Hyundai Motors – PESTEL and Porter’s Five Analysis

Hyundai Strategic Report

Executive Summary

This report takes an honest attempt for the analysis and evaluation of different strategies of Hyundai Motor. The first part of the report covers the external environmental analysis of Hyundai Motor with the help of the tools of Porter’s Five Forces analysis and PESTEL analysis. The next part of the report analyses the internal business environment of Hyundai Motor through value chain analysis. The next part involves in the analysis and evaluation of the business level strategies of Hyundai Motor. For this reason, the SAF model is used. The last part involves in providing the overall conclusion of the report.

Table of Contents

Introduction

1. External Environmental Analysis

1.1 Porter’s Five Forces Analysis

1.2 PESTEL Analysis

2. Internal Environmental Analysis

3. The Strategic Analysis

3.1 Analysis of Business Level Strategy

3.2 Evaluation of Strategy

Conclusion

 The main aim of this report is the analysis as well as evaluation of different dimensions of the business strategies of Hyundai Motor. For this purpose, this report covers various strategic aspects of the company like the analysis of the external and internal business environment, analysis of the business level strategic of the company and evaluation of the company strategies along with the ethical considerations. Hyundai Motor is one of the leading multinational automotive manufacturers of South Korea; and it operates in the auto manufacturing industry (hyundai.com 2018). The company was established in the year of 1967 and is headquartered at Seoul, South Korea. The main products of Hyundai Motor are automobiles, commercial vehicles and engines. The company has an employee base of around 105,000 all over the world. This report takes an honest attempt to analyse various strategic perspective of Hyundai Motor (hyundai.com 2018).

1.1 Porter’s Five Forces Analysis

Competitive Rivalry: This threat is high for Hyundai Motor in the presence of huge number of motor companies operating in the market.

Threat of Substitutes: This threat is moderate for Hyundai Motor as the substitute products of the company are public vehicles and rivals’ cars (Gupta 2013).

Bargaining Power of the Customers: This threat is high for Hyundai Motor as the rival companies are providing same quality of motors in competitive prices.

Bargaining Power of the Suppliers: This threat is low for Hyundai Motor due to the presence of suppliers all over the world.

Threat of New Entrants: The presence of high entry barriers keeps this threat low for the company (Rothaermel 2015).

1.2 PESTEL Analysis

Political: Highly complex government supervision has made it difficult for the companies to operate.

Economic: The effects of global recession has negative impact on Hyundai Motor due to the decrease in the purchasing power and demand in the market.

Social: The operations of Hyundai Motor are affected by the continuous change in the social trends as it affects the demands (Zimmerman and Blythe 2013).

Technological: Improved technologies are providing better business opportunities to the companies in motor manufacturing industry

Environmental: Hyundai Motor is needed to comply with all the regulations and standards related to environment (Villeneuve and Pasquier 2017).

Legal: Hyundai Motor is required to make compliance with the national as well as international legal standards and regulations for their business operations.

Value Chain Analysis

Primary Activities

Inbound Logistics: The presence of the suppliers of Hyundai Motor can be seen scattered all over the world from whom the company gets raw materials of good quality (de Souza and Márcio de Almeida 2013).

Operations: Hyundai Motor has the world’s largest manufacturing plant in Ulsan. The location of the other major plants of the company are China, India, Russia, Brazil and Alabama.

Outbound Logistics: The Company sends the produced vehicles in these plants to the Hyundai Motor dealers who are scattered throughout the globe.

Marketing and Sales: Hyundai Motor has the tendency for hugely investing for the marketing of their vehicles. The firm spent 2460 billion of Korean won for marketing purposes (Savino, Manzini and Mazza 2015).

Support Activities

Technology: It is a crucial aspect for Hyundai Motor as the company invests heavily in advanced technologies. As a result, Hyundai Motor owns some of the best manufacturing plants. The firm has been investing hugely in new technologies along with research and development.

Human Resource: The focus of the company is also on innovative human resource management.

Procurement: The main responsibility of the procurement teams of Hyundai Motor is the effective procurement of the raw materials around the globe.

Firm Infrastructure: Hyundai Motor has many large infrastructure that start from huge manufacturing plants to research and development facilities (Zott and Amit 2013).

3.1 Analysis of Business Level Strategy

 It needs to be mentioned that Hyundai Motor is one of the most successful automobile manufacturer all over the world and the presence of certain business level of competitive level strategies can be considered as the main reason behind the success of the company. These competitive level strategies are discussed below:

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Segmentation, Targeting and Positioning Strategy of Hyundai Motor: The strategy of the company is to use psychographic and behavioural segmentation variable for the purpose of segmentation. Hyundai Motor is an economic segment and the company is planning to enter into the premium segment by offering premium SUVs. In addition, the company uses differentiated targeting strategy for targeting and satisfying the customers’ needs. In case of business positioning, Hyundai Motor uses value based positioning strategy along with mix of products with the aim to create effective experience for their customers rather than just selling vehicles (Weinstein 2013).

Competitive Advantage in Business Level Strategy of Hyundai Motor: Hyundai Motor has invented a customer-centric smart service and it is assisting the company to increase the credibility as well as efficiency in post-sales services. In addition, the company has invented IT-enabled ecosystem that makes the services available anytime and anywhere on the real-time basis. The Research and Development centres provide the company with the required competitive advantage by providing understanding about different market and the continuously changing preferences of the customers.

 The passenger cars segment of Hyundai Motor that has hatch-backs and sedans is the star products of the company. Certain vehicles like i10, i20, Accent and Elantra are the most popular cars that are the main reason for boosting the sales of the company. However, the company needs to consider their SUVs and trucks due to the presence of well-established companies proving these types of vehicles (hyundai.com 2018).

