Diamond Analysis of Hyundai
Hyundai, with its excellence and quality, has carved a niche for itself in the international automotive industry. The Korean company ranks 10th in the global list of carmakers and is known to have survived the thick and thin economic conditions, emerging as a leader. This has been possible for the company as it identified the right opportunities, acted pre-emptively and kept its strategy simple yet aggressive. The primary focus of the company has always been to keep the costs low while achieving maximum market share. Its home nation has provided the competitive edge, which is analysed here by using Porter’s Diamond of National Competitive Advantage (Porter, 1990).
Porter’s Diamond Analysis
There are different indigenous as well as exogenous factors that play a phenomenal role in the success of a multinational enterprise like Hyundai. They are mutually interdependent. Such factors either impede growth or favour the same, which consequently leads to the development of business patterns and systems (Krugman & Obstfeld, 2003). To evaluate the contribution of each of these factors, Michael Porter has devised four pillars that will help in analysing the elements of Hyundai’s international success:
1. Factor Endowments
Korea is replete with low-cost labour, technologically inclined human resources that fulfil the innovation requirements and funds. In case of Hyundai, most of the capital investments are in the form of FDI. Therefore, as mentioned in the case study, an abundance of cost-effective labours, high technology, knowledge workers and capital in the form of inward FDI are the important factors that support the growth of capital intensive and highly competitive automobile industry of carmakers. Besides, Hyundai, while expanding worldwide, has ensured to tap similar locations that provide similar factor conditions as well as access to new markets (Dunning, 1993).
2. Demand Conditions
The change in lifestyle and increase in the standard of living is the driving forces of demand conditions prevalent worldwide for Hyundai. Besides, the company has something to fit for every demand class – economy version cars, sedans, SUVs, heavy vehicles, etc. Hyundai has keenly shifted from the ‘making and selling’ principle of ‘listening and customizing’ (Bauman, 2000) when the demand for the brand lowered in the 1990s.This led Hyundai to develop exclusive and unprecedented packages like 10 years warranty, assurance, quality check, customizations, etc. to sustain the demand and the market share. The company has a growing demand globally – with the US, Asian subcontinent, Gulf countries and Europe leading the demand.
3. Strategy, Structure and Rivalry
The strategy of Hyundai is driven by growth and expansion internationally. The company’s strategy ensures to have an optimal mix of the factor conditions and demand conditions. To gain access to new markets, the carmaker has entered into joint ventures with the local carmakers like in China. To expand its R&D base and be at the forefront technologically, it has tied up with the giant Daimler and Chrysler. The company’s strategy is to have a diversified market presence so that a single or dominant market or national fiscal policies or government intervention does not affect the sales. Due to this, the company had remarkable profit margins even when the other carmakers experienced short sales and other threats of economic crisis post-2008. Many big players either merged or acquired to surface the crisis led by low demands and excessive capacity. Hyundai also lay off employees, but its primary focus was to diversify geographically and capitalize on the developing economies even during the crisis.
The industry is characterized by extreme competition across all the sectors – be it luxury cars, economy cars or heavy-duty vehicles. Yet, with quality focus and innovation in the core, Hyundai cars have sustained its market share. The unique make of cars has also bagged many awards to the company over its rivals. To beat its rivals, Hyundai sought the marketing pitch by replacing the big brands through aggressive promoting ideas and market entry strategies (Crane, 2010).
4. Related and Supported Industries
Hyundai’s origin country has been home to conglomerates that have extensively relied on building supply chains that ensure efficiency in and out. The company has strong affiliates across the world that ensures in time supply of inputs like the engines, tires and other parts. Besides, the company has established distribution centres of the spare parts through distributors and network channels. The carmaker is vertically integrated into the industry. It also has horizontal tie-ups to support R&D and remain competitive internationally.