The Hyundai group is facing the dearth of leadership and a coherent strategic direction after the death of its founder Chung Ju-yung. The strategy of expansion and diversification of business portfolio and using this diversity to work in their favor by coordinating and sharing resources is not working for them anymore. Also, with the uprise of Asian giants like India and China, more and more companies from these countries are posing challenges for the new Hyundai. These companies are not only eating the revenue streams of Hyundai but also imitating the business model of Hyundai. In its golden days, Hyundai used to do business by avoiding direct competition with technologically advanced companies, Hyundai explored opportunities and extended its existing core competencies to develop a new business for them. The first company to be established in Hyundai Conglomerate was Hyundai Civil Industries, which is now known as Hyundai construction. The conglomerate grew at a tremendous pace until 1997 adding Automotive, manufacturing, construction, shipbuilding, electronics, and financial services companies to their portfolio. The company in its true essence reflected the achievements attained during South-Korea’s economic empowerment. South Korea went from having a GDP of mere 2.7b to becoming 12th largest economy of the world. The group had overall sales of more than $80 billion in 1999. The growth was mainly due to South Korea's reconstruction programs following World War II, the Korean War as well as due to the state-led capitalism that resulted in domination of the economy by a number of conglomerates. But, as the South-Korean economy took a sharp turn in late 90’s, it triggered a set of problems for the conglomerate. Year 1997 brought the economic turmoil for the country mainly because of Asian financial ‘flu’. The KOSPI fell by more than 65% in 1997-98. In order to restore the nation's financial health, President Kim Dae Jung launched a series of restructuring programs designed to reform the existing business units, many of which had become heavily debt-burdened. His reforms included changing the ownership, business, and financial structures of the conglomerates. By this time, the Hyundai Group was responsible for approximately 20 percent of Korea's GDP. As such, its financial health was directly related to South Korea's overall economic condition. Therefore Hyundai decided to sell off many of its businesses in order to pay its debt. Hyundai's concentration remained on autos, electronics, heavy industry, construction, and finance. Even as the group struggled under its debt load, it strengthened its holdings with the purchase of Kia Motors Co. Ltd. and LG Semiconductor. Rivalry between members of the family of founder was another cause of worries for Hyundai, it lead to bad publicity for the conglomerate, leaving many investors anxious about the future of the group and its member companies. This caused the dissolution of the group after the death of its founder. The new Hyundai Group is smaller and is dealing with a bigger set of problems. Once the symbol of Korea’s economic miracle, Hyundai Construction is now seen as one of the most troubled businesses in the nation. What lead to such a downfall? Why was Hyundai unable to carry on with the strong strategic direction given by its founder? To answer these questions, we need to understand what changed and what went wrong during the transition.
Hyundai Business Model:
Exploring business opportunities based on existing core competencies and extending these core competencies from one business to another to translate them into the growth and expansion for the conglomerate and the Korean economy. In the era of Chung Ju-yung, there was a coherent strategic direction that existed and was followed by the business religiously. The group explored opportunities in different sectors such that they do not have to compete directly with the existing powerful competitors. This gave the group...
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