hyundai and kia case study
Hyundai and Kia
Samuel David Sims Jr.
October 28, 2013
Intro to International Business
Hyundai and Kia
Hyundai aims to appeal to the conservative buyers, while Kia is sporty and targets the adventurous. There ultimate goal is to increase the small profits the continue to earn due to the market they sell to. The Korean won has appreciated against the US dollars causing their profit margins to remain small. While the objective of a company is to increase profit, for Hyundai and Kia, foreign exchange rates plays a major role in their profit margins. The automobile makers have to make decisions that will allow them to increase profit margins. While the easiest way to increase profits is to decrease cost and increase sales, the foreign exchange rate must be considered (Anglebrandt, 2008).
1. Explain how the rise in the value of the Korean currency the won, against the dollar impacts upon the competitiveness of Hyundai and Kia exports to the United States?
The rise in value of the Korean currency, the won, against the dollar has a negative impact upon the competitiveness of Hyundai and Kia exports to the United States. A strong won means the value of their products sold in the United States are recorded at a lower value. Hyundai and Kia are clearly trying to increase market share by offering a low-pricing strategy to compete with automakers domestic and abroad. Here are some reasons why the rise in value of the won impacts both Hyundai and Kia:
* Low Price Strategy = lower profit margins
* Car sold in the US are worth less
* 15 cars in 2006 = 14 cars in 2005
Both automakers felt they had a competitive advantage in pricing their cars lower. However, because of the rise in value of the won, this led to lower profit margins. Hyundai and Kia have to sell more cars now than in past to make up for the lost in profits.
2. Hyundai and Kia are both expanding their presence in the United States. How does this hedge against adverse currency movements? What other
Samuel David Sims Jr.
October 28, 2013
Intro to International Business
Hyundai and Kia
Hyundai aims to appeal to the conservative buyers, while Kia is sporty and targets the adventurous. There ultimate goal is to increase the small profits the continue to earn due to the market they sell to. The Korean won has appreciated against the US dollars causing their profit margins to remain small. While the objective of a company is to increase profit, for Hyundai and Kia, foreign exchange rates plays a major role in their profit margins. The automobile makers have to make decisions that will allow them to increase profit margins. While the easiest way to increase profits is to decrease cost and increase sales, the foreign exchange rate must be considered (Anglebrandt, 2008).
1. Explain how the rise in the value of the Korean currency the won, against the dollar impacts upon the competitiveness of Hyundai and Kia exports to the United States?
The rise in value of the Korean currency, the won, against the dollar has a negative impact upon the competitiveness of Hyundai and Kia exports to the United States. A strong won means the value of their products sold in the United States are recorded at a lower value. Hyundai and Kia are clearly trying to increase market share by offering a low-pricing strategy to compete with automakers domestic and abroad. Here are some reasons why the rise in value of the won impacts both Hyundai and Kia:
* Low Price Strategy = lower profit margins
* Car sold in the US are worth less
* 15 cars in 2006 = 14 cars in 2005
Both automakers felt they had a competitive advantage in pricing their cars lower. However, because of the rise in value of the won, this led to lower profit margins. Hyundai and Kia have to sell more cars now than in past to make up for the lost in profits.
2. Hyundai and Kia are both expanding their presence in the United States. How does this hedge against adverse currency movements? What other
Cited: Anglebrandt, Gary. "Hyundai And Kia Dare To Be The Same." Automotive News Europe 13.7 (2008): 9. Business Source Complete. Web. 28 Oct. 2013. Ihlwan, Moon. "Korean Exporters Win With A Weaker Won." Businessweek Online (2008): 21. Business Source Complete. Web. 28 Oct. 2013. "South Korea: A Collapse Of The Won? (Cover Story)." Emerging Markets Monitor 14.21 (2008): 1-2. Business Source Complete. Web. 28 Oct. 2013. http://www.termpaperwarehouse.com/essay-on/Hyundai-And-Kia/214584