Global Business Situation and Opportunity Analysis: Hyundai Motor Company in India and US Markets - Case Study Example

Global Business Situation and Opportunity Analysis: Hyundai Motor Company in India and US Markets. Executive Summary This report presents a situation and opportunity analysis of the Indian and United States (U.S) market for Hyundai Motors, a global multinational. The report essay first examines Hyundai Motors internal situation in terms of company structure, product line, capabilities and resources. The report then examines the potential through Hyundai’s external situation in terms of the market characteristics, demographics and political and economic environment in the Indian and American market. The findings of this report illustrate that, both the Indian and US market present significant growth opportunities for Hyundai Motor Company if it enhances its marketing strategy to leverage on its strengths such as affordability and fuel efficiency. The report then concludes that in order for Hyundai to realise its full potential the company should mitigate risks such as quality concerns over its car models and venture into new unexploited markets. Introduction Companies operating in the global market have to take into account a number of variables before venturing into new markets. Foremost, it is essential for multinational companies to consider economic aspects of a market particularly in relation to stability of exchange rates, inflation rates, economic controls, GDP and the overall economic development of a market. Secondly, it is important for multinational companies to consider the political state of a market especially in relation to political stability and continuity. Additionally, multinational companies should consider physical and demographical aspects such as population size, education level of populations, availability of natural resources, and shipping distance among many other factors. These factors significantly determine the success of a company in a particular market (Neelankavil 2007; Rai & Neelankavil 2009). Hyundai Motor Company is a good example of a multinational company operating in the global market. This report seeks to critically examine and analyse Hyundai’s current internal situation and external situation particularly in relation to the viability of two markets that the company sells its car models. The two markets that will be examined in this report are the Indian market and the United States Market. Internal Situation Products/Markets Since the establishment of Hyundai in 1967, the company has grown steadily to become the world’s fifth largest automobile maker. Hyundai Motor Company specializes in the production of compact and luxury cars, sports utility vehicles, trucks, buses, minivans and other commercials vehicles. Some of Hyundai’s popular brands include luxury brands such as Sonata, economy cars such as the Accent and others such as the Sedan, Tuscani, Elantra, Santa Fe, Equus, Centennial, Genesis, Veloster and Azera (Hyundai Motors 2012). Company Structure Hyundai Motor Company employs more than 80, 000 people globally and has six overseas production plants located in the United States, India, China, Turkey, the Czech Republic and Russia (Hyundai Motors 2012). The company has a combined production capacity of approximately 3.91 million units annually. In South Korea, it has 3 production plants with a combined annual production capacity of 1.86 million units. The Alabama based American production plant is one of the most technologically advanced car plants with an annual production capacity of 300,000 units while the Indian, Chinese, Turkish, Czech and Russian have an annual production capacity of 600,000, 600,000, 100,000, 300,000 and 200,000 units respectively (Lansbury et al 2007). The production plants have been spread out in different continents in order to serve these markets with products that are customized to suit their needs. The output is also determined by the demand in these markets. The company sells its product through over 5,300 dealers spread out worldwide in 186 countries (Lansbury et al 2007). The company’s top management comprises of the Chief Executive Officer (CEO) Mr. Kang Ho Don, Chairman of the board Mr. Chung Mong-Koo and the President, Mr. Yang Seung. The company has a board of directors which makes key decisions and oversees the overall management of the company. The board of directors has nine members of which four are internal directors while the others are external directors. The company has three committees which are mandated with different tasks. They include the ethics committee and audit committee. The third committee is responsible for recommending potential candidates for the external director positions. The company’s management structure is streamlined into six levels from the most senior management team down to those who are on the car production line. The hierarchy is then divided into 3 clusters with the first comprising of senior managers from the workshop while the second cluster comprised of the cell leaders (junior engineers) and finally the third comprised of the sub-cell keepers(senior technicians) and employees on the production line (Lansbury et al 2007, p.92). External Situation Indian Market One of the key markets for the Hyundai motor company is the Indian market. The automotive industry in India accounts for 4% of the country’s GDP and created more than 200,000 job opportunities (KPMG 2010). The country has one of the lowest car per capita ratios (expressed in cars per 1,000 in the population) among the top 10 automobile markets in world. Prior to the arrival of Hyundai, the Indian market was dominated by Maruti Udyog Ltd which controlled about 50% of the market share (Lansbury et al 2007). Hyundai is currently the second largest car maker in the country (Verma & Gopalakrishnan 2009). Initially, consumers in India targeted affordable, fuel efficient, reliable and low cost maintenance vehicles with locally available spare parts and an extensive maintenance service network with quality service delivery. However, consumer trends have evolved and now there is demand for stylish cars with built-in air conditioning and contemporary design and safety features such as air-bags and interior accessories (Moon 2010). Initially consumer trends were based on price against features while today’s consumers are keen on both price and features. As the Indian market continues to globalize, new consumer trends have emerged. For instance, car buyers are becoming younger and consumers are now buying more than one car