Hyundai and Honda Motor Companies in the Ever-Changing Global Business - Case Study Example

CASE STUDY Name Course Tutor Institution Date Introduction In the past few years, the automotive industry has experienced rapid growth and the environment in which the business takes place has constantly undergone changes. Various forms of barriers exist that restrict the entry of automotive companies such as Hyundai and Honda to new markets (Armistead & Clark 1994, p. 5). Honda is believed to be the largest manufacturer of engines in the world and motor cycle market leader in the global market by operating in twenty-nine countries and employing one hundred and sixty nine thousand, two hundred and thirty one people (Armistead & Clark 1994, p. 5). Honda operates one hundred and twenty manufacturing plants, in the twenty-nine countries. On the other hand, Hyundai motor company is the leader in the worlds market in profit making, and is believed to be number four in making motors according to units sold and the fastest growing automaker. This essay discusses the key international success factors of Honda and Hyundai motor companies in a changing global business environment, their competitiveness and their future prospects in internalization. Success in a Dynamic Global Business Environment Since its inception in the 1967, Hyundai Motor Company has experienced tremendous growth and other than becoming the first automobile company to produce manufacturing facilities units on its own; it was also one of the first to be elevated into global markets by manufacturing and exporting the first model, ‘Pony’ (I AM Expert 2014, n.p). Hyundai started the first export business in 1976 with overseas markets such as middle Asia, Africa, and North America expanding into European market later on making it very successful into venturing into the global automaker markets (Dyer & Ross 2008, p. 133). Through the ever-changing process of business globalization, Hyundai motor company has used the strategy of exporting which has been very successful (Dyer & Ross 2008, p. 135). Since its inception, Hyundai motor company has always recognized exporting to overseas market as an important factor to its growth in global business. Hyundai is involved in independent management strategy by using single Ulsan plants to manufacture most automobiles (Dyer & Ross 2008, p. 138). Furthermore, Hyundai motor company has implemented transnational strategies such as joint venture strategy in Turkey, Malaysia and China with the purpose of handling barriers brought about by host countries regulations and rapid market changes (Gosenpud & Vanevenhoven 2011, p. 10). This has successfully assisted Hyundai motor company to expand its global market share. Hyundai motor company has also promoted sustainable development throughout the world with the purpose of strengthening its global presence in the automotive industry. In 2007, Hyundai motor company began constructing manufacturing plants in United States of America and Czech Republic, which created a strategic network. This network consisted of production facilities in more than six countries (Gosenpud & Vanevenhoven 2011, p. 10). Another factor contributing to the success of Hyundai in the changing global market environment is its organizational structure (Iwami & Sato 1996, p. 194). Hyundai motor company has strived to recruit local managers who can control, coordinate and manage global regional operations hence allowing diversity as a strategic task (Iwami & Sato 1996, p. 194). Since its inception in 1948, Honda motor company has grown to be a leader in automobiles, motorcycles and power products. The key factor to the success of Honda motor company in the changing global business environment is the continuous innovation, which was laid as a foundation of the company by the founder of the company, Mr. Honda (Limin & Linyunun 2011, p. 34). Evolution and innovating being the lead factor has enabled Honda motor company to have four main market segments namely, automobile business, motorcycle business, financial services and power product (Limin & Linyunun 2011, p. 34). Furthermore, the success of Honda motor company in the ever-changing global market can be attributed to the five levels of strategies that it has laid down in its operations. Honda motor company uses the enterprise strategy by being dedicated to supplying products of high quality at reasonable prices, to satisfy the diverse needs of worldwide customers (Ramsay 2001, p. 39). Secondly, Honda uses the corporate strategy effectively by including three types of businesses in its portfolio including, power business, motorcycle business and automobile business (Ramsay 2001, p. 39). The company stepped into the automobile industry in 1963, but is leading in the industry with attributes such as optimum safety, superior fuel economy and driving pleasure (Rouse & Daellenbach 1999, p. 487). While motorcycle business was the first business for Honda motor company, the company has attributed its success to building products that are close to customers, by operating over twenty-eight motorcycle plants in over twenty-one countries (Rouse & Daellenbach 1999, p. 487). Honda motor company uses the business strategy of R&D to shape its business advantage over its competitors. The R&D system that Honda uses focuses on reliability, durability and basic performance to come up with a creative technical foundation (Saito, Umemoto & Ikeda 2007, p. 97). The R&D