Executive Summary
Hyundai is one of the most famous automobile companies in the world. The renowned brand has seen expansion in recent years, mainly because of its dedication to technological innovation and its ability to understand the changing customer needs and tastes at the right time. The brand has now developed into the Asian markets as well with a much notable success that now accounts for a large part of its revenues followed by the revenues from North America. Other than the advanced technology and the superb quality of the products, the company is known for its manufacturing capabilities and its global presence. The analysis of the company included an evaluation of the internal and external environment of the company which showed the suitability of the company to currently look into new areas of the market for better growth opportunities. The analysis of the internal environment showed that the company has been facing some ethical issues in the shape of product recalls and union strikes which show it needs to strategies in this area as well. After internal and external analysis, the business level strategy of the firm is evaluated along with the key recommendation. Ethical implications create an impact on the business process and strategic planning, and it is also present along with several insights.
Introduction of Hyundai
With the changes in the environment, organisations are required to change their strategies accordingly to adapt to the environment for their growth and sometimes for their survival. Hyundai is one of the most popular and leading automobile manufacturers in the world. The vehicle brand has increased in recent years, mainly because of its commitment to technological innovation and its ability to comprehend the changing customer needs and tastes in time. Other than the advanced technology and high-quality products, the company is known for its exceptional manufacturing capabilities and its worldwide presence. The brand has now grown into the Asian markets with a success which now accounts for a large part of its revenues followed by the revenues from North America.
However, in the last decade, competitive forces have made the automobile industry slightly aggressive as well. The industry seems to be undergoing a significant transition. The uncertainties in the market are expected to remain in the market for some years. However, the company is committed to becoming the leading manufacturer of environmentally friendly automobiles. The emphasis of the study is on internal and external analysis along with the evaluation of the business (competitive) level strategy. Ethical implication is also a crucial part of the study to evaluate the recommended strategy.
External Environment Analysis for Hyundai
Porter Five Forces for Hyundai
Power of buyers
The power of buyers is high. Automobile companies are imitating features, size, prices, and distribution. Thus, the availability makes this force strong.
Power of Suppliers
The power of supplier is low because firms do not focus on concentrated supplier policy. Different suppliers are used for different manufacturing purposes.
Threats of Substitutes
The risk of substitutes is high because of emerging small car manufacturers.
Threats of New Entrants
The risk of new entrants is low due to high capital investments. It seems harsh to create hype and create a favourable brand image in the industry.
Competitive Rivalry
Fierce competition is in the limelight due to existing competitors. Toyota, Suzuki, Honda, Nissan, Mitsubishi, and Tata motor are significant players, which express high brand image and market share (Balise, 2016).
PEST Analysis for Hyundai
Political
Political stability is a significant concern for industry or companies. It supports business expansion and strategic decisions.
Economical
Stability and good condition are necessary for the automobile business. Hitting the developing economies where the unemployment rate and GDB rate is low is the best option due to lower labour costs and bargaining power.
Technological
Meeting the demands of tech-savvy people in different countries is the right approach. Millions have been invested in the research and development process.
Environmental
The environmental impact has emerged as a vital issue for automakers. Integrating with environmental regulations and reducing the environmental impact is essential to survive in the industry for a long run (AFP Relax News, 2017).
Industry Analysis for Hyundai
The automotive industry has been much better in recent years after the financial crisis. The profits and revenues have increased in the US market. The Chinese market has seen steady growth as well. The sales are expected to grow at the same speed in the year 2020. Various trends are shaping this growth in the automotive industry. Electric vehicles and free driving introductions now form the fast transition through which the industry is going through it. The automotive industry is expected to see its future shift entirely to electrical driving as well as autonomous driving (Leggett, 2016).
Internal Environmental Analysis of Hyundai
Value Chain Analysis of Hyundai
Competitive Advantage for Hyundai
The production capacity is in the limelight, which also supported the geographical diversification. Mass production and global distribution network are strong competitive forces, which leads towards a competitive advantage. Investment in research and development is helping the differentiation capability of the firm, and it also provides a lead to gaining a competitive advantage.
