Executive Summary
Hunyadi Strategic Report is based on three significant phases. Three phases of the report are the internal environment, the external environment, and the strategic analysis. After a short introduction of this automobile giant, five forces and pestle analysis are conducted to derive several external business insights. The study only used relevant elements of Pestle such as political, economic, technological, and environmental. Due to pertinent political and financial condition, the firm can enable business sustainability. On the other hand, five forces depicted high customers and completive forces. The power of suppliers and the threat of new entrants are low. The risk of substitutes is moderate. Value chain analysis portrayed the internal business environment by illustrating primary and supportive activities. The firm has successfully gained a competitive advantage due to suitable strategies in each section. The business strategy of the firm is integrated cost leadership and differentiation. The report has aligned this strategy with different strategic tools. The study showed SAF as a key tool to evaluate the business strategy, which is recommended for the firm’s future. Ethical implication is in the limelight due to the issue of efficient fuel economy. The study illustrated the customer perception and impact on business operations along with some key conclusive statements.
Introduction of Hunyadi
Every business needs an effective strategic plan to gain success and sustain the business for the long run. A firm with a solid strategic plan may perform well in the competitive market. The study contains three main sections. These three sections are external market analysis, internal market analysis, and strategic analysis. Several strategic management tools will be used to derive several insights and propose a better strategy or recommendation at the end. It is a complete strategic report that evaluates current and future business considerations.
Hunyadi is a South Korean automobile manufacturer. The company was founded in 1961 by Chung Ju-Yung. The main products of the company are Automobiles, Commercial vehicles, and Engines. This firm operates with the world’s largest manufacturing facility. The production capacity of the firm is 1.6 million Units. According to 2016 financial reports, the revenue of the company is ₩93.649 trillion.
1. External Environment Analysis: Hunyadi
Five Forces Analysis: Hunyadi
Bargaining Power of Buyers
The power of buyers is high due to the availability of several substitutes. Current and new automobile makers are some critical alternatives.
Bargaining Power of Suppliers
The power of suppliers is low because they are scattered around the globe. The automobile industry contains an immense range of suppliers for companies, and every supplier wants to integrate with a big automobile giant.
Threat of Substitutes
It seems a moderate force. Small cars are available. However, the firm is using large customer segments.
Threats of New Entrants
It is a weak force because new arrivals may have to invest billions initially. It is a huge entry barrier in the global automobile industry.
Completive Rivalry
Honda, Toyota, Suzuki, Nissan, Mitsubishi, and Tata motor have made the industry competitive. It is a strong force due to the sustained brand image of these firms (Admin, 2016).
PESTLE Analysis: Hunyadi
Political
Political stability is a need of the automobile industry, as it supports the business in a country
Economical
Economic factors matter. For Instance, firms usually decide to establish a manufacturing facility in developing economies due to low bargaining power and need of employment (Kirk, 2010).
Technological
People have become tech savvy with time. Automakers are investing billions in research and development processes to come up with some relevant products.
Environmental
Firms have to take appropriate initiatives to reduce the environmental impact. The production of electric and hybrid vehicles is in the limelight in this industry. Environmental concerns are also associated with several regulations. Focus on power strains and sustainability is triggered by the environmental strategy (AFP Relax News, 2017).
Competitive Advantage: Hunyadi
Procurement and technology are two supportive activities, which have helped the company to be relevant in the auto industry. Also, maximum production capacity and differentiated inbound logistics have helped the firm to gain a competitive advantage over other firms. The firm is sharp in production and vehicles are available widely. It is a significant competitive factor (Levin, 2015).
3. The Strategic Analysis: Hunyadi
3.1 Business-level Strategy: Hunyadi
The business level strategy of the company is integrated cost leadership and differentiation. It has been revealed that the company wants to sustain its low-cost structure to reduce the cost of manufacturing facilities in different parts of the world. The firm seeks to gain and maintain the competitive advantage by offering low priced vehicles (Ohnsman, 2016). Even in the marketing process, which is one of the prominent activities of the value chain, the firm has positioned better in the minds of customers by streamlining the low-cost vehicles. As mentioned in the value chain the firm has invested billions in the research and development process. The purpose is to derive low-cost approaches or techniques to justify this business strategy. The business level strategy also supports the firm in an intense rivalry. As mentioned in five forces, Automobile industry contains a stiff competition due to existing rivals. By coming up with different auto innovations, the firm is in the best position to get an edge, and it does in many developing countries (Lienert & Jin, 2015).
