UNIVERSITY OF REDLANDS

Hyundai Strategic
Management Analysis
Arman Tabatabaei
INTB 692W

History and Background

The Hyundai Motor Group was established in 1967 from its parent company, Hyundai. Pony,
the first Korean car, was released. In 1984, Hyundai entered the Canadian market with great success.
In 1986, Hyundai entered the United Stated market with the Excel because Pony did not pass the
emission standards. The cheap Korean currency at the time and technology borrowed from Mitsubishi
Group allowed the Excel to sell incredibly well. In fact, Hyundai still holds the industry record for the
most U.S. cars sold during its first year of business. Hyundai continued to expand its lineup by
developing more vehicles using its proprietary technologies. The midsize Sonata was developed in
1988 and was followed by the launch of Elantra and Scoupe in 1990. The strong footing of Hyundai
was initiated by a acquisition-growth strategy in 1995. A Stanford analysis paper states: In 1995 and
1996, HMC began production at its new Chunju plant (in southwest Korea) and Asian plant (southeast
of Seoul). With a total global production capacity of 2.4 million units per annum, Hyundai had acquired
the necessary economies of scale to compete on an equal footing with the worlds leading automakers.
(pg.2 Stanford.edu).
Hyundai has always been keen on their Corporate Philosophy Framework. The guiding
management philosophy is to Realize the dream of mankind by creating a new future through
ingenious thinking and continuously challenging new frontiers. Currently Hyundai is perceived as
cutting-edge, high quality yet affordable, and a positive experience to shop. Since entering the U.S.
market in 1986, Hyundai has ballooned its market share of the industry to a peak of 4.95% from 1.03%
(wardsauto.com/data-center). However, in order to reach their pinnacle of success, a new strategy was
needed.
source: L. Kim, Crsis construction and organizational learning Organizational Science 9 (1998)

Hyundai's Vision
People's expectation toward individual mobility is more than just a means of transportation.
The old understanding of cars has become outdated. A car has become to speak for different lifestyles,
being a living space. At the same time, the automobile industry has also experienced a big change.
Hyundai Motor Company has grown rapidly to become one of the largest automobile companies with
global top five production capabilities and superior quality. We have now reached a tipping point
where we need qualitative approach, bringing bigger ideas and relevant solutions to our customers. At
this opportunity to move ahead, we have developed a new brand slogan that enacpsulates our
willingness to take the next big step up. Led by our new slogan and the thinking behind, we will
become a company that keeps challenging ourselves to open up new possibilities for people and the
planet.
Identifying The Problem

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Despite initially being perceived positively from the Excel, Hyundai's at the time strategy was
cost-minimization and production peak. With the acquisition of Kia Motors in 1997, Hyundai was
deemed unstoppable. Shortly after, in 1998, the Asian currency crisis urged Hyundai to drastically cut
back on quality efforts. In 1998, Hyundai had the biggest drop in sales which can be attributed to lowquality vehicles; rusting, recalls, defects, etc. The wheels were coming off the Hyundai. To further
augment the problem, Hyundai attempted to introduce a range of high-priced vehicles in the 1990's.
This was an ineffective strategic decision because the public still held on the low-quality notion which
contradicts high-priced vehicles of Hyundai.
A Major Shift In Strategy: quality improvement, new designs, clever marketing, and long-term
infrastructure investment from mother company
In order to redeem the brand damage and increase market share, Hyundai executives would
need to conceive of several new strategies. Beginning in 2001, MacDuffie says, Hyundai launched a
major push to upgrade quality with a daily focus on improvement through new processes at its
manufacturing plants, and from better design and engineering. At the same time, to help overcome its
reputation for poor quality, the company announced a 10-year, 100,000-mile warranty (Wharton). This
was considered to be a risky move by the automotive industry. Hyundai chose a differentiation strategy,
borrowing from the Korean culture in order to implement said strategy within the company culture.
Korean traditionalism became the root of the company matrix. Se-Yung, the brother of Chairman JuYung, approved the new warranty strategy on a car ride to his hotel from Los Angeles. This is a prime
example of how cultured-based strategy can be adopted and implemented. In Toyota, such a decision
would have taken nearly 18 months to wind through the consensus process.
Chung Mong-Koo is the eldest of Chung Ju-Yungs eight sons and nudged Se-Yung aside to
become the Chairman and CEO of Hyundai Motor Group. This should be considered a salient point in
Hyundai's differentiation strategy for international markets. Mong-Koo served 11 years at Hyundai's

