HYUNDAI MOTOR

INDIA LTD.

GROUP 3
SECTION - A

Arenas
- Product
Categories:
Passenger Cars
- Channels: 451

dealerships and 647+

Authorized Service Centers
in 340 cities across India.
Hyundai Motor Plazas in
large metros.

- Market
Segments: Mid-sized &
semi-luxury, hatchbacks,
SUVs and sedans

- Geographic
Areas: Exports vehicles

to more than 110 countries

across Europe, Africa,
Middle East, Latin America
and Asia

- Core
technologies: The

Hyundai ix35 Fuel Cell

- Value Creation
Strategies: Vehicles

are certified by Hyundai

Engineers using 147 check
points

Vehicles
- Dealership:
Wide number of
dealerships and
authorized service
centers throughout
the country. HMIL has
415 dealers and over
1,100 service points
and 327 rural sales
outlets (RSOs) across
India.
- Acquisitions:
Acquired Kia Motors
and later divested
again as apart of its
plan to acquire engine
design technologies,
remains as the largest
stakeholder of Kia

Differentiat
ors
- Launching new
models by taking
advantage of the R&D
department, Hyundai
Engineering India ltd.
- Largest exporter of
passenger cars
- High brand equity Korean manufacturer
has become an Indian
brand due to its ability
to identify & cater to
the preferences of
Indian consumers
- Focus on styling &
technology

Staging
- Hyundai Motors
realized that next
millennium was going
to give a boost to
passenger cars
category, it boosted up
its resources and
focused on new product
development and built
up an extensive supply
chain network.
- It realized the
potential of Indian
market and entered it
at a very early stage
where there were only
five major automobile
manufacturers in India,
Maruti, Hindustan,
Premier, Tata and
Mahindra

Economic
Logic
- Hyundai products are
not as cost effective
since it doesnt
compromise on its
quality. Premium prices
due to unmatchable
service, styling and
technology
- However, Hyundai
Indias plant capacity
utilization is more than
95% helping the
company to reduce
costs by economies of
scale.

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMIL & ITS COMPETITORS

RETAINED EARNINGS

PLANT & MACHINERY

Retained Earnings (in crores)

Plant & Machinery(IN CRORES)

20,000.00

20,000.00
18,000.00
16,000.00

15,000.00

14,000.00

Retailned Earnings

12,000.00

10,000.00

Plant/ Machinery

10,000.00
8,000.00

5,000.00

6,000.00
4,000.00

0.00
2006

2,000.00
2007

2008

2009

2010

2011

2012

2013

2014

0.00
2006

2007

2008

2009

-5,000.00

2010

2011

Year
Year

Hyundai

Maruti

Ford

Toyota

Hyundai

Maruti Suzuki

Toyota Kirloskar Motor Ltd

Ford India

2012

2013

2014

HMIL & ITS COMPETITORS

CASH RESERVES

Profitability of Hyundai vs Maruti Suzuki

4,500.00

Cash RESERVES(in crores)

4,000.00
3000

3,500.00

2500

3,000.00

2000

Cash Bal(Rs Cr)

2,500.00

1500

In Crores

1000

hyundai

1,500.00

500
0
2006

2,000.00
maruti suzuki

1,000.00
2007

2008

2009

2010

2011

2012

2013

2014

500.00
0.00

Year

-500.00
Hyundai

Maruti Suzuki

Toyota

Ford India

Year

HMIL & ITS COMPETITORS

TOTAL RESERVES

SALES/ADVERTISING EXPENSES RATIO

SALES/ADVERTISING EXPENSES RATIO

TOTAL RESERVES (IN CRORES)

