The automotive manufacturing sector consists of automobile and light truck manufacturers, motor vehicle body manufacturers, and motor vehicle parts and supplies manufacturers. United States, Japan, China, Germany and South Korea are the top five automobile manufacturing nations throughout the world. The United States of America is the world's largest producer and consumer of motor vehicles and automobiles accounting for 6. 6 million direct and spin-off jobs and represents nearly 10% of the $10 trillion US economy.
Automobile is one of the important industries in the world, which provides employment to 25 million people in the world. Overview The main purpose of this research report is to compare the global strategies which Hyundai Motors and Ford utilize in managing their international automobile business. The firm I use as my "base” firm is Hyundai Motors, while Ford is the "competitor". I would like to illustrate where Hyundai Motors stands compared to the competitor in terms of managing its 1) Global integration/ efficiency 2) national responsiveness 3) worldwide learning to grow their international business as a transnational firm.
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At the end, I could possibly find out the competitive advantage of Hyundai Motors by this and develop a recommendation for Hyundai Motors to do a better job than its competitor in the automobile industry. Company Profile Hyundai Motors *All data in this section provided by Hoovers. com South Korea's leading carmaker, Hyundai Motors produces compact and luxury cars, SUVs, and mini vans, as well as trucks, buses, and other commercial vehicles. The company re-established itself as South Korea's leading carmaker in 1998 by acquiring a 51% stake in Kia Motors (since reduced to about 34%).
Selling cars in the US since 1986, Hyundai Motors started selling its heavy trucks stateside in 1998. Hyundai's models for the North American market include the Accent and Sonata; models sold elsewhere include the GRD and Equus. Through its Hyundai Motors WIA subsidiary, it also manufactures machine tools for metalworking applications, such as horizontal machining, turning, and vertical machining. The Hyundai Motors has been in existence for more than 40 years and is one of the most diversified business organization and one of the most famous conglomerates in the world.
The group is active in sectors such as shipbuilding, steel, petrochemicals, heavy machinery, electronics and aerospace. Hyundai Motors was established in December 1967 as an export-oriented light industry company in textile, footwear and wigs etc. Since then it has moved into heavy industries as well as into the automobile industry, and has managed to sustain its position as the largest automobile company in Korea. During the currency crisis in 1997, they went through a hard time but they managed to overcome the adversity through continuous exports and innovation within the enterprise.
Since the company was founded, they pursued independence in technology from the developed countries so that they could strengthen their position mainly based on exports. Low labor costs and cost leadership enabled them to step into the international business arena. In 1974 Hyundai motors went for an IPO and got listed on the Korean stock exchange. Hyundai Motors achieved much in 2007 despite the challenging business climate. Numerous sections of the world media have praised Hyundai Motors' high quality. Improvements in customer satisfaction and a continuous sales growth demonstrate Motor's ability to increase its market share.
Hyundai Motors' success, watched closely worldwide, is a result of continuous and aggressive innovations that have been implemented on behalf of customers. Hyundai Motors continues to stabilize its global management by establishing an effective cooperation system among production bases around the world. Ford *All data in this section provided by Hoovers. com Ford Motor began a manufacturing revolution with mass production assembly lines in the early 20th century. Ford Motor is one of the largest automobile manufacturers in the world. It manufactures and distributes automobiles across six continents.
The company's automotive vehicle brands include Ford, Lincoln, Mercury and Volvo. It primarily operates in the US and Europe. Among its successes are the redesigned Ford Mustang, the F-Series pickup, and the fuel-efficient Focus. Finance unit Ford Motor Credit is one of the US's leading auto finance companies. Ford owns a small stake in Mazda but has sold Volvo to Zhejiang Geely Holding, parent of Geely Automobile, for about $1. 3 billion cash and other monetary consideration. Though it operates about 90 plants worldwide, Ford Motor gets more than half of its sales from North America.
Now that the Mercury brand has been discontinued, finances are freed up to spend on product development and marketing for Lincoln, Ford's luxury brand. The company plans to pave the way for the 2011 model push, which includes the Lincoln MKX and MKZ Hybrid. This change of pace comes on the heels of the global economic downturn that hit the auto industry particularly hard, especially in North America. Although Ford didn't seek loans from the US government or go through bankruptcy as Chrysler and General Motors did, the company took a huge hit to its bottom line.
Its ability to recover from a series of year-over-year lackluster results is weighted down by billions in debt. In an effort to refocus resources on its North American and European businesses, the company reduced its 33% stake in Mazda to 3%, effectively ceding control back to the Japanese. In a larger move, Ford sold Volvo. Geely, China's largest privately owned carmaker, acquired Ford's Volvo unit in mid-2010. In the meantime, Ford looks to decrease costs as well as position itself to respond more quickly than its rivals to changing consumer demands. To this end, the company restructured its production facilities.
The drive towards fuel-efficiency, safety, and design has paid off. In February 2010 Ford's year-over-year sales were up by more than 40%. Like many other car makers, the company is looking to emerging economies -- including China, India, and Brazil -- for growth. Ford is planning to import its Edge model -- which will be introduced at the 2010 Beijing Auto Show -- into China by 2012. The company is also developing all-electric versions of its Transit Connect urban delivery vehicles; small delivery trucks are popular across Asia. Global Strategy *data from marketline The current issue in the world economy is characterized by globalization.
Corporations have built up a world-wide network economy by promoting production and trade. An important cause for the globalizing trend of the world economy lies in relocation of production sites and management strategies of business. Firms need not only partnership with foreign companies in the form of direct investment and joint ventures, but they need also to develop cross-border buyer supplier relations. These trends also provide opportunities for the sharing of risks and costs in R&D and production. Globalization is driven by strategic alliances that reflect a shift of company strategies.