system allows Honda to have a wise approach to the future, by creating products that care about environmental, economic and social issues. This approach has led to a steady increase in Europe and America, although the whole industry is being affected by external factors such as depreciation, political recessions and rising of price of oil (Saito, Umemoto & Ikeda 2007, p. 97). Despite this, Honda is involved in doing research and development that will benefit people in the future. Finally, although Honda operates in the global market and pushes for independence of local management and sales operations for each region, it has an individual strategy reflected by its philosophy of the three joys, “ the joy of buying, the joy of selling and the joy of producing” (Trip Advisor 2014, n.p). Applying various strategies has been the key factor to the success of Honda on the ever-changing global business environment. Competitive Advantage from the Global Perspective Both Hyundai motor company and Honda motor company are very competitive automobile companies although Honda motor company is the most competitive. Hyundai motor company has applied a major strategy that enables it to generate manufacturing plants in local regions and coming up with an integrated distribution centres in Europe and North America (Pavlínek 2012, p. 280). These two regions cover sixty five percent of the Hyundai motors company exports (Pavlínek 2012, p. 280). The strategy was developed to act as a global management structure with the aim of improving the quality of products according to the environment. This maintains demands of the products and sustainability. When Hyundai selects a major market site, they work towards increasing their market share and offering high brand value then expands the market by extending to the neighbouring markets (Pavlínek 2012, p. 280). Hyundai uses the regional strategy in its three major markets, Europe, china and North America (Pavlínek 2012, p. 281). Europe is an important market for Hyundai because its demands for automobiles are fifteen million per annum (Pavlínek 2012, p. 284). For Hyundai to be a competitive global auto company, Europe is an important importing hub for its products (Bensaou 2012, p. 274). Different European countries have different preferences of purchasing automobiles. Hyundai meets this challenge by making adapting cars, which meets the needs and demands of the locals. Hyundai motor company however needs a differentiated strategy of marketing to offer unique products to its larger Europe market (Bensaou 2012, p. 274). Hyundai can also upgrade their brand by manufacturing products that promote sports. People in Europe have strong interest in sport, and therefore, using sporting events such as world cup events and regional football leagues can be a very useful method (Bensaou 2012, p. 274). Hyundai motor company, however, deals with automobiles only while Honda motor company deals with motor cycles, and automobiles and operates in many countries, which makes it more competitive than Hyundai. Honda is more competitive because it focuses on four business operations, service parts, automobiles, motorcycles and power products. The company also uses a matrix organization structure to combine its business and geographic functions (Itami 2012, p. 31). The major regions of operation for Honda are china, North America, Latin America, Japan, Europe and middle and east Africa (Underwood 2012, p. 464). The global business environment is ever changing, and the matrix organizational structure enables Honda to respond faster to changes in the business environment (Underwood 2012, p. 464). Whenever there are changes in a certain market, for example American market, the local company in the market is allowed to make free decisions that will help the company adapt to the changes. Furthermore, Honda seeks to build relationships with local government agencies and business partners by abiding to laws and regulations (Underwood 2012, p. 465). For some time, Honda had some problems with Chinese manufactures of motorcycles, which made imitations of the Honda motorcycles and sold them to the locals at a very low price (Underwood 2012, p. 464). Instead of buying the original Honda motorcycles, which the locals regarded as being expensive, they opted for the cheaper imitations. Honda dealt with this problem wisely by forming alliances with the Chinese manufactures, and in turn, produced copies (Sun, Hyland & Cui 2014, p. 299). This increased the competitiveness of Honda motor company because there was a decline of copied products and a new motor cycle model ‘Wave’ was formed in 2002, which had a reasonable price and high quality (Sun, Hyland & Cui 2014, p. 299). Other than different product lines, Honda is more competitive than Hyundai because it focuses its business strategies on consumer behaviour. According to Sun, Hyland and Cui (2014, p. 299) in 2007, the motorcycle business of Honda gained a profit of approximately thirteen percent, the automobile business had a profit of seventy eight percent, power product business had a profit of four percent while its financial services business had a profit of four percent. Having different business operations makes Honda more competitive than Hyundai motor company (Terpstra, Foley & Sarathy 2012, p. 23). The Effects of Economic State on Internationalization International automobile companies such as Hyundai and Honda base their major markets in North