The Strategic Analysis of Hyundai
Business Level Strategy Analysis: (Brand Innovation)-Hyundai
The recall of the vehicles from Hyundai has caused a lot of trouble for the company brand image and its future investment sales regarding its financial structure. A survey has shown that Hyundai has the worst ratio of having 1.15m vehicles getting recalled for each of its models since the company entered in the US market in the year 1986. The company defines its corporate strategy as brand innovation which is based on the norms of quality. The company implements this strategy by aiming at the targeting of the highest quality of delivery of customer satisfaction through controlling every aspect of the processes. IT further aims at consolidating the essential principles of the company regarding the qualitative development for managing the future competitiveness of Hyundai. The company also seeks to strengthen the technological competitiveness of Hyundai by making investments in the research area for electrical control vehicle systems and eco-friendly vehicles.
One strategy can be to make eco-friendly vehicles. The company has invested in this area and is looking forward to pondering this market. Environmental sustainability has become more of an important thing for the customers, and the company should consider the changing customer preferences to remain relevant in the market. The company can adopt this strategy to strengthen its competitive strength. Furthermore, it is no longer a luxury to have environmentally sustainable operations. The companies in the world now know the importance of adopting ethical business practices to better gain from the services. The companies now need to make their operations less harmful for the environment in any way possible. It is just one aspect of business ethics. The company Hyundai also needs to work on its labour relations as well. The riots and strikes against it in South Korea by its labour shows it needs to work on its employee’s motivation and commitment to the company. It does not mean it has to force them to do it. It implies it needs to adopt strategies which are aligned with the rights of employees and labour and does not violate these in any way (Derose, 2014). Another significant opportunity presented by the market is the introduction of motorised vehicles in the market. Many competitors of the company have already launched their first few versions of the automated cars in the market. The company Hyundai can also work on getting this opportunity to work on their research in Artificial Intelligence and incorporate it in its vehicles to provide automated driving experience to its customers.
The use of technology has only increased. With this, it can be said that in the coming years, more and more of the companies will be entering into the market of Artificial intelligence, automated driving, and eco-friendly vehicles. It is important to notice that the computerised cars can be made eco-friendly as well. It presents another untapped market, which offers an excellent opportunity to the automotive industry.
Strategy Evaluation and Recommendations for Hyundai
Formulation of strategy and its further review comes with the difficult task to select one of the best strategies among the entire alternative. The assessment of the usefulness and effectiveness of the plan before it is implemented is tough. However, it can be done by using the SAF model the approach looks at the suitability, Acceptability, and Feasibility of the options and the best fit among these fulfils the criteria is selected as the final strategy for implementation.
SAF
Suitability
Suitability is one of the most critical factors of the strategic model of SAF as it is essential to understand if the strategy wants to do what the company needs it to do. The suitability can be judged in many ways like the environmental suitability, the capability suitability or the expectation suitability. The Hyundai strategy of brand innovation is making use of the company strengths; thus, it fulfils the capability suitability. The strategy also provides the expected results of growth if successful which meets the expectation suitability. The last criteria of environmental suitability are also fulfilled with environmentally friendly vehicles. However, it is not entirely satisfied with Artificial Intelligence or the automated car. However, the company can make it eco-friendly as well to fulfil this capability.
Acceptability
This aspect of the model is all about the measurement of the risk and return. The company needs to assess the reactions of the stakeholders on this strategy and for the presentation of the strategy alternative; returns and risk associated with it can be calculated as well. Cost-benefit or profitability analysis can be used for the measurement of the profits. Furthermore, all the corporate losses, potential failures, and risks should be considered a weighed down to get the real feelings about the business risk. Sensitivity analysis can be some to measure it (Oxford College Of Marketing, 2018).