Remarkably, the cost leadership is integrated with the differentiated. As the name suggests, cost leadership and differentiation have been merged. Hyundai always wanted to create unique value. Superior quality, design, and price are three different elements, which assist the company in producing differentiated outputs in the competitive automobile market. Hyundai is continuously changing the technology in manufacturing facilities to integrate with new automotive trends. For Instance, it has enabled automation and machine learning in the production process, which reduces the cost and helps to make superior products.
For Instance, Hyundai believes in mass production in different manufacturing facilities, especially in Europe. The firm aims to develop 30 differentiated car models to depict their powerful presence (Hyundai.News, 2017). Notably, in developing countries, the firm faces minimum taxes or regulations to support the industry. Thus, it seems easy for the company to use modern technology and reduce employee costs. The company has reduced the cost of production, and it is a significant source of low-cost vehicles. The backward integration of Hyundai is remarkable. It makes the company different from other companies because of the high-quality material which is to be used in the production process.
In the automobile industry firms are looking to increase the imitation capability to convert customers and increase sales. However, differentiation has become a significant trend in the industry to get an edge. Firms like Hunyadi are making differentiated vehicles for customers. By developing and improving quality measures, these can make the difference. Hunyadi has used the total quality management approach in both developing and developed countries to increase efficiency and reduce the cost of the production process. Thus, cost leadership and differentiation are combined to integrate with automotive industry trends, and it is working for the company. On the other hand, customers make buying decisions and depict their preferences due to high quality, design, reliability, and cost. For Instance, Hunyadi has enabled remarkable fuel efficiency in its vehicle to keep the high switching cost in this competitive landscape. Integrated cost leadership and differentiation are a suitable business strategy for this firm.
3.2 Evaluation of Strategy (Suggestions and Recommendations): Hunyadi
Combined cost leadership and differentiation can be evaluated by using SAF. It is a useful strategic tool to assess the business or competitive strategy. Evaluating the plan regarding suitability, acceptability, and feasibility is the best approach to navigate the current business impact and suggest something for the future (Oxford College of Marketing, 2018).
Being a strategic consultant to the company, I would like to recommend the existing business level strategy. This recommendation can be justified by using SAF.
SAF
Suitability
Integrated cost leadership & differentiation is a suitable strategy for Hunyadi. In the automobile industry, it is necessary for the management of the company to align with modern market and customer trends. The big challenge or constraint for the business is to retain its quality and brand value in the presence of an intense rivalry. Firms like Toyota and Ford intend to reduce the cost of production to grab an immense range of customers. They are expanding and becoming lucrative to sustain the business in the long run. On the other hand, due to this particular business strategy, the firm should be able to generate revenues and maintain brand loyalty. Cost reduction has been used by the company as a differentiation strategy, as comparatively, Hunyadi cars are available at low prices (Jin, 2016). Due to high revenues, it seems an excellent opportunity to expand in neglected markets and emerge as one of the most profitable manufacturing companies in the global automobile industry.
Acceptability
The integrated cost leadership and differentiation strategy are acceptable, as key stakeholders such as investors, management, and customers are quite happy with the brand (Abramowicz, 2008). Hunyadi has successfully created brand value. Visible brand equity made customers assertive in making buying decisions. The cost reduction and differentiation are triggered by business sustainability, success, and satisfied the customers. However, in the internal business process, training and development of employees to integrate with quality and efficiency measures are highly recommended. Employee performance can be improved by using these measures. It can make the business level strategy acceptable to these stakeholders (Holstein, 2013).
Feasibility
The existing business strategy has been proposed, and it is to be sustained to move forward in the future. The strategy can be financed because the firm has already invested billions in research and advertising. Internally, people’s skills exist, but the firm can train employees to integrate with modern automotive industry trends such as automation, machine learning, and artificial intelligence.
