Sales and Growth of Company

Hyundai-Kia Motor Company (HMC) has been in the United

States since 1986 when the Excel was launched. After the

successful start for HMC in America, they were eventually

clouded with poor quality and a bad reputation. In 1989 HMC

opened its first production plant in Bromont, Quebec,

Canada. This seemed to be a great idea in that having a

production plant in North America would help with the

growing success of HMC in an emerging American market.

Quality problems soon followed after the opening of the

plant, which deemed be the crippling factor for this

production plant. The quality issues forced dealership to

close, and the plant was eventually moved to India. () On

top of the poor quality, Hyundai has always dealt with labor

problems at their South Korean plant. The poor quality

branched from the labor problems at these Korean plants.

When they exported these kits to assemble the vehicles at

the North American plant they were never able to fix the

quality problems, instead they were worsted. This failure

would plague Hyundai for over ten years due to their bad

reputation of horrible quality vehicles.

Though Hyundai was struggling to provide a strong

quality product in the current market. In 1999 HMC was able

to acquire Kia Motors creating Hyundai-Kia Motor Company. ()

Thus creating a strong business strategy to overcome a very

competitive market. HMC did this for many reasons including

economies of scale, and an attempt to create an effective

global network. By taking over Kia, HMC was able to increase

their production capacity to 2.3 million cars a year. This

acquisition pushed HMC past Honda as the 10th biggest

automaker in the world.() By using the same parts to create

the vehicles allowed better quality control throughout the

entire process. This helped reduce cost by purchasing large

amounts of parts. Both companies use common parts, which

help the standardization of creating the vehicle improving

the safety of the end product.

There is a production plant in Montgomery, Alabama,

which is responsible for most of the domestic production of

Hyundai vehicles. The sales in the past 5 years and the

market share HMC has in the U.S. market shows how important

quality has been to HMC since they acquired Kia Motors.

Hyundai is assuring continued job creation and investment in

the U.S. by manufacturing there three most popular American

models in Alabama. The Sonata, which led their 2012 sales

with more than 230,605 vehicles sold;

The Elantra, with more than 202,034 vehicles sold; and The

Santa Fe, whose production recently was moved from Hyundai’s

Alabama to Kia’s Georgia plant to bring the Elantra

to the Alabama plant. Hyundai has responded to market trends

and growing customer

demand with record sales of 703,007 in 2012an 8.9 percent

increase from 2011. Between 2001 and 2009, HMC America more

than doubled their market share, which in 2011 accounted for

5.1 percent of the U.S. automobile market.

Market Position

Hyundai Motor Group may be a Korean company, however,

in the United States over half of the cars sold here are

made in the U.S. There are four main facilities, which

produce a variety of Hyundai and Kia models. They are

located in Montgomery, Alabama, which is the main

manufacturing plant. In Superior Township, Michigan, which

is an engineering facility. There are two facilities in

California: California City is where the proving grounds

are, and in a research and design center in Irvine.( )

There are key strategies held by Hyundai Motor Group, which

Hyundai-Kia Motor Company major affiliates of HMG, have

taken upon themselves to continue to be a strong competitor

in the automotive industry.

Hyundai Motor Group competes throughout the world in

many different markets. Their most prominent affiliate is

Hyundai Motor Company and Kia Motors. In the United States a

current market strategy has been to consistently improve

Hyundai and Kia’s brand image and maintain strong sales

growth momentum by launching new models of vehicles. This

has been the main focus for HMC in the Unites States.

Hyundai entered the U.S. market in 1986 when they introduced

the Excel. ( ) There positioning with the U.S. market

played a key roll in implementing a successful strategy. HMC

has differentiated themselves by being self-sufficient, and

actively seeking to be better within the automotive

industry. When Hyundai and Ford where working together they

were forced to terminate their agreement with Ford because

they wanted full control of the managerial decisions. ()

This is just one example of how HMC is self reliant, and

strive to be an independent automotive leader within the

market.

Hyundai-Kia Motor Company is dedicated to reassuring

the customer decision to purchase a Hyundai or Kia vehicle.

