Hyundai Case-Megan Gray

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Apr 3, 2024

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Megan Gray Strategic Management Hyundai Case 1. When reading the case we were able to learn about the automobile industry both globally and in Korea during the late 1990s. Globally the automobile industry was dealing with an oversupply. Marketers were producing more than what was being demanded. Due to societal demands for safety and environmentally friendly vehicles, the R&D costs had increased. Still with mergers and strategic alliances that were going on, the competition in this industry was still very competitive. In Korea however, they were still dealing with a weak domestic demand and a continuous oversupply. Japan was a huge part of the Korean automakers supply chain due to their technology. The US market however lacked the marketing to give them more of an advantage even though Korea Auto did well to compete with prices with the Japanese automakers. a. Porters Five Forces: i. Rivalry: The threat included the threat of other companies in the industry, especially those who were playing an important role in the oversupply of automobiles. Another important threat to talk about was the threat from over companies that were looking to acquire Kia before Hyuani, those included Samsung Motors, LG Group and Ford. The threat of rivalry overall in this industry is high. ii. Threat of new entrants: The case doesn’t really mention much about new entrants trying to enter the industry or how hard it would be to enter. However if we were to make an assumption, the threat of new entrants to me would be low. It would take a lot of money and capital to even try to enter the industry. We can use the example of Kia entering bankruptcy from the pre existing competition of domestic automobiles for economies of scale. Because no new companies enter the market or tried to enter the threat of new entrants would be low. iii. Bargaining power of buyers: Buyers in the automobile industry have a high bargaining power. The amount of choices they had to choose from gave them the power to choose where to buy from. They were the ones who controlled how many cars were bought and what brand to choose from. Switching costs were low as there were a number of alternatives brands and models available to choose from. iv. Bargaining power of Suppliers: While the vast majority of bargaining power came from buyers, suppliers still have an important role. The scale of production gives automobile manufacturers a moderate amount of bargaining power. Overall the bargaining power of suppliers was moderate. v. Threat of substitutes: The case also didn’t really mention anything about the threat of substitutes. Public transportation, substituting Hyundai/Kia for a different brand or taking a bike could be a threat of substitute. Overall the threat of substitutes would be moderate as there are some threats but not a vast majority of them.

2. Hyundai made the correct decision to acquire Kia motors. We can look at it in the way it impacted Value, rareness, imitability and organization. With value, their value definitely increased after acquiring Kia. They would be able to meet consumer demands across a more diverse product range with acquiring Kia. Hyuandi already had a high value but now with Kia they provide more products that can meet more consumer demands. Both Hyundai and Kia have a valuable product to consumers. With rareness, it was necessarily rare because the case stated many other companies that merged with others. There were many other companies providing the same products as Hyundai and Kia. Imitability, it would be easy for other companies to try and imitate what Hyundai gets from merging with Kia. It would be easy for other companies to imitate each model of car they had. Many other mergers already had similar products like Hyundai and Kia or it would be easy for them to recreate. As far as Organization, they have a very good organization with the bundled resources that they have. The case stated that they got to a point where they had to lay off people. Acquiring Kia gave them more control of Korea and got them into top 10 in the world as well as provided them with more locations to sell their products. Overall Hyundai made the correct choice strategically in acquiring Kia. 3. The administrative tasks that Hyundai needed to complete after acquiring Kia included, reorganization of the automobile division, integration of the business division and organizational changes. As far as reorganization of the automobile division, Hyundai planned to integrate the management of the two companies. The case also mentioned that they needed to install a coordination committee to coordinate the production, sales, R&D, parts supply, workforce operation and fundraising. For the business division Hyundai absorbed and merged Kia’s five affiliated automobile companies into Kia motors and disposed of Kia’s eight other affiliated companies. For organizational changes, Hyundai was for the most part operated through a direct management system but they changed to a horizontal management system after separating the automobile division from the Hyundai Group. 4. When talking about economies of scope they were more focused on horizontal integration instead of vertical. The case stated that they switched from direct to horizontal. When they two came together they were able to meet each consumer and what kind of car they wanted to enjoy, allowing them to enjoy the new scope they created. They were able to reduce costs of making car while still being able to come out with more models. Merging with Kia gave Hyunai the opportunity to create a better competitive advantage between its competitors. Kia had lowered the pressure for capital to develop new models for the short term with the development of the Carnival, Carens, and Rio.

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