At the turn of the twenty-first century, Korea‟s Hyundai Motor Company (HMC) announced ambitious plans to become a global leader in the automotive industry, and established plants in various parts of the world, including Europe, India, and North America. In 2002, HMC turned its attention to China, one of the world‟s largest and fastest-growing economies. China‟s burgeoning demand for automobiles was forecast to become the world‟s third-largest―even as the worldwide auto market was stagnating. In this light, HMC had selected China to be site of its largest, lowest-cost assembly and manufacturing base. So it was that HMC created a separate China Business Division to lead its move into the Chinese market (Exhibit 1). In May of 2002, HMC initiated a joint automotive project with Beijing Automotive Industry Holding Corp. (BAIC) and by October the Chinese government had approved the joint venture, leading to the establishment of “Beijing Hyundai.” By February of 2003, Beijing Hyundai rolled out its first midsize sedan, the EF Sonata. Yet many were skeptical of Beijing Hyundai‟s chances. A number of the world‟s major auto makers were already established in the Chinese market, while Hyundai lacked an understanding of the distinct characteristics of Chinese consumers, distribution channels, labor markets, and parts suppliers. Moreover, while Hyundai enjoyed a strong reputation for quality in its home market, the Hyundai brand was generally seen as lower status in China. Sung-Kee Choi, senior executive vice president at the China Business Division of HMC, who was in charge of the planning and development of Beijing Hyundai in the entry period, explained: When HMC entered the China automobile market, responses from other major automobile competitors and the media were lukewarm, as HMC‟s reputation was not high and HMC‟s joint venture partner, BAIC, was also a very low rated company when compared with competitors. They…