HMC provides America’s Best Warranty. “America’s Best

Warranty does more than give you peace of mind; it’s a

commitment from Hyundai-Kia Motor Company to maintain a high

degree of quality, dependability and reliability.”() They

have many different warranty benefits for their customers

when they purchase a vehicle, which beats the competitions

in all three categories. This helps the consumer feel they

are investing in a quality product.

( )

Hyundai-Kia Motor Company is constantly improving their

customer’s experience by providing a hands on approach when

shopping for a vehicle. In 2010 HMC launched an ad campaign

to do just this. Customers got to get behind the wheel of a

Hyundai Sonata, a Toyota Camry, and a Honda Accord and take

each one on a preset course. The course entailed various

road conditions, quick turns, and high-speeds. All of which

the customer was able to test for themselves, and get a

feeling of which car was the best for them. After the tests

were completed the customer was encouraged to gather around

and discuss their experience. They were even asked to post

things to social media about how good or bad their

experiences were. This seemed to prove how important it is

for customers to get behind the wheel of the car they were

looking to buy. Monique Kumpis, Hyundai’s manager for

experiential marketing and strategic alliances, believes

that actually driving the car is the best way of all. She

explains, “ Ad campaigns tell a story but there’s nothing

there for a consumer to touch and feel. The key is letting

consumers draw their own conclusions but to do that they

need to have the Hyundai experience. This is beyond tents

and cones. With everything they can do here it becomes an

experience and the more we can get them driving our cars and

telling their friends about us, the better.” ()

These strategies are to build a brand name customers

can trust to be quality, and pay for what they want instead

of what they hope to get. Hyundai and Kia have made great

gains in recent years by providing quality vehicles at a

reasonable cost. HMC has been able to increase its customer

loyalty because their marketing team has done a great job at

relaying the message to them. Hyundai-Kia Motor Company’s

customer-oriented advertisements and campaign has made

significant gains in respect and reputation among consumers.

Management

The current CEO of HMC is Mong-Koo Chung who is a

chairman and a co-rep director of HMC. The Co-Vice Chairman

is Eui-Sun Chung and Yeong-Heun Seol. The Vice Chaimen is

Jong-Woon Shin. Mong-Koo was appointed CEO when his father

gave him control of the company shortly after the Kia

acquisition. The new CEO was the main reason Hyundai and Kia

focused on a new vision of producing the best quality

vehicles possible. HMC is an international company,

operating under Hyundai Motor Group; they have implemented

many different strategies throughout the world in order to

create better quality vehicles in all countries HMC operates

in.

International Strategic Positions

HMC has become a leading competitor in the global

market from balanced sales growth through global

manufacturing plants. HMC has 7 manufacturing plants, 6

research and development facilities, 14 direct sales

subsidiaries, and has sales in over 190 countries in the

world. () Current international strategies for HMC include

high global utilization and low inventory levels to promote

value pricing in all countries. HMC implies Order To

Delivery production methods in order to customize customer’s

orders to be exactly the way they want them. This helps keep

inventories down, but puts them at risk. If HMC cannot keep

up with consumer demand then they could lose customer

loyalty and brand recognition. This has been an issue

recently with the American manufacturing plants. To help

this problem the Elantra was moved to the Alabama plant in

order to keep up with the demand for the more popular

models.

These are HMC inventory levels in the U.S. and

overseas. As stated keeping the inventory levels low helps

reduce unneeded materials and reduces costs. This ultimately

helps implement a low average selling price, and HMC begin

to reduce the incentives offered when a customers purchase a

vehicle. The ultimate goal for HMC is continuously building

is brand image in all countries. Building brand value not

only increases market share for HMC, but also has allowed

them to become one of the biggest automakers in the world.

Hyundai-Kia Motor Company has increased their efforts in

increasing the average selling price of their vehicles by

lowering the amount of incentives HMC spends per car. By

lowering the incentive spending HMC has seen an increase in

the average selling price by about 8 percent in the U.S.

markets. It has grown globally by about 5 percent from 2011

to 2013. The value of Hyundai’s brand has allowed them to

increase their ASP in all markets because customers trust

they are getting a good deal for what they pay for. Also by

building a better quality car customers do not need to be

incentivized to purchase the vehicle. They are happy with

they quality and care Hyundai has developed over the past

decade. HMC has momentum going forward, which will continue

to increase their ASP of all vehicles and allow them to cut

out incentive spending cost that bring down the average

selling price.()

Core Competencies

Hyundai-Kia Motor Company implements a customer driven

culture, and is focused on providing the best quality

vehicle in every country they operate in. This corporate

driven objective has given HMC outstanding brand value

throughout the global automobile industry. As stated before,

giving the customer the power to chose and providing a hand

on experience increases the value and dependability

associated with Hyundai vehicles. This however, is not the

only thing HMC has done to create better profits and higher

market share within the industry.

