Hyundai Analysis

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Hyundai Consultant Report
Team Seven

4/26/2011
MGMT 4000: Strategic Management
Michelle Marshall, Isaac Sokol, Tina StCyr,
Kevin Voigtschild, Chris Yonushewski

Decision Issue
Our group conducted an analysis of Hyundai Motor Company to determine whether or not the company should continue to sell their luxury cars under the Hyundai brand, to sell them under a different brand name, or to discontinue certain car lines. After an examination of the US automotive industry and of the Hyundai Motor Company itself, our group focused on three different analysis tools to help answer the strategic decision issue: an RBV analysis, a Value Stick analysis, and Game Theory analysis. Ultimately, we conducted an exhaustive study of the pros and cons of the possible options Hyundai has and made our recommendation. Industry Analysis

We are researching Hyundai Motor Company, which operates in the automobile industry. Hyundai’s operations are set in Korea and have been around for 44 years. The automobile industry is dynamic and undergoing multiple changes throughout its landscape, including the bailout of major brands in the US and abroad. By revenue, it is one of the most important economic sectors in the world. The top five car manufacturers are Toyota, GM, Volkswagen, Ford and Hyundai-Kia. The automobile industry has a moderately high threat of substitutes and a low threat of new entrants. Suppliers maintain a low bargaining power, but buyers hold a high bargaining power and the intensity of rivalry among firms is incredibly high. Threat of Substitutes

The threat of substitutes for the automobile industry is moderately high. Customers will switch to substitutes in response to price increases and their usage needs for the product. The substitutes for cars are public transportation, motorcycles, bicycles, airplanes, and walking. Public transportation has limited usage opportunities as the stops on a bus or train route are the only places one can arrive. Furthermore, motorcycles are just as expensive as cars, if not more. They are limited in the sense that they cannot carry more than two passengers and you must have a different type of license to drive them. Bicycles are inexpensive compared to cars, however they do not provide the speed that comes with autos. It will take more than double the time of a car to get to your destination. Airplanes are capable of traveling overseas, however it is more expensive and the routes are limited. Also, one needs a means to get to and from the airport, which complicates this form of transportation. Walking is great for short distances but not useful for long ones. Although there are many pros and cons for each substitute, there are many different transportation methods to choose from which makes the threat of substitutes high for the automobile industry. That being said, these substitutes have been options for many decades and the automobile industry has not suffered because of them. Therefore, the threat of substitutes is moderately high. Threat of New Entrants

Due to high barriers of entry, the threat of new entrants is low for the automobile industry. The industry utilizes a large economy of scale due to maturity, which deters entry. Product differentiation is high due to the competition within the industry. Large capital investments are required to enter this industry, specifically start up costs. One must have access to distribution channels, which is difficult without knowledge and relationships with suppliers. Switching costs are high due to the amount of investment it takes to switch from one project to another. There are a many government policies regarding the industry such as pollution and emission guidelines on each automobile, carbon credits to companies with eco friendly operations, and mileage requirements. The retaliation is high due to the high competitive nature of the industry. Threat of Suppliers

Suppliers of the automobile industry maintain a relatively low...
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