Ethical Implications of Strategy: Hunyadi
Issues that impacted Hyundai’s ethical image
Hunyadi has differentiated its vehicles by claiming fuel efficiency. It claims that cars are more fuel efficient as compared to other brands. However, authenticity is a significant issue that can create an impact on the ethical image of the company (Warrick & Mufson, 2017). For Instance, Hunyadi and Kia motors paid fines ($100m) because of their misguided customers (Goldenberg, 2014). Fraudulent activities may restrain the company from retaining the ethical image, as chairman was sentenced for 75 years over construction regulation infringements (Reuters.Com, 2007).
Public Perception
The public or customers perceive this organisation a significant player that can contribute to the reduction in the environmental impact. After the occurrence of this issue, the ethical image has been impaired, as people perceive that firm wants to increase sales and experience the long-term financial benefits instead of proving sustainable benefits.
Impact on Organization’s Current and Future Strategy
Interestingly, this moral issue creates an impact on current and future policy. As mentioned, the company wants to sustain integrated cost leadership and differentiation for the future. Thus, it has to replace measures, which are associated with differentiation. Cost leadership and differentiation must be communicated to get an adequate response in the market.
Conclusion
In the end, it is to conclude that Hunyadi will be quite capable of implementing the cost leadership and differentiation strategy in the future. The automobile industry has changed with time, and it is necessary for the company to evolve. Five forces analysis depicts the high competition in the industry due to the availability of substitutes and competitive strategies of major automakers. A pestle analysis demonstrates the global business situations regarding political, technological, economic and environmental factors. A comprehensive value chain analysis has also been conducted to streamline supportive and primary activities of the company. The firm can gain a competitive advantage if the firm combines all these activities with the cost leadership differentiation strategy. It is Hyunadi ‘s business or aggressive policy, which is to be sustained to secure business sustainability in the future. The plan has been evaluated by using SAF. The strategy is linked with the ethical implication as well, and it creates an impact on customer perception. In the competitive market, the successful execution of the strategy seems mandatory, as it is a single option for the company to sustain the brand image, enable customer satisfaction, and accelerate profitability.
References
Abramowicz, W., 2008. Business Information Systems: 11th International Conference, BIS 2008, Innsbruck, Austria, May 5-7, 2008, Proceedings. Springer Science & Business Media.
Admin, 2016. See how the Toyota brand stacks up against competition from Ford, Hyundai, and more. [Online] [Accessed 1 December 2018].
AFP Relax News, 2017. Hyundai Future Powertrain Strategy Announced. [Online] [Accessed 1 December 2018].
Goldenberg, S., 2014. Hyundai and Kia were fined $100m for misleading customers on fuel economy. [Online] [Accessed 1 December 2018].
Holstein, W.J., 2013. Hyundai’s Capabilities Play. [Online] [Accessed 1 December 2018].
Hyundai.News, 2017. Hyundai Motor Europe’s four strategic cornerstones for growth. [Online] [Accessed 1 December 2018].
Jin, H., 2016. Exclusive: Hyundai to make low-cost SUVs to battle Chinese rivals – sources. [Online] [Accessed 1 December 2018].
Kirk, D., 2010. Tailoring Cars to Fit the Country. [Online] [Accessed 1 December 2018].
Levin, D., 2015. How Korean car makers beat out the Japanese. [Online] [Accessed 1 December 2018].
Lienert, P. & Jin, H., 2015. Hyundai Is Setting A Blistering Pace For Innovation. [Online] [Accessed 1 December 2018].
Ohnsman, A., 2016. Hyundai’s Automated Car Strategy Prioritizes Cost — And Realistic Timing. [Online] [Accessed 1 December 2018].
Oxford College of Marketing, 2018. Evaluating Strategic Options Using SAF Strategy Model. [Online] [Accessed 1 December 2018].
Reuters.Com, 2007. Milestones in the Hyundai chairman fraud case. [Online] [Accessed 1 December 2018].
Six Seconds.Org, 2017. Hyundai Sets the Pace with Creative Thinking. [Online] [Accessed 1 December 2018].
Warrick, J. & Mufson, S., 2017. EPA fines Hyundai, Kia $100 million for underreporting emissions. [Online] [Accessed 1 December 2018].
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