisions affecting the company.
One of the challenges that the company encountered both in local and foreign markets was the decision-making process. The success of any organisation dwells on the ability by the management team to make informed decisions. The executives ought to have a chance to present their opinions on matters affecting the organisations.
At the beginning, the leadership of HMC denied the executive a chance to share their ideas on how to manage the company. Hence, the company could not benefit from the wide knowledge and expertise that most of its professional managers possessed. Chung fired all the executive members that opposed his decisions and replaced them with others who showed veritable loyalty to him.
Later, Ju-Young handed over the leadership baton to his younger brother who made efforts to enhance the leadership culture of the company. He promoted autonomous management coupled with equal opportunity and called for harmonious human relations in the company. Unfortunately, he introduced these aspects at a time when Korea was also experiencing political democratisation.
In spite of the positive changes made by Ju-Young’s brother, the company suffered from numerous labour-management disputes. The company saw its first labour union established in 1987, which was responsible for presenting employee complaints and bargaining for better employment terms on behalf of the employees.
Disagreements between the leadership and labour union led to strikes in 1987 and 1988, which pushed the company into huge loss. In 1997, the company suffered liquidity crisis because of the financial crisis that swept across the East Asia.
Moreover, Hyundai group had to restructure its business in line with the International Monetary Fund policies. The restructuring process subjected the company to public distrust as it involved allocating most of the company’s properties to the Chung family instead of coming up with novel management strategies.
In the United States, Hyundai Motor America started at a high note, but later its performance plummeted. At the beginning, the Americans associated the company with Japan; hence, they freely purchased its cars leading to high sales volume recorded during the early days of HMA. Nonetheless, it did not take long before people learnt that HMA’s car, the Excel, had immense quality problems.
The car started exhibiting engine failure and some of its components, as air conditioners did not function properly not to mention its body, which rusted fast. In 1989, the sales volume for Excel went down significantly, which left the company in huge losses. In the process, the dealer profit went down with numerous dealerships closing down. It became hard for Hyundai to get lenders to cater for its consumer loans.
In 1990, J.D Powers and Associates started rating and publicising Hyundai cars. The ratings showed that vehicles manufactured by HMA were of poor quality relative to those manufactured by other automakers. Eventually, Hyundai cars became the synonym for sloppy products.
After Rodney assumed the leadership of HMA, he thought of enhancing the company’s image by enhancing the quality of its cars and increasing their costs.
Poor organisational performance coupled with poor leadership are recipe for employee turnover. Whenever employees feel that they do not have the opportunity to make decisions on matters affecting their company, they tend to slacken and eventually look for another company that allows them to partake in the decision-making process.
Besides, whenever employees learn that their company is not doing well, they fear for their job security, which forces some to quit. Another problem that affected HMA was employee turnover. In 1996, the company lost seven of its talented managers.
In an effort to address all these challenges, the Hyundai Motor Company used numerous strategies. Some of the strategies proved successful while some solved the problems only for a short period. After Se-Young took leadership from Ju-Young, he tried to address the leadership problems by restructuring the organisational culture.
He advocated for autonomous management, equal opportunity, and harmonious human relationship. This move helped in delegating duties to the executive managers that for a long time had been denied the opportunity to participate in managing the company.
Later, in an effort to boost production efficiency, Se-Young merged some of the job functions, which eventually helped the company in downsizing thus cutting down on operations cost.
In 1996, Se-Young relinquished the HMC leadership to his son, Mong-Kyu Chung. Mong-Kyu sought to continue with the leadership style used by his father and in a bold move to improve the company’s image; he set a vision to ensure that HMC became one of the reliable companies in the world. Consequently, he embarked on improving the quality of products sold by the Hyundai Motor Company.
He aimed to use move as an avenue for enhancing organisational brand and realising consumer satisfaction. His humane attitude helped the company in solving the labour-management disputes, thus improving its performance between 1996 and 1998.
In the United States, HMA tried to use varied strategies to address the challenges facing it. For instance, the company came up with advertisements and promotions, offered dealer incentives, and established new packages as ways of regaining its past glory. Nevertheless, these strategies did not work due to the immense tension between HMC and HMA.
Moreover, the company tried to diversify its product mix as away of enhancing its performance in the United States. In 1991, it came up with the Elantra car with an aim of closing the gap between Excel and Sonata.
Nevertheless, the introduction Elantra posed a threat to the sales of Excel in the American market, thus rendering the strategy unsuccessful. In 1994, the company embarked on an advertisement strategy using a popular NBA player. This move helped the company to increase the sales volume of the Sonata model, but only for a short period.
Hyundai’s global strategy
In a bid to facilitate in improving the image of Hyundai Motor Company both locally and internationally, Bob Martin helped the company in establishing bold market strategies. The company not only sought to enhance the quality of its products, but also worked on enlightening its target customers about the quality of its vehicles.
