Samyeong Cable Company manufactures cable parts such as control cables, speedometer cables, ignition cables and filter elements mostly for motor vehicles. It sells its products domestically and internationally. Its major customer is Hyundai Motor Company but it also sells to other large motor companies like Kia and Daewoo and Rockwell International for door regulator cables.
In four-year’s time, the company’s revenue grew by 153% from 8.7B Korean Won in 1991 to 22B Korean Won in 1995. 68% of the revenue in 1995 comes from its domestic operations while only 32% from international customers. Because Hyundai plays a very important role to SCC’s growth, they have to be responsive to the former’s development action plans, namely: CR 30, “2 by 2” and “100pm”.
II. Point of View
The case is analyzed based on the point of view of Samyeong Cable Company’s management during the middle part of the 1990’s.
III. Problem Statement
Samyeong’s current customers can be split into its domestic and overseas market. In 1995, 3/4ths of its revenues were from its domestic sales while 1/4th were from overseas. Its major customer in Korea, Hyundai, has recently overhauled its supply chain management into capability-based single sourcing. Taking this and its global potential into consideration, how can Samyeong secure an immediate improvement in operations in order to continue a profitable relationship with Hyundai while taking a long-term perspective of becoming competitive globally as an automotive cable solutions and automotive parts provider? IV. Assumptions
1. Reason for class B rating - Samyeong’s rating in Hyundai’s Supplier Rating Report is average (18-20%) in Production Management and Quality Management and lower than average (15-18%) in Technological Development criteria. 2. There will be no major changes in the political and economic environment of South Korea that can affect the operations of Samyeong. V. Analysis
a. Industry Analysis
Products: control cables, speedometer cables, ignition cables, hood latch cables, etc.
Plant operations are highly affected by labor disputes.
Analysis of Hyundai’s direct competitors (we need info on this) *According to sir’s suggestion, we can tap other potential customers so long as they do not directly compete with Hyundai. For example, Chrysler serves a more upper class market than Hyundai does.
Actual and projected vehicle sales in Asia
Source: standard and poor’s dri-global automotive group
*Show also trend from 1995 onwards
Labor disputes in South Korea
Source: Ministry of Labor, S. Korea
B. SWOT Analysis
C. Global Market Potential
Motor Vehicle Production by Manufacturer in 1998 (in thousands, Top 15)
Motor Vehicle Production by Country in 1997 (Top 15)
World Motor Vehicle Production (in thousands)
and Compounded Annual Growth Rate by Country:
* Countries in BLUE on the table are also countries that are included in top motor vehicle production by manufacturer (98) and top motor vehicle production by country (97). * Countries in bold on the table are countries that are not included in top motor vehicle production by manufacturer (98) but are included in top motor vehicle production by country (97). Recommendation:
The remaining countries in blue and bold are the ones feasible for either placement of a future manufacturing plant or a distribution channel. Since all the countries in the table above have exhibited substantial positive growth from 1991-1997, these are countries that present some potential for Samyeong’s global market. SHORTEN!!!
Manufacturing overseas - China and India, both known for their low labor costs, had a compounded annual growth rate (CAGR) from 91-97 of 13.18% and 11.11% respectively. Since these are countries that have substantial growth potential, their low labor costs may allow Samyeong to put up a manufacturing plant in these locations. They can do this through joint-ventures to...