Feasibility
It is the make-or-break stage of the strategic model. These stages are the business has the capability or not, they can implement it or not, the financial feasibility is to be done to assess it. It is done by forecasting the cash flows from the strategy implementation and also through performing a break-even analysis. It can be some by looking at the feasibility of the equipment, workforce, management power, market and material for the strategy.
Ethical Implications of Strategy-Hyundai
Ethical Issue and their Impact
The brand innovation is linked to moral consideration as well. In the United States of America, Centre of auto safety has put pressure of Hunyadi and Kia Motors to recall 2.9 million vehicles (Associated Press, 2018). Brand innovation is an ethical approach after this significant recall. Ethically the firm must have to ensure the safety of customers. Melted wires, burning odours are, and the smoke is several issues, which have been observed in the United States and many other countries. The ethical image of the company has been impaired due to these car incidents. The firm is just focusing on cost leadership and differentiation to make the vehicles different and maximise profitability. However, ethically, the image has not been sustained.
Perception in Public of Hyundai
The public perception has been changed after these unethical business practices and car incidents. People think that vehicles are not reliable, and they move towards different substitutes. People perceive the brand due to quality, reliability, safety and features along with the price. However, if the company does not depict safety and reliability, the perception cannot be changed by just depicting the design, quality, cost, and features. Thus, the most important thing for the company management is to change the perception of people in the competitive automobile market through innovative branding. Of course, innovation can help the firm make cars, which are reliable and safe (Maric, 2018).
Effect on Current and Future Organizational Strategy of Hyundai
The current strategy of the company is cost leadership. The future strategy of the company is brand innovation. The ethical issue creates an impact on both strategies. For Instance, after recalling millions of cars, it looks tough to control the production cost. The firm has to reuse these cars in production facilities. It can increase the prices of the company’s outputs. It is also unethical to put the cost burden on customers. Ethically, it has to sell cars at the same prices to retain its image. On the other hand, brand innovation will support the ethical image. Disruptive innovations are to be taken to be relevant in the industry. Ethical consideration in the production process is imperative to rationalise the brand innovation in the future (Akhtar, 2015).
Concluding Remarks
In the end, it can be concluded that the analysis of the company has revealed that the internal and external environment of the company is suitable for the company to look into new areas of the market for better opportunities. The company has been facing some ethical issues in the shape of product recalls and union strikes, which shows it needs to work on that as well. Furthermore, the untapped market of artificial intelligence and eco-friendly vehicles should be the next significant consideration for the company in future years. This needs investment in the area of making cars environmentally friendly. Brand innovation is the recommended strategy for the firm, and it will further support the ethical image of the company.
References
AFP Relax News, 2017. Hyundai Future Powertrain Strategy Announced. [Online] [Accessed 6 December 2018].
Akhtar, T., 2015. How ethical innovations boost brand perceptions. [Online] [Accessed 6 December 2018].
Associated Press, 2018. Center for Auto Safety wants Hyundai and Kia to recall 2.9M vehicles. [Online] [Accessed 6 December 2018].
Balise, 2016. See how the Toyota brand stacks up against competition from Ford, Hyundai, and more. [Online] [Accessed 6 December 2018].
Derose, C., 2014. Hyundai: Wage Issues & Illegal Dispatching of Workers. [Online] [Accessed 6 December 2018].
Jung, S., 2018. Hyundai Motor plans $21.5bn new technology spend. [Online] [Accessed 6 December 2018].
Lee, J., 2011. Hyundai steels itself for a cleaner future. [Online] [Accessed 6 December 2018].
Leggett, D., 2016. Hundai Motor Posts 2016 Sales & Profit Declines. [Online] [Accessed 6 December 2018].
Maric, P., 2018. Hyundai Australia Seeing Big Changes In Brand Perception. [Online] [Accessed 6 December 2018].
Oxford College Of Marketing, 2018. Evaluating Strategic Options Using SAF Strategy Model. [Online] [Accessed 5 December 2018].
+447462439809