160

25000

140

20000

120
15000

100
80

10000

60
5000
40
0
2006

20
0
2006

2007

2008
Hyundai

2009

2010

Maruti Suzuki

2011
Toyota

2012

2013

Ford India

2014

2007

2008

2009

2010

2011

2012

Toyota

Ford

-5000
Hyundai

Maruti

2013

2014

service centers

HMIL & ITS COMPETITORS

Customer Service Rating

Number of service centers

900

3000
2500
2000
1500
1000
500
0

880
860
840
820
800

Company

Maruti suzuki customer service

Credit Rating

780
760
740

Company

Credit rating

720

Hyundai

A1+

700

Tata Motors

A1+

Maruti Suzuki

AAA

Mahindra

AAA

Honda

A1+

HMIL & ITS COMPETITORS

R&D Expenditure
450

Market Share

400

50

350

45

300

40

250

R&D expenditure

35

200

Hyundai
Maruti suzuki

150

30

Market Share

25
20

100

15

50

10

Year

Maruti suzuki

hyundai

Honda

Others

DRIVERS OF COMPETETIVE
ADVANTAGE

INTERNAL FACTORS- RESOURCES

Resource

Valuable

Rare

Imperfectly
Imitable

Organizationally
exploitable

Competitive
Implication

Innovation

YES

YES

YES

YES

Sustained
advantage

High Brand Equity

YES

YES

YES

YES

Sustained
advantage

Modern engine
shops

YES

YES

YES

YES

Temporary
advantage

High Capacity
Utilization

YES

YES

NO

YES

Temporary
advantage

High bargaining
power

YES

YES

NO

YES

Temporary
advantage

Intellectual rights

YES

YES

YES

YES

Temporary
advantage

INTERNAL FACTORS- VALUE CHAIN ACTIVITIES

DRIVING COMPETITIVE ADVANTAGE
Infrastructure - Computer controlled line that converts sheet metal to body panels in the press shop, Automated
robotic arms in body shop, environment friendly water based process equipment in paint shop, biggest engine
shops in the country equipped with modern tooling and testing facilities
Human Resource Management: Right mix of fresh & experienced people
Healthy relationships with labour union, Strong management with continuous evaluation Powerful whistle blower policy
Technology Development: High-tech information technology to integrate suppliers, Automated robotic arms are used for intricate welding
operations, biggest engine shops in India with modern tooling & testing facilities, 200,000 square-foot facility R&D Centre at Hyderabad

Ma
r gi
ns

Procurement: Minimize dependence on a single supplier, Leveraged strong buyer power into procurement of raw materials,
Strong long lasting relationships with suppliers, Efficient inventory management
Operations
Minimized costs by
outsourcing of
commodities,
66% of components by
119 suppliers,
In-house production of
engines preserves
their core competency

Outbound
Logistics

Marketing
& Sales

Reduced delivery
time, Increased
efficiency of finished
product warehousing

Partnerships with
BCCI to reach a wide
customer base,
efficiently readjusting
its product mix
according to consumer
demand

Service
Hyundai care
mobile app, Digital
showrooms with
realistic 3D
screens, 445
dealers and more
than 1,100 service
points across India

M
a
r
g
ins

Inbound
Logistics
Quality inspection
at supplier level,
Using JIT to
achieve efficient
inbound logistics,
Efficient inbound
warehousing
system

EXTERNAL FACTORS VALUE NET

PARTIES
Consumers
- Public transport
- Car Pooling
- However, no significant substitutes to replace
passenger cars

Substitutes

- Specialized products produced in-house

- Commodities are out-sourced
- Hyundai : 119 suppliers (66% components), inhouse (34%)

HYUND
AI
MOTOR
INDIA

Suppliers

- In 2015, domestic sales, the company achieved an

all-time high of 4,76,001 units with a cumulative
growth of 15.7 per cent.
- The market share of 16.3% was highest-ever with
strong performance of successful launch of new
models

Complements
- Diesel, Petrol Prices regulated by Government.
Hence, cannot exercise any control.
- However, launch of hybrid cars & electric cars can
help reduce dependence on diesel and petrol.
- Automotive components (commodities) market
has several players & hence has less power

RECOMMENDATIONS

- FAME India scheme

- Launch of National Electric Mobility Mission Plan 2020 in India to
promote hybrid and electric vehicles in the country
- Fluctuating fuel prices and tightening emission regulations are
creating opportunities for hybrid and electric vehicles.
- Mahindra acquired a majority stake in Reva to place itself in the
electric vehicle segment
- Maruti Suzuki planning to introduce Swift Hybrid in India by 2017

- Opportunity for Hyundai to leverage its hybrid car technology as

used in Hyundai Sonata (launched in US)

New
Existing

DRIVERS

Market Scope

LAUNCH OF HYBRID CARS IN INDIA (1/2)

MARKET
DEVELOPME
NT

DIVRSIFICATI
ON

MARKET
PENETRATIO
N

PRODUCT
DEVELOPME
NT

Existing

New

Product Scope

LAUNCH OF HYBRID CARS IN INDIA

(2/2)

COST
LEADERSHIP

DIFFFERENTIATI
ON

FOCUS COST
LEADERSHIP

FOCUS
DIFFERENTIATI
ON

GROWTH THROUGH BACKWARD

INTEGRATION (1/2)
VERTICAL INTEGRATION (BACKWARD)
-To manufacture tyres for Hyundai.

Benefits

Risks

-Secure source of raw materials

-Simplified procurement and
administrative procedures

-Increased Capital expenditures

-Loss of flexibility

SHOULD HYUNDAI GO FOR VERTICAL INTEGRATION?