In the process, the company came up with a global approach that sought to help it to realise product differentiation as well as market diversification. One of the factors that made Hyundai Motor Company not to make substantial sales in the global market was the consumers’ perception that the company offered poor quality vehicles. This perception hinged on the low prices of the vehicles sold by both HMC and HMA.
Therefore, to address this challenge, the company opted to come up with a packaging strategy, which sought to repackage their vehicles at higher prices to impart the notion of quality on its target consumers.
One of the challenges that faced this approach was the fact that most of the sales made by the company in the global market relied on the cost of its vehicles. Hence, repackaging the vehicles at a higher price would have resulted to reduction in sales. The challenge was addressed by differentiating some of the equipments installed in its cars from those installed by its competitors.
This approach helped the company to change its image in the public eyes. Customers started perceiving HMC vehicles as reliable just like those manufactured by other automakers. The main reason why customers fail to associate with a particular organisation is its brand image. The brand image facilitates in selling an organisation (John et al. 2002).
No matter how hard an organisation advertises its products, if its brand image is poor, it is hard for consumers to use its products. Differentiating the car equipments from other automakers helped HMC to regain its glory and attract more customers. This move made customers to realise that Santa Fe did not have a cheaper car image as they thought, and thus they developed the willingness to purchase the vehicle.
In 2000, HMC deliberated on selling a luxury car in the American market as a way of enhancing its image. The company felt that selling the entry-level models in the international market, even after being in the market for a long time, sent a negative image about the company. HMC borrowed this idea from its competitors. Other motor companies were selling luxurious cars like Acura, Lexus, and Infiniti.
Building a luxurious car would thus help HMC in boosting its sales in the global market. Besides, it would make the public change their perceptions about the company, and thus start buying even its intermediate models. Normally, companies always strive at being at par with their competitors.
Failure to come up with strategies to counter competition waged by rival companies may lead to a company losing its customers. One of the reasons that prompted HMC to come up with the idea of developing a luxurious car was the fact that the Japanese automakers were already using the approach, which gave them both quality and price advantages.
Besides product differentiation, HMC also opted to establish market differentiation to ensure that it benefited from all the market segments. Hyundai worked in liaison with Kia. Moreover, they operated at the same market level. Moreover, the two companies opted to differentiate their markets and products to ensure that they reap optimally from all market segments.
Kia Company was to focus on the low income earners by selling the entry-level car models, while HMC targeted the high-income market segment by selling expensive car models. This approach could work without opposition from Kia Company. Every organisation would wish to enhance its image by selling products of presumably good quality.
Requesting Kia Company to continue selling low priced vehicles would make the public doubt the quality of its vehicles. Consequently, the company could not just agree with this idea, as it would be detrimental to its profit margin.
In spite of this approach standing out as the most appropriate, it had significant drawbacks to the company. For the company to change the brand image through enhancing the quality and increasing the prices of its product, it had to give up its price benefits. Hyundai Motor Company made significant sales in the global market due to the prices of its vehicles.
Low-income earners and young families bought their vehicles from the company since their prices were affordable. Consequently, increasing the cost of these vehicles would lead to the company losing most of the low-income customers.
Moreover, the company would incur huge costs in manufacturing and distributing high quality car models. Even though the approach would facilitate in building the company’s brand, the management had to dig deeper into the company’s financial reserves to fund the approach.
Theory/concept behind the Hyundai’s strategies
Most companies come up with business strategies based on the market forces that rival companies exert. It would be hard for a business organisation to stand out in the market without differentiating itself from rival companies.
In a bid to achieve this goal, the organisation ought to have a good understanding of its rival companies, their operations strategies, and be in apposition to forecast future market changes that might affect its performance (Teece et al. 1997).
Apart from learning from rival companies, a company ought to understand its customers as well as suppliers in terms of their bargaining power and its probable effects to the company. Hyundai Motor Company formulated its business strategies under the concept of the five forces of competition established by Porter.
The forces include competition from substitutes, new entrants, and rival companies. Besides, the company considered the suppliers and buyers’ bargaining power in coming up with its strategies (Teece et al. 1997).
In coming up with the operations strategies, HMC considered the level of competition waged by rival companies, especially in the American market. The Japanese and European automakers were already manufacturing and selling luxurious and expensive cars in the market by the time Hyundai Motor Company opened HMA in the United States, and thus to capture the market, HMA started by selling the entry-level cars.
The cars were cheaper relative to cars sold by other automakers. With time, customers started doubting the quality of the vehicles that HMA was selling in the market. The competition waged by rival companies triggered the move to embark on enhancing the quality of the vehicles as well as the image of the company.
It was hard for HMA to remain competitive in the market since people perceived that the company sold its vehicles at lower prices due to their poor quality. Therefore, in an attempt to overcome this challenge, Hyundai Motor America had to start selling vehicles that were at par with those offered by rival automakers like the Japanese.
Hyundai Motor America was afraid that new companies would venture into the American market. Hence, it had to look for ways to ensure its establishment in the market before the new entrants. The company feared that in the next ten or fifteen years, the Chinese automakers would establish themselves in the American market.
