Transcript of "Corporateand globalresitcase hyundaiglobalstrategies"
1 Actes du GERPISA n°22 GLOBALIZATION STRATEGIES OF KOREAN MOTOR VEHICLE INDUSTRY: A CASE STUDY OF HYUNDAI Myeong-kee CHUNG The current issue in the world economy is transplants on one hand and the establishment of acharacterized by globalization. Corporations have global business network on another hand.built up a world-wide network economy by In the following, I would like to first of allpromoting production and trade. An important investigate specific firm organization and interfirmcause for the globalizing trend of the world market relations to which the globalizationeconomy lies in relocation of production sites and strategies of Hyundai must adjust. Then, I willmanagement strategies of business. Firms need not explore the transition of globalization strategy fromonly partnership with foreign companies in the transplants in the core market to set-up the KDform of direct investment and joint ventures, but production site in periphery regions from 1985they need also to develop cross-border buyer- through 1995. There was a clear change insupplier relations. These trends also provide Hyundais globalization strategy at the end of theopportunities for the sharing of risks and costs in 1990s that has been primarily built by Global Top-R&D and production. Globalization is driven by 10 strategy. The closing reflections deal with thestrategic alliances that reflect a shift of company multi-regional strategy of Hyundai.strategies. Globalization is an increasingly importantaspect of the automobile industry. In the past GLOBALIZATION, FIRM ORGANIZATIONdecades, the automobile industry has been one of AND INTERFIRM MARKET RELATIONSthe mains driving forces in globalization. Thepattern of globalization followed by the major car Exports are the engine of the contemporarymakers can so far be split into three stages. The Korean motor vehicle industrys success. Hyundaifirst stage is export. At this stage the goal is to exported a total of 560,169 units, up 13% from thecreate a car that fits into a worldwide car category. 1995 figure of 494,479. In the 1980s, HyundaiThe second stage of globalization comes after the began to explore strategies to increase access to theexpansion of export. This is the setting up of overseas market. The strategy oftransplant in major market regions. The last stage internationalization in the first stage was to developof globalization is complete localization of joint ventures with advanced foreign car makers
that would allow them to develop a world market 1994 that belonged to 329 firms of their suppliers.sales car. The growth in production and exports With the development of this system Hyundai canrequires closely linking both the advanced product completely control the logistics chain, so they willdesign and process technology. For this project increase the flexibility of the logistic plan. As aHyundai began technical cooperation with result of the revitalization of JIT delivery 2 theMitsubishi. They obtained chassis components and time-unit of delivery scheduling was radicallyother parts that were difficult to manufacture, such reduced from months to days and then to hours. Byas gears and engines, directly from Mitsubishi, but 1993 approximately 76.4% of the total parts boughtfabricated the cylinder head and blocks, housing, (in volumes) were delivered daily, 17.1% of itand transmission case in house. In the early 1980s, weekly, and 6.5% of it monthly.3 Hyundai has anHyundai constructed a new plant for the first front- average inventory of 0.6 days of production.wheel drive car in Korea and created the "Excel As an initial step towards a collaborativePhenomena" in 1985 and successfully entered the relationship, Hyundai and their suppliers can beginmarket in the United States in 1986. with joint value analysis. An import outcome of In the next phase, Hyundai saw the need for this shift in subcontracting from unilateral todiversification of the overseas market. Their efforts bilateral relationships implies recognizing theintensified after the loss of the U.S. market strategic role of subcontractors in determining theengendered by the end of the 1980s and domestic quality and costs of cars.4 In 1985, Hyundaimarkets saturation. Regional sales for the year introduced a Japanese style subcontracting system1996 were 133,009 units in North America, and began a supplier association. Approximatelyoccupying 24% of all exported vehicles; 178,328 265 firms were participating in 1994. Thisunits in Europe with 32%; and the rest of the organization is the most important mechanism forregions occupying 44% with 248,832 units. As the supplier coordination and development. Hyundaidomestic vehicle market gradually matures, must be regarded as one of the primary innovatorsHyundai is trying to explore more overseas markets in the use of supplier associations, so calledthrough the expansion of car production bases in "Hyungdong hoe". Finally, the cost and quality canforeign countries. In particular, developing be controlled through this organization.countries are becoming more important markets for Consequently, Hyundai has set up a hierarchicalKorean auto makers, taking into account the nearly structure of committees through which informationsaturated status of the domestic car market, cheap is regularly exchanged. Suppliers should treat thelabor costs of foreign workers and the toughened exercise as a process whereby they can redesigntrade barriers built by advanced countries on the components with the necessary informationimports of cars. Hyundai has focused their efforts provided by Hyundai5. On other hand, Hyundaion the developing overseas markets because theyknow that they can no longer depend on the 2 Hyundai, since the early 1980s, has adopted a JIT-styledomestic market for sustained growth.1 delivery system in order to shorten delivery time. 3 Hyundai began to face increasing global Korea Institute for Industrial Economics & Trade (1994),competition both at home and abroad from the Development Tendency Toward. 