HMC has a technology-based production system that

depends heavily on engineering in order to maximize

efficiency instead of relying on a highly skilled workforce.

This has allowed HMC to differentiate its self from their

main competitors within the automobile industry by

eliminating mistakes and in return maximizing utilization

and profits. Hyundai and Kia’s system minimizes worker

involvement by using the newest technology, automating as

many production processes as possible, and minimizing worker

involvement by standardizing the process that low skill

workers must follow.() HMC’s main production focused is to

eliminate as many mistakes as possible in order produce the

best quality vehicle for their customers.

Competitive Advantage: Production System

HMC’s technological Order To Delivery production system

gives Hyundai a competitive advantage in many markets. Their

system’s ability to operate quickly and effectively between

different locations and cultures is a key component for

Hyundai’s success in the automotive industry. For example,

Hyundai’s production plant in Montgomery, Alabama (HMMA) has

been extremely successful in the past decade due to their

effective production system. In 2012 HMMA was ranked the

second most productive plant in the United States. They had

a production rate of 70 units per hours, 19.9 hours spent

per vehicle, and a sign-off ratio of 96 percent. ()

Hyundai’s production system is one of the most effective,

but it also produces some of the highest quality vehicles in

the industry.

Hyundai Motor Company and Kia Motors are the major

affiliates, which make up Hyundai Motor Group. When this

group was formed, HMG controlled even more of the automotive

industry, and pushed to be the top global automotive

provider. In September of 2000 Hyundai Motor Group establish

Hyundai-Kia Motor Company (HMC), which their vision was to

become a Global Top 5 Automaker by 2010.() Kia Motors runs

separately within the industry, but is an affiliate of the

Hyundai Motor Group. Because the same group owns Hyundai and

Kia, they have the same production system allowing them both

to create the best quality vehicle within the automotive

industry. “All of the affiliates will cooperate to turn

Hyundai Motor Group into a top-tier global automotive

provider.” () This vision has established Hyundai and Kia as

one of the top brands within the industry giving them a

great advantage over the competition. Having two major

automotive companies working together in unison provides a

great advantage, and allows HMC to expand their market share

even more.

Competitive Advantage: Hyundai-Steel

Hyundai Motor Group has many affiliates within many

different industries. This gives Hyundai-Kia Motor Company

advantages other major automotive providers do not have. HMG

has leveraged their steel and automobile affiliates together

in order to provide synergy and convergence in order to

create a better value for customers and their communities.

Hyundai Motors invested over 5 million dollars in their

steel subsidiary in order to increase productivity. They

were able to build two new blast furnaces less than a

hundred miles away from the South Korean plant. Hyundai

projects with these new furnaces they will be able to

produce 8 million tons of automobile steel. Hyundai Motor

Group has been able to strategically place their steel

subsidiary to benefit Hyundai-Kia Motor Company by providing

their own steel instead of buying it from a supplier.

Hyundai has manufactured high quality lightweight but strong

steel in order to provide safe cars with high fuel economy.

()

Hyundai-Kia Motor Company and Hyundai Steel work

together in order to produce the best quality products.

Hyundai Steel has made research and development a top

priority. “Hyundai Steel has expanded joint R&D activities

to develop advanced technologies” (). The Total Solutions

Center at Hyundai Steel plant focuses on creating new

technologies for automobiles. They use effective processes

in order to create the strongest steel in order. They use a

stamping process, which heats the steel at 900 degrees

Celsius and then cools it at the same time. This makes the

steel four times stronger than what it was before going

through the stamping process. Once the steel is made this

way they can specifically make parts for Hyundai-Kia Motor

Company ().