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Motor Service. Hyundai's shift towards industry-setting quality and differentiation strategy was
excelled by his encumbrance. In another anecdote, Mong-Koo called everyone related to transmission
design to California after noticing a large pie of re-manufactured transmissions sitting in a pile. As a
result, it was decided to bring transmission design and manufacturing in-house. Other automotive
behemoths were actually outsourcing complex assemblies to suppliers. This is another illustration of
Hyundai's dramatic shift to responsive strategy. Hyundai can control, monitor, and innovate every step
of the transmission manufacturing.
To further expand on this, the Strategic Management Framework, I believe would be adequate
because it provides the basis for the strategic management methodology. In this model, we become
familiarized with the decision-making process. The Korean Tradition model has an emphasis: on family
owned operations, top-down management, and cross-cultural emphasis. This is achieved by encourage
U.S. and Korean executives to communicate daily via computer mediated communication. Toyota
would communicate, on average, about once every two weeks. Meanwhile, Hyundai also continued to
expand in Europe and China. In fact, the Sonata was announced as the official taxicab during the
Beijing Olymics. This is a reflection of the Strategic Management Framework, in which leaders define
a strategy and set the course for long-term gratitude. The result is the ability to pick up local signals and
rapidly turn them into product designs. In the Hyundai community this is known as the Hyundai
Speed.
If this sounds like a challenge to Toyota, thats the intentwith an eye toward raising resale
value, which makes customers more willing to spend more money on new cars (Holstein strategy
business). This promoted the idea that Hyundai is setting the quality standards within the industry and
specifically, within U.S. An analysis paper states that This investment paid off in 2004 when Hyundai
tied with Honda for initial brand quality in a survey from J.D. Power and Associates (pg.11
gatech.edu) competitive analysis of honda

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In order to achieve such accomplishments, including several safety and quality awards, certain
production standards would have to be changed. This is reflected by Hyundai's top-down decision to
create the Global Command and Control Center in Korea. The walls are covered with broadcasted
screens that monitor every operating line from every plant around the world, 24 hours a day, 365 days a
year. This allows the center to contact any factor the moment any error is spotted, which is a unique
technique that has set Hyundai apart. Another example of Hyundai's effort towards a product
differentiation strategy, is their adaptive process. The top executives would tear apart their competitors
vehicles, adopting their best practices. Michael Dunne, a noted expert on the Asian auto industry, once
exclaimed All of the people I meet at Hyundai are hell-bent on making sure the quality is getting
better all the time. Another fine example of differentiation in Porter's Generic Competitive Strategy.
As an addendum, it should be noted that in a savvy strategic move, Hyundai sold a 9% stake to
DaimlerChrysler in order to strengthen its global market position.
Their strategy can be observed in their vehicle design process as well. Chung and his team felt
that consumers were getting jaded of incremental changes to the same basic look. Chung quietly
recruited several acclaimed designers and would subsequently announce Hyundai's new design
approach called fluid sculpture, inspired by natural shapes. In order to implement rapid prototyping
in an industry where new designs can take up to four years from inception to public market, Hyundai
must again develop a new strategy and process to facilitate said strategy. Firstly, they focused on
recruiting young and contemporary designers who are not biased by mere trends. Asian Automaker
Journalists have described the younger design teams as fearless. Secondly, the Korean culture
encourages internal competition between teams. This is a stark contrast to the conduct of Japanese car
manufactures where nobody likes to see anybody lose. John Krafcik, CEO and president of Hyundai
Motor America, exclaims We often say, with a smile, we never set a target that we know how to hit.
He further drives this bold strategy home: We always under-resource our organization, in terms of

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both head count and dollar operating budgets. The thing that fills the gap is innovation. For example,
Krafcik wisely bridged the cultural gap between his Korean superiors and the coordinators the assigns
to key U.S. executives by having the U.S. manager Skype the Korean coordinator as his shift is ending
and the coordinators is just beginning. This is conducted on a daily basis, as opposed to other
Automotive Dealers, and albeit not a particularly smooth process it fortifies international relationships
and results in rapid decision making.
Figure demonstrating the value-chain process
Hyundai's Future: SWOT analysis
Hyundai now sells more vehicles outside the U.S. than inside. What is interesting is that despite
high demand in Europe and China, Hyundai has decided to hold back production in order to focus on
continually improving quality. Only a company with a long-term strategy would adopt such a bold
strategy. Hyundai is adamant about their high-quality reputation and capturing the ever-growing
demographic of younger generation with good credit scores. This pause in production is the
embodiment of strategic brand development; which will ultimately yield high price perception to the
consumers if the plan is followed through. As always, in the global auto wars, no one wins forever.
We will conduct a SWOT analysis of Hyundai and their closest competitor, Honda:

source: www.strategicmanagementinsight.com

source: www.strategicmanagementinsight.com

Reference:

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http://people.bu.edu/rohc/roh_Hyundai_strategy.pdf
http://www.strategy-business.com/article/00162?pg=all
http://worldwide.hyundai.com/WW/Corporate/CorporateInformation/History/index.html
http://wap.wsj.com/mdc/public/page/2_3022-autosales.html#autosalesE
http://www.cargroup.org/assets/files/hyundai.pdf
http://wardsauto.com/keydata/historical/UsaSa28summary
http://www.srl.gatech.edu/Members/bbradley/me6753.industryanalysis.teamA.pdf
https://gsbapps.stanford.edu/cases/documents/SM122.pdf