Globalization is an increasingly important aspect of the automobile industry. In the past decades, the automobile industry has been one of the main driving forces in globalization. Global Strategy of Hyundai Motors Hyundai Motors initially succeeded by the centralized, globally scaled business leveraging economy of scale. With auto sales in its home market stagnant, Hyundai Motors looked to key overseas markets for growth. Its drive into emerging market proved just as important to the company's goal of becoming the world's fifth-largest auto maker -- and just as disruptive to competitors' plans.
The Korean company is trying to outflank its rivals and take over smallish markets before they grow, building large, modern plants to give it and its suppliers the economies of scale they need to operate profitably. However, the company developed its developing strategies moving on to a transnational mentality by becoming more responsive to local needs while capturing the benefits of global efficiency they established at the beginning. The resources and activities are dispersed but specialized to achieve efficiency and flexibility at the same time.
Furthermore, these dispersed resources are integrated into an interdependent network of worldwide operations. The manufacturer ties their decentralized development organizations into a cohesive, unified global product development operation. Hyundai Motors is successively operating in US market attributed to their flexibility responding to the local market. This is shown by various programs exclusive for the US market such as the company's highly publicized Hyundai Assurance vehicle return program, America's Best Warranty (for cars old in the US), and free roadside assistance.
That strategy stands in stark contrast to many bigger rivals. In India, for example, U. S. and Japanese carmakers tiptoed into the market in the '80s and '90s with tired offerings built from imported kits. Hyundai Motors held off until 1998, but then set up a plant capable of building 100,000 of its latest-model cars a year and established a network of dealerships and service stations. They could possibly offer the most up-to-date technologies to the Indian customers.
As India's economy boomed, sales from plants there rose to 215,630 last year from 111,051 in 2002, and the factory has since been expanded to a capacity of 250,000. Hyundai Motors establish a joint venture to expand to the emerging market and respond to the local market. The company operates two of its manufacturing plants in China through Beijing Hyundai Motor, a 50:50 partnership with Beijing Automotive Holdings. (businessweek 2005/6. 20) Hyundai Motors acquired worldwide learning through going abroad. Hyundai Motors established a technology center in Japan with Mitsubishi as they thought it is necessary to acquire the technology.
Hyundai Motors did not have its own production capability at the beginning so they learned most of the skills from Mitsubishi. However, in order to sustain a competitive advantage it is necessary to have its own ability of R&D. Hyundai Motors learned from Mitsubishi to leverage their own technological capability to build their own R & D Center. Global Strategy of Ford *data from 10-k of Ford motors Ford pursued international strategy initially. High tariff motivated the US companies to go abroad and build a plant and operate in the local market.
However, US companies were not used to localization while European makers such as Peugeot or Renault produced based on segmentation and identifying consumer needs. The consumer requirement was getting varied with the technological development, the industry was moving to multinational mentality requiring localization. Recently, they acknowledge the international approach lacks the organization to share vision. Therefore, Ford is growing through M&A for economy of scale. It could be assessed that Ford is shifting to a transnational mentality .
One Ford global product development system ("GPDS") allows it to realize efficiencies in capital and engineering costs, to increase revenue, and, in general, to bring to market a broad range of frequently-freshened, highly-acclaimed global vehicles that customers want and value. In addition, GPDS allows it to accelerate to market the number of new products designed to meet shifting consumer preferences of more fuel-efficient vehicles. Overall its global product strategy is to serve all meaningful geographic markets with a complete family of products that have best-in-class design, quality, green, safety and smart features.
The efficiencies resulting from One Ford GPDS and global product strategies are demonstrated by a 60% reduction in engineering costs and a 40% reduction in capital costs from 2005 to 2008, per typical new vehicle, with ongoing improvements planned. (Ford 10-K report-strategy and trend) However, Ford is making effort to be responsive to the local market. Ford is establishing its business through its joint venture partnership to respond more effectively to the local market.
Ford and its joint venture Changan Ford Mazda Automotive Ltd. are building a new assembly plant in Chongqing, and made an agreement to build a new engine plant also in Chongqing. There is another example that shows this aspect of responsiveness. Ford India last year launched the Figo small car to boost sales, as three-fourths of the cars sold in India are in that category. To cut its production costs and offer cheaper models, Ford also intends to have a high level of local components in some upcoming models. (MarketLine) Ford Motor introduced various new and improved models in order to expand its product offerings.
This is where we can see Ford is shifting to a transnational mentality. In North America, the company introduced Ford F-150 pickup. It also plans to introduce the upgraded gas and new hybrid versions of the Ford Fusion midsize sedan; a new Ford Mustang, and Shelby GT500; a new Ford Taurus; a new type of small commercial van for the North American market called the Ford Transit Connect; an upgraded Mercury Milan and new Milan Hybrid; an upgraded Lincoln MKZ; a Ford Flex and Lincoln MKS with a fuel-efficient EcoBoost engine, and an all-new Lincoln MKT premium crossover.
In Europe, the company intends to launch the new Focus RS; and introduce the new Ford Ka in 2009. Further, in Asia, Ford Motor plans to introduce the all-new Ford Fiesta five-door and four-door sedan in China, Australia and New Zealand. Other new product introductions in 2009 include the Ford Ranger compact pickup and Ford Everest SUV. A strong pipeline of new and improved products is likely to drive Ford’s organic sales growth in 2009.
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