Hyundai’s R&D center is at the core of all business

process carried out by these business partners. Each piece

makes up an important factor in becoming one of the largest

global automotive providers in the world. Hyundai is focused

on providing the best quality by developing solutions now to

help future generations. Hyundai has made great efforts with

their affiliates and subsidiaries in order to provide the

best quality automobile throughout the world.

Competitive Advantage: Hyundai HYSCO

Hyundai Motor Group is the third largest conglomerate

in South Korea only behind Samsung Group and SK Group. HMG

is parent to another major affiliate, Hyundai HYSCO who is a

major global competitor in the steel industry. Hyundai HYSCO

is the third factor contributing to the Hyundai’s R&D

Center. HYSCO contributes to HMG’s manufacturing process by

focusing on reducing the steel’s weight used to build

automobiles. HYSCO uses three methods when developing

automobile parts, which include: Taylor Welded Bank (TWB),

Hydroforming, and Hot Stamping. Each method is designed to

create a specific part of the automobile. ()

The first method used to create lightweight vehicles is

Taylor Welded Bank (TWB). TWB means that boards in different

material quality and thickness are blanked and laser welded

according to form, required in building an automobile. This

is the latest automobile lightening method focused primarily

on initial cost decrease through enhancement. “TWB is the

latest method of construction that simultaneously enhances

safety and reduces automobile waste gas, main factor for

global warming, by enhancing fuel efficiency of automobile”.

The uses of TWB produce door inner panel, rear wheelhouse,

wheeler reinforcing panel, and side member pane of an

automobile (). These pieces are crucial in reinforcing the

inner part of the automobile helping the overall safety of

the entire automobile.

The second method used to create lightweight vehicles

is Hydroforming. This is an advanced technique to make

automobile parts with complex shape, not by welding various

shapes of pressed plates, but by forming steel tubes with

pressurized liquid inside the tubes. There are crucial

strengths when using this method which include:

Decreasing the number of structure parts due to

integrated structure

Decreases the number of welders per vehicle

Increase in intensity and rigidity

Enhancement in material gaining percentage and size

precision

All of these strengths from hydroforming help reduce costs

of production and lighten the automobile.

The bending machine starts the procedure by bending the

steel in the shape of the vehicle’s frame. Once they have

the specific shape a performing press and lubricating device

prep the steel to be pressurized and pressed into exact

specifications for each vehicle. Performing press and

hydroforming press occur simultaneously, which sends

pressurized water into the steel tubes to form the exact

size and shape of the parts made from this process. After

they have the desired shapes they can then send the parts to

post treatment, which they are then ready for the

manufacturing process.The engine cradles, the chassis

frames, and the front side members are all made from

hydroforming. The parts created from this procedure are the

main parts in creating Hyundai’s vehicles. By eliminating

the number of welds within the frame of the vehicle provides

the highest quality safety for the customer. Lower the

amount of steel used provides lightweight vehicles, which

increase fuel efficiency and reduce the carbon footprint

made by Hyundai’s vehicles.

The third method used to create lightweight automobiles

is Hot Stamping technology. This method is the construction

to manufacture high tensile parts by heating steel in high

temperatures for 5 to 6 minutes. Then taking the steel and

molding the pieces together with a press in high

temperatures while rapidly cooling the steel upon molding

within the desired molds to create the developed part. The

parts created from hot stamping are Roof Side outer Ref.,

Center Pillar Ref., Center Floor Side Upper Mbr., and Bumper

Back Beam. These pieces construct the sides, the roof, and

some of the bumper. They need to be very strong in order to

provide the customers the safest vehicles.

These pieces create the integrity and shape of the

vehicle, which other pieces are then attached to these steel

parts during the manufacturing process. With high quality

steel and strong procedures in place provide Hyundai Motor

Company the materials needed to manufacture the safest and

highest quality vehicles within the industry. Reducing the

weight of the vehicle provides a competitive advantage most

automobile manufacturers are pursuing. Hyundai implements

key strategies by focusing on technology and research and

development to provide safe and quality vehicles to

consumers throughout the world.

Sustainability: Current Strategies

Hyundai Motor Group has developed and implemented core

values for all of their affiliates to follow. Mentioned

early in the case, Hyundai-Kia Motor Company is the major

affiliate of Hyundai Motor Group. HMC is leading the way in

innovation and sustainability throughout the global

automotive industry. Over the last