This move would lead to the introduction of vehicles that sell at lower prices thus being detrimental to the price advantage that HMA had been enjoying in the market. The fear of new entrants’ inevitability in the American market forced HMA to embark on the strategy of enhancing the quality of its cars. The company felt that by enhancing the quality of its cars, it would surmount competition waged by new entrants.
Besides the competition from new entrants and rival companies, numerous vehicles acted as substitutes to the ones sold by Hyundai Motor America. For instance, Elantra competed with Nissan Sentra, Chevrolet, and Dodge Neon. On the other hand, Santa Fe competed with RAV4 and Toyota Highlander.
These substitutes were mainly from companies known for manufacturing quality vehicles, thus making it hard for HMA to assert itself in the American market. The main reason why HMA decided to differentiate some of the standard components in its vehicles was to outdo the substitute cars in the market. It was hard to prove that its cars were superior while they did not reflect anything unique relative to their substitutes.
This aspect compelled Hyundai Motor America to install unique air conditioner components, power windows, and other components to its cars as a way of signifying the cars’ uniqueness relative to the substitutes offered by other automakers.
In coming up with the warranty strategy, HMA considered the bargaining power of its suppliers. The strategy was to be compensated by developing quality vehicles thus boosting the company’s sales volume. Therefore, to come up with quality vehicles, the company had to liaise with suppliers to acquire quality materials.
This aspect meant that suppliers would have an upper hand in influencing the company’s strategy. Moreover, to ensure that they continued acquiring quality materials from the suppliers at a cheap cost, the company worked closely with suppliers in its research and development strategy.
Consumer bargaining power played a significant role in the business strategy that HMA adopted. The company benefited most from the low-income earners and the young families.
Hence, in the effort to come up with high quality and expensive vehicles, the company had to consider this group of buyers. The reason why the company embarked on a market differentiation strategy was to ensure continuity in serving this group of buyers, which acted as it main market.
Policies affecting Hyundai Motor Company
The success of any business organisation depends on its policies. Through policies, a business establishes a set of guidelines that direct its operations. Moreover, every market has some policies that direct the operations of all the stakeholders. Technological, international, and local policies are some of the policies that influence organisational performance in any market (Metcalfe 1994).
Therefore, to enhance its operations, Hyundai Motor Company adopted a technological policy that sought to promote innovation in the company by enhancing management capacity and knowledge acquisition. After operating in the American market for a long time, HMA learnt that it was hard for it to continue enjoying substantial sales without working on the quality of its cars as well as building its image.
Hence, the management embarked on looking for the most innovative enhancements to include in its cars. The company sought the assistance of its research and development personnel to achieve this objective. The personnel members were to work in liaison with suppliers to ensure the acquisition of quality supplies. Moreover, the company worked in collaboration with its customers to identify some of their preferences.
It would be hard for an organisation to meet all the customer needs without liaising with its customers (Metcalfe 1994). Consequently, HMA adopted a technological policy that allowed for cooperation between the company and its customers in building its new car models.
One of the local policies that affected Hyundai Motor Company in Korea was political democratisation. Initially, the Korean Chaebols did not allow their employees to form labour unions. Nevertheless, the democratisation process led to the emergence of labour unions, and as the unions started fighting for employee rights, they led to HMC encountering a series of labour-management disputes.
The disputes made it hard for the company to maintain its consistency in vehicle production and distribution. In 1987 and 1988, the company recorded numerous employee strikes because of labour unions. Besides the local policies, international policies also had significant effects on Hyundai Motor Company. In 1997, East Asia suffered a severe financial crisis. Most of the Korean companies were forced to close down due to bankruptcy.
The crisis did not spare the Hyundai group. In the process, the International Monetary Fund and other foreign companies imposed their foreign policies on the Korean government forcing it to ensure that local Chaebols restructured their operations and enhanced transparency. Hyundai had no option but to restructure its businesses. In the process, the company lost about 70 associate businesses, thus affecting its performance.
Another foreign policy that significantly affected the performance of Hyundai Motor Company in the United States is the tendency to publicise the information about how its products were fairing with respect to quality. When the company entered into the American market, consumers did not know anything about the quality of its cars.
Some associated it with Japanese automakers; nevertheless, as time went on, J.D. Power and Associates started broadcasting the ratings of Hyundai cars. Hyundai’s cars ranked low in the market, which stirred doubt amongst customers regarding their quality. This aspect made most of the potential customers to shun from buying Hyundai cars.
Reference List
John, R, Cox, H, Gillies, G & Grimwade, N 2002, Global Business Strategy, Thomson, London.
Metcalfe, S 1994, ‘Evolutionary economics and technology policy’, The Economic Journal, vol. 104 no. 425, pp. 931-944.
Teece, D, Pisano, G & Shuen, A 1997, ‘Dynamic capabilities and strategic management’, Strategic Management Journal, vol. 18 no.7, pp. 509-533.