per family, a trend stimulated by higher income levels and the emergence lavish lifestyles. As evidence, the market for luxury cars has been growing substantially for the past three years. Another feature of this new trend is the fact that many car buyers are only using the vehicles for a shorter period and then disposing them for latest brands in the market. Style and class is increasingly playing a vital role in the Indian car market (Majumdar 2010). The ownership of a car is now associated with prestige, style and class more than for the convenience it offers (KPMG, 2010). Economically and demographically, the Indian car market is shows significant growth potential. There has been a steady growth in the automobile industry for the last seven to eight years with the exception of two years (between 2007 to 2008 and 2008 to 2009) when the effects of the global economic crisis were felt. The market was not severely affected by the recent global downturn. The growth in the market is attributed to the increase in the population and the working age group, easier access to financial facilities and rising levels of prosperity. These factors are expected to stimulate further growth in the local automobile market (Majumdar 2010). Despite pressure on the existing road infrastructure, the boom in private vehicle ownership is projected to increase as the socio-economic status attached to car ownership will continue to fuel the appetite or many would be car owners. India has more than 40 million vehicles on its road with the highest passenger car sales recorded in 2009-2010 (Majumdar 2010). The USA Market Hyundai first entered the U.S market around 1986 and marketed its cars under the premise of affordability. However, during the initial years, the company experienced turbulent times with annual car sales fluctuating. Cars sales then started picking from the late 1990’s through to 2008. In 2008, the company made sales of close to 500,000 cars with its low price Accent and Elantra models enjoying a strong demand. The company’s long term goal is to penetrate the high end and luxury car market where consumers are more willing to pay for superior features (Hoyer & McInnis 2010). One of the factors that contributed to the company’s rising car sales was the fact that it offered long warranty for its products as compared to other players in the market which boosted consumer confidence on the cars manufactured by the company. The U.S economy has generally been on a slowdown due to weakening consumer confidence. However, the automoive industry seems to have recovered after a series of bailouts inunder economic stimulus programmes as the industry has posted substantial increases in sales figures such as in June where sales suprassed estimates by market analysts. Some of the factors that are contributing to recent growth in car sales include low interest rates, a drop in fuel prices and availability of good incentive programs. However, there was a 2.9% increase in the average cost of a car bringing the price to 30,508 dollars. Despite this increase, the demand for new cars has remained high and this underscores the fact that consumers are willing to pay for a new car. This has impacted Hyundai positively, boosting its sales growth by 8% in the U.S market (Hoyer and MacInnis 2010). Although, the global economic crisis might has have created a huge dent for most businesses such as Hyundai, it also stands to gain from it. This is because the company has already an established brand of low priced cars such as the Accent and Elantra which the company can use to deliver higher sales and enhance its market penetration since it is the low end or econommy segment of the market which is showing growth. This is a strength which the company can leverage to take advantage of opportunities in the American market. Recommendations Hyundai should take advantage of its affordability appeal in the US market due the sluggish economic growth in the country (Freedman 2011). The company should fight hard to ward off the quality concerns that have bogged the American consumer with regard to its products to an extent that Hyundai cars are viewed as of inferior quality as compared to the Japanese models (Freedman 2010, Kim et al 2011). Hyundai should venture into the production of electric cars in addition to hybrids due to rising fuel prices which are forcing consumers to consider other possible alternatives. The company should venture in other rising markets especially in Africa where the company has not had a vibrant market. Conclusion This report has presented a situational and opportunity analysis of the Indian and the U.S market for Hyundai Motors. It is established in this report that both the Indian and US market presents significant growth opportunities for Hyundai Motor Company if it enhances its marketing strategy to leverage on its strengths such as affordability and fuel efficiency and to mitigate safety and quality concerns over its vehicles. To enhance its reputation, Hyundai also needs to build a concrete presence in other emerging markets. Addressing these concerns will put Hyundai in a better position to meet the needs of the global consumer. References Freedman, J., (2011). The U.S. Auto Industry: American Carmakers and the Economic Crisis. New York: The Rosen Publishing Group Hoyer, W., & MacInnis, D. (2010). Consumer Behavior. Mason: South-Western Cengage Learning. Hyundai Motors (2012). Retrieved on October 3, 2012 from Kim, B., Kim, P. & Voegl, V. (2011). The Park Chung Hee Era: The Transformation of South Korea. Cambridge, Massachusetts: Harvard University Press. KPMG (2010).The Indian automotive Industry. Retrieved October 3, 2012, from Lansbury, B., Sok Suh, C., & Kwon, S. (2007). The Global Korean Motor Industry. Oxon: Routledge Majumdar,B.(2010). Consumer Behaviour: Insights from Indian Market. New Dehli: Asoke. K.Ghosh for PHI Learning private limited Moon, H. (2010). Global Strategy: Asian Perspective. Singapore: World Scientific. Neelankavil, J. (2007). International Business Research. New York: M.E Sharpe, Peng, M. (2008). Global Strategy. New York: Cengage Learning. Rai, A. & Neelankavil, J.(2009). Basics of International Business. New York: M.E Sharpe, Sturgeon, T. & Biesebroeck, J. (2010). Effects of the Crisis on the Automotive Industry in Developing Countries: A Global Value Chain Perspective. Retrieved October 4, 2012, from Verma, A., & Gopalakrishnan, D. (2009). A Study of the relevance of consumer ‘perception’ in the A2 segment of the Indian car passenger market. Bangalore: India institute of Management Read More