Hyundai automotive distributors were established in 1967. The company has displayed a high level of commitment to southern Africa’s future from both an economic and political point of view.
There are many different types of market entry strategies that may be implemented by a foreign firm in an emerging country. Amongst the most popular are: 1. Portfolio Investment;
5. Shared Equity/ Joint Venture
The initial market entry strategy implemented by Hyundai Korea was a joint-venture. However, after liquidation (1999), the new entry strategy for re-establishment was franchising. The aim of this paper is to show how Hyundai can reposition its operational strategy utilising a management decision-making and controlling processes.
The team of Hyundai Automotive South Africa took an enormous challenge in 2000, with the acquisition of the Hyundai franchise. Since 2000, due to high pressure at home (South Korea), Hyundai and the other Korean auto makers have become more aggressive in terms of pricing and quality. They have begun developing larger cars and broadening their product ranges to meet diverse customer preferences.
Associated Motor Holdings, a division of Imperial Holdings, announced in the month of April in the year 2000 that they had signed a distribution agreement with Hyundai Motor Company in Korea to import and distribute of Hyundai vehicles and parts for Southern Africa. Economically and politically, Hyundai Motor Company Korea is dedicated to AMH operation and to Southern Africa’s development.
Strategies are the means to the ends or what a firm is going to do to meet its objectives. Many companies, including Hyundai and Pepsi Co, have entered and been successful in emerging markets. Market entry strategies shows that there are different ways or strategies by which firms can enter international markets. The strategies vary in the amount of risk, control and investment that firms face.
Hyundai’s initial entry strategy into South Africa was a joint-venture. This failed due to liquidation of the dealership in Botswana and subsequent seizing of the South African branches assets. Shared-equity alliances entail the foundation of a new business, commonly referred to as a joint venture (Freidheim 1998). Joint ventures are the most common form of strategic alliances, which means that two or more firms create an independent business unit by contributing their share of equities. Joint ventures are considered independent legal entities from their parents (Korean based Hyundai).
The joint venture was between Hyundai South Korea and Wheels of Africa. The managing director of Wheels of Africa was Billy Rautenbach. The operating region for the Wheels of Africa holding company was South Africa and Botswana, (18 % of the parts of Hyundai vehicles were manufactured in South Africa). A factory was established in Botswana to manufacture the Hyundai trademark vehicles. The reason for choosing Botswana as a location for the factory over South Africa was: a lack of foreign exchange restrictions, a high level of political stability, and a relatively well educated labour force. The initial entry strategy focused primarily on cutting costs.
Billy Rautenbach, due to fraudulent acts, was wanted for arrest, as he allegedly (and later proved) stole 1300 vehicles worth R8m from the Hyundai Corporation. He bribed officials, and fraudulently reduced the tax liability of Wheels of Africa subsidiaries. This directly resulted in the liquidation of the Hyundai Automotive Company in South Africa. Assets worth millions were taken from him once it was established that he was guilty. This indicates that through corrupt management practices and insufficient control over the subsidiary company, the initial market entry strategy was flawed.
Advantages of forming a Joint Venture (JV):
• Provide companies with the opportunity to gain new capacity...