America and Europe. The recent economic crisis has had a great impact on the automotive industry. Firstly, economic downturn results to freezing of credit markets, which leads to cancelled orders, shattered plants and unpaid supplier invoices (Terpstra, Foley & Sarathy 2012, p. 23). There are high labour costs, huge debt loads and costly commitments to retirees in terms of health care compensation and immense pension due to promptness of the damage. Secondly, some of the barriers that could result from economic dilemmas include high inflation and recession (Terpstra, Foley & Sarathy 2012, p. 23). The increase of the price of oils is also a major problem that Hyundai and Honda motor companies are facing due to economic downturn in North America and Europe. Being large markets, there are cases of cultural concerns due to management styles and tastes of customers. Hyundai has created specific models targeted to specific markets. For example, its strategic model that targets the European market is responsible for its qualitative growth in the European market (Doole & Lowe 2012, p. 45). Netherlands is one of the countries in Europe with the best working conditions. The economic crises in the country may not have an impact on the working standards of the country. According to a survey by (Khanna & Palepu 2013, p. 45), Netherlands has the best remuneration rates and welcoming conditions in America. This could mean that there are chances of success for both Honda and Hyundai due to motivated workforce and an enabling environment. In emerging markets such as china and India, there changes in the expectations of customers. At first, the customers were conscious of prices but in the current trend, they tend to go for value and quality. Emerging economies shape the internalization of automobile companies because they are involved in accelerating initiatives of global management and creating more manufacturing plants in India and china, increasing its production capacity (Khanna & Palepu 2013, p. 45). China is one of the major emerging markets of automobile companies and Honda and Hyundai can be included in providing official cars and official suppliers of taxis in Beijing, which will promote their brand images greatly. The changes in consideration factors of such countries from prices to quality and value will change the internalization strategies of both Hyundai and Honda in such markets (Khanna & Palepu 2013, p. 45). Management Strategy With the purpose of becoming more successful in the global automobile industry, a manager in either Hyundai or Honda motor companies could make changes in their future global strategy from one that reflects transnational strategy instead of multi-domestic agenda. This will increase the effectiveness of the companies to responding to local and global changes (Khanna & Palepu, 2010, p. 35). When a company extends to other countries, there is the struggle with specific laws and regulations of each country. There should be higher brand value to handle with external factors, such as government aid programs, strategies of competitors and currency rates. Furthermore, it would be necessary to ensure high brand value with the purpose of meeting the demands of customers in terms of quality and quantity. To avoid mistakes that would damage the whole brand and cause difficulties of financial economy, it would be important to strengthen the competitiveness of the product by increasing and maintaining quality (Khanna & Palepu, 2010, p. 35). Automobile companies should invest in new technologies that are aimed at maintaining the quality of products. Other changes would be to implement differentiated strategy of marketing to offer major markets such as North America and Europe options (Rodrik 2010, p. 12). The automobile companies can also upgrade their brand by manufacturing products that promote sports. People in Europe have strong interest in sport and therefore using sporting events such as world cup events and regional football leagues can be a very useful method of increasing their markets (Rodrik 2010, p. 12). To increase risk management, a manager in an automobile company will implement changes that will help the company in taking global risk management with the purpose of increasing global competitiveness and cope with market change (Khanna & Palepu, 2010, p. 35). Enhancement of global environment performance and producing Eco-green cars such as electricity cars and Hybrid cars will also be important changes that can be implemented by an automobile company manager (Doole & Lowe 2012, p. 45). This can be done by upgrading the management systems and focus on integrating global control in relation to improved environment performance. Employee relationships with synergy would be encouraged. This means focusing on the horizontal view of work environment and a management style that is based on trust (Doole & Lowe 2012, p. 45). Conclusion Hyundai and Honda motor companies are very competitive companies in the ever-changing global business. While various barriers exist that may resist the entity of companies into new markets, Honda and Hyundai have laid strategies that enable them to secure the larger markets of Europe and North America and the emerging markets of India and China. Honda motor company is more competitive as compared to Hyundai motor company because it has four product lines while Hyundai deals with automobiles only. 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