-Fairly predictable demand

-Reduce dependence on suppliers like Michelin and Hankook.
-Hyundais competencies include technical know-how, expertise in engineering, innovation, production
efficiency etc. help in executing the strategies.
-Potential pitfall maybe the hampering of the relationship with existing stakeholders like Michelin and
risk of production of tyres of low quality.

GROWTH THROUGH BACKWARD INTEGRATION - PROFIT POOLING (2/2)

Operating margins Passenger

Cars

Operating margins Tyres

Generation of huge revenues doesn't mean generation of huge profits.

The margins on tyres is more than on cars historically.
If Hyundai can produce a differentiated product using its R&D, it can command an even
higher margin.

AREAS OF IMPROVEMENT TO CATCH UP

WITH MARUTI
Considering the market
share, It is better for Hyundai
to increase the R&D
expenditure and aggressively
innovate products which can
provide a superior value
curve vis--vis Maruti Suzuki
Low in price availability, R&D
expenditure and
serviceability
Can create products to meet
this preferred value curve

120
100
80
60

SCALE

40
20
0

Maruti suzuki
Hyundai
Preferred

SETTING UP OWN DEALERSHIP CENTRES

VERTICAL INTEGRATION (FORWARD)
- To setup and operate their own dealership centres

Benefits

Risks

-Secure distribution channel

-Cost effective
-Simplified procurement and
administrative procedures

-Coordination effectiveness may

get hampered
-Barriers to exit will be high

SHOULD HYUNDAI GO FOR FORWARD INTEGRATION?

-Fairly predictable demand
-Reduce dependence on third party dealerships

Research &
Developm
ent

Enhanced
Production

Marketing
& Sales

Customer
Service

-eliminates the possibility of market foreclosure or unfair prices and insulates companies from short-run supply
and demand imbalances
-Can move closer to their customers

ENTER INTO COMMERCIAL VEHICLE

SEGMENT (1/3)
IN INDIA

ACROSS
THE WORLD

ENTER INTO COMMERCIAL VEHICLE

SEGMENT (2/3)
Market yet to be tapped
Major players - Tata Motors, Ashok Leyland
Parenting advantage the positive contributions of the corporate office to a
new business as a result of expertise, insights, dispassionate reviews, and
support provided
Low cost drivers: economies of scale, superior technology, proven product design
Differentiation drivers: Premium brand image, high quality, unique styling

ENTER INTO COMMERCIAL VEHICLE

SEGMENT (3/3)
UNRELATED DIVERSIFICATIONPORTFOLIO MANAGEMENT
Recent example- Mercedes-Benz,
started building sub-premium
large and medium trucks in 2012
under the BharatBenz brand and
has taken a 4.6% share in truck
market
Hyundai also can compete in
financial economies by efficiently
maintaining a portfolio of
businesses in India.
Its commercial vehicle business
is already a proven success in
foreign markets.

EXPORTS SCENARIO
Volume of Exports
300000

Suspended export of i10

and i20 models to Europe
in 2014
Wanted more production
space for domestic use
40% of exports in 2013
went to Europe
Chennai plant Utilization
reduced from 6.8 lakhs to 6
lakh units production
As there is no complete
utilization of plant in India,
Hyundai can continue its
halted export business with
Europe
Bring in a new production
plant in the country to
meet the demand of

250000

200000

150000

100000

50000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EON VS ALTO (1/3)

Hyundai EON

Maruti Suzuki Alto 800

Price is higher (2.84 lakhs-Base model)

Price is lower (2.42 lakhs Base model)

Less fuel efficient (21kmpl)

High fuel efficiency (23kmpl)

Quality issues

High value

Hyundai attempted to change the strategy from differentiation to low cost strategy
Resulted in a disaster
12,000 sales vs 5,000 sales(10,000 sales twice only)
Compromised on quality (Engine noise, unstable at high speeds)
For improving the situation, the strategy needs to be reverted

SALES OF EON VS ALTO (2/3)

CHANGE IN STRATEGY (3/3)

Broad
Segment
Low Cost

EON

Narrow
Segment
Low Cost

Narrow
Segment
Differentiat
ion

ENTRY INTO LUXURY SEGMENT

Existing Market

This is a diversification strategy (Ansoff

matrix) (Concentric diversification- the
product is related to the same industry)

New Market

Hyundai has its customer segment in the

moderate income group. It can extend
its customer base in the luxury segment
also. It is currently in the phase of
manufacturing smart cars by leveraging
its R&D capabilities and transforming
them into smart technology. This will
generate a new source of profit pool for
the company

Market
Developme
nt

Diversificat
ion
(Smart
Cars)

Market
Penetration

Product
Developme
nt

Existing
Product

New
Product

THANK YOU