Question 1: HMC’s problems and strategy
During 1980s and 1990s, Hyundai group had been affected by several factors whether internally or externally which had a huge influence on its market position and brand image, in particular its U.S subsidiary, Hyundai Motor America (HMA).
This report will focus on these factors particularly in US and the strategies that help Hyundai to overcome these problems with my point of view regarding whether these strategies were successful or not.
HMA’s difficulties during the 1980s and 1990s:
Hyundai’s challenge came in particular from a sequence of situations facing the company.
Market position and Brand reputation
One of the fatal problem that affected (HMA)’s market position and brand reputation was in 1986, when Hyundai exported its first car model (EXCEL) to US market. HMA sold 100.000 Excel cars within seven months. The timing in terms of US market segmentation was ideal at that time since most of automakers were produce high priced cars and the customers such as college students and young couples wanted a car with a low price. But unfortunately, customers started to realize the severe quality problems in this car for example, the car bodies rusted fast, air conditioners did not work on hot days and it could stop any time on the street with its engine blown.
Because of this, The Excel became among the bottom 10 car models and were also rated the worst cars overall for injury claims based on the analyses of insurance coverage and claims data by the Highway Loss Data Institute. Which cause the sales of Hyundai in 1989 to fell to 30% which in turn affected its market position and reputation in US.
Hyundai was been labeled at that time by low quality-low price cars. The maximum and minimum prices of Hyundai cars were almost the lowest in the auto industry. Hyundai was one of few automakers that did not offer cars priced over $30,000 in the U.S. Many people suspect that Hyundai does not have the capability to produce expensive cars.
The fact that Hyundai cannot command a $30,000-plus price in the U.S. may lead to a false impression that Hyundai should wait until its quality deserves more than $30,000.
In addition, ‘Hyundai group was subject to public criticism because its restructuring was focused mainly on the sharing of property among the Chung family, rather than on the rationalization of management’. (Ki-Won Kim, 2000). Also, the prime income of the Hyundai group and was all given to the family of Mong-Koo Chung, chairman from 1999.
Moreover, the conflicts among the HMC management, the labor union, and HMA; since high labor cost of the Alabama plant (HMA), because the salary of their plant workers in Korea would not be lower than that of Alabama workers. The salary of plant workers in HMC had been the highest increase rate within the Korean labor group which is essential to increase their car price for survival.
Strategies adopted to improve competitive position
These difficulties facing Hyundai led many Hyundai executives to suggest that the solution HMA brought out was to differentiate the standard equipment of its cars from other makers, they did so through producing Santa Fe car and added many features as “standard” in the were “optional” in the RAV4 (Toyota) such as manual air conditioning, power windows, power door locks, delayed power retention system, cruise control, CD player, power adjustable exterior mirror, heatedexterior mirror, and alloy wheels., this resulted in a breakthrough that lead to a fundamental upgrade of its brand image.
These was called the “packaging strategy” or “value pricing” by people working with HMA, an example of ‘packaging strategy’ is when Hyundai suggested implementing a 10 years, 100,000 miles warranty to help in outgrow its cheap car image, but Hyundai’s competitors such as Chrysler and Mazda had begun to imitate this warranty strategy and devised a variety of...