Distribution Strategy in the Business Level Strategy of Hyundai Motor: It needs to be mentioned that Hyundai Motor offers their large variety of vehicles to their customers through more than 6000 dealerships and showrooms. The company is conducting a major change for delivering value to their customers with the help of Hyundai Motorstudio that is a new type of showroom engages in the creation of customer engagement opportunities and providing revolutionised brand experience (hyundai.com 2018).

Brand Equity in the Business Level Strategy of Hyundai Motor: One major aim of Hyundai Motor has been to associate with the renowned international events like FIFA, UEFA, ICC matches in T20 format and one day international matches along with different other events with the aim to create high visibility to the customers all over the globe (hyundai.com 2018).

Competitive Analysis of the Business Level Strategy of Hyundai Motor: It needs to be mentioned that all the companies operating in the auto manufacturing industry have adopted the red ocean strategies rather than the adoption of innovation-based strategies to become successful. Major companies in this industry like Hyundai Motor, Suzuki, Honda, Fiat, Ford and others are giving tough competition to each other to eat up their market shares.

Market Analysis of the Business Level Strategies of Hyundai Motor: In the recent years, only a small percentage of the vehicle companies are taking the attempt to redesign their business level strategies with the aim to enter into the upper-income customer segment with the introduction of the premium vehicles as it is the fastest growing segment. For retain the business success, Hyundai Motor needs to put more focus on certain aspects like post-sales customer serviceability, brand awareness, penetrating the market growth with the help of new vehicles and services to the customers.

3.2 Evaluation of Strategy

Strategic Evaluation through SAF

 SAF model is considered as a major tool for the evaluation of the organisational strategies; and SAF stands for Suitability, Acceptability and Feasibility. They are discussed below:

Suitability: Suitability is the most crucial factor in SAF strategy model as it provides the companies with the idea whether their existing strategies will achieve their organizational goals. It needs to be mentioned that that the above-discussed strategies of Hyundai Motor are using the strengths of the company that are the brand image and equity, global presence, strong manufacturing as well as innovation capabilities and others. However, the above-discussion also shows the weakness of Hyundai Motor in entering in the SUV segment. Thus, Hyundai Motor needs to consider redesigning their strategies related to the SUV segment (Hill, Jones and Schilling 2014).  

Acceptability: Acceptability is considered as an important factor for the assessment of the risk and return as it is strongly related to the expectations of the stakeholders. The recent financial performance of Hyundai Motor questions the acceptability of the existing strategies to their major stakeholders. Decrease in the global pant sales can be seen for Hyundai Motor in 2017 (hyundai.com 2018). The presence of -0.4% growth can be seen in total assets along with the reduction in the shareholders equity. Profit growth for the year is -20.5% with a massive decrease in basis earnings per share (hyundai.com 2018). In the presence of all these aspects, it can be said that the existing strategies of Hyundai Motor have almost failed to increase the wealth of the stakeholders along with increasing the risk factor of business.

Feasibility: This aspect of the model assesses whether the organisations have all the resources to carry out the strategies. It can be observed from the earlier part of the discussion that Hyundai Motor has all the required resources for carrying out their business level strategies. It needs to be mentioned that Hyundai Motor has high-class production facility equipped with all the required advanced machineries for the purpose of production. After that, the company has the required market to market their products.

 The above discussion indicates towards the fact that the management of Hyundai Motor needs to consider the recent financial de-growth of the company in the strategy development mechanism. Only then, they will be able in developing effective business level strategies that will help the company in tapping all the market segments. At the same time, the management of Hyundai Motor needs to be innovative so that they can consider the small but critical issues of their businesses.

Ethical Implications

 In the recent years, Hyundai Motor has been involved in certain ethical cases and two of them are discussed below:

1st Case: Hyundai Motor had to pay a fine of $100 million and forfeit $200 million in credits as the company misled their customers about the fuel economy of more than 1 million cars sold in United States (US). Hyundai Motor had to pay this fine to the Environmental Protection Agency (EPA) and the Justice Department (theguardian.com 2018).

2nd Case: The Chairman of Hyundai Motor, Chung Mong-koo was handed a three-year suspension sentence by the South Korean appeals court as he was using the funds of the company in fraudulent manner (reuters.com 2018).

 It needs to be mentioned that the occurrence of these ethical issue changed the perception of the public for the company for a particular time; and this affected the overall business of the company. The management of the company had to adopt the strategy of restructuring the business-level strategy with the aim to abandon these types of ethical issues in the future. Thus, it is needed for the management of Hyundai Motor to consider these ethical implications at the time of strategy development.

 The above discussion shows different strategic perspectives of Hyundai Motor. The above discussion shows the needs of the companies to consider the effects of the external business environments on the business as it assists the managements in considering the elements of external environment in the strategy development process. At the same time, Hyundai Motor is also needed to consider the crucial elements of internal business environment as it helps them to strengthen their business level strategies. It can also be seen from the above discussion that Hyundai Motor has developed their business-level strategies by taking into consideration all the required external as well as internal environmental factors. However, the analysis of SAF model shows that these strategies lack acceptability as they failed in fetching good financial results in the year. At the same time, Hyundai Motor is needed to consider the ethical implications in the strategic development process due to the fact that the company was involved in many ethical issues in the past years. Thus, on the overall basis, it can be concluded that Hyundai Motor needs to consider the restructuring of certain business-level strategies with the aim to tap to the targeted markets and segments.   

References

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