21 Century of Korean Automobile Industry, KIET, p.184.1990s onwards. Since the late 1980s, Hyundai has 4 In 1994 Hyundai maintained subcontracting relationshipsadopted a comparative production system, namely with about 455 firms and 52% of the value of its products werelean production system, in order to improve quality composed of parts and components bought fromand productivity. In this point of view, Hyundai subcontractors.started to rationalize their reorganized logistics 5 Hyundai organizes a range of events at different levels forthrough the use of modern information and differing supplier staff types. At the head of this hierarchy arecommunication technologies like "value added the presidents meetings. These biannual events involvenetwork". They set up rationalization of logistics in presidents from suppliers who come to listen to policy plans that Hyundai has formulated. At an intermediate level each of the Suppliers Group Committee meetings occurs roughly every1 The domestic market for passenger cars entered the maturity 6 months. These meetings are convened for different types ofphase in 1995, with its sales growing only 1% to 1,149,755 suppliers according to the type of product they produce. It is atunits (including sport utility vehicle such as jeep). Hyundai this level that senior company managers decide how theysold 558,743 cars, posting a 5.8% increase over the previous should make progress on subjects such as quality, newyear. technology or delivery performance improvement. It is largely
should accept the idea that the purpose of this joint satisfy diverse needs of local customers. Itseffort is for vendors to improve their profits while domestic research institutes are as follows:reducing costs for themselves. Hyundai began to Mabookri Central Research Center, Ulsaninvest in their subcontractors because many of Passenger Car Institute #1, Namyang Passengerthese parts makers are small and medium size Car Institute #2, Chunju Commercial Vehiclefirms that simply cannot afford to modernize the Institute, and Namyang Design Center. These areproduction process. Therefore, Hyundai often gives moving to spend 1,350 billion won or 10% of itstechnical advice, management advice, money, and total turnover for R&D projects in 1997.6 Themachines to subcontracting companies through the strategic alliance is one of the important sources ofsuppliers association. In 1993, Hyundai supplied new technology imports (see Table 1).40 billion Won as working funds, 1 billion Won for To join the international top tier of automobiledies developing, 8 billion Won for equipment manufacturers, Hyundai is creating an overseaspurchasing, and 1 billion Won for payment network of sales. There are two agencies in Northassurance. America, 37 in Europe, 40 in Latin America, 44 in The subcontractors participation in the design Middle East/Africa, and 29 in Asia/Pacific.process effected the reduction of cost and lead Hyundai Motor America is responsible for sales intime. The bilateral design between customer and North America. Its sales activities in Canada aresupplier resulted in formalizing the "black box" carried out by Hyundai Auto Canada, which is adesign concept. Hyundai has common laboratory branch of Hyundai Motor America. For the long-facilities in order to provide bilateral design and term improvement of sales in US market, Hyundaidevelopment of new components between Hyundai established Hyundai Motor Finance Company inand their subcontractors. Around 50 engineers from 1990. They also established their own distribution50 subcontractors resided in these facilities and company in Germany, a joint venture with a localanother 50 engineer from other suppliers partner, in order to promote marketing activities incooperated with Hyundais engineers irregularly. Western Europe.The degree of "black box" components Parallel with extension of the network ofdevelopment was only 29%, in sharp contrast to the overseas dealers from 2,968 to 3,200, they also willJapanese automobile components development. In extend the 3,700 after-service chains worldwide. Inaddition, target cost techniques were useful in 1996, Hyundai invested a total of about US$ 30reducing costs of components development. million constructing one of the most modern parts Improving ability of high technologies is one of logistic centers in Lummen City, Belgium. Thethe preconditions of survival in the competition of service and supplying of car parts and componentsthe world market. Hyundai operates five research from this parts logistic center will cover all ofinstitutes in Korea and overseas. They accelerated Europe. Before the establishment of the partsset-up of the R&D facilities in order to facilitate logistic center, car components and parts werethe transfer of advanced technologies in advanced supplied from Ulsan upon the Europeancar makers countries. It also broke ground for its distributors request. Hyundai will be able tonew research institute in Yokohama, Japan with shorten the delivery time from 56 days to just aoperations scheduled for 1997. This new research mere 8 days in the case of general orders. Forinstitute will function as the Japanese base for emergency orders the delivery time is shortenedmutual exchanges of R&D with the existing from 10 days to 2 days. Hyundai is also operatinginstitutes, development of new cars and electronics parts centers in the North American region.systems and analysis/assessment of advanced cars. Additionally, they have hired Americas CaterpillarIn Los Angeles, they set up a design center and Logistic Service Inc. to take charge of parts andalso established a technical center in Ann Arbor, components warehouse operations, transportationMichigan in 1986 to supply the parent company of parts and components, customs clearance, andwith the latest technology and to develop cars that stock management. Hyundai set up worldwide maintenance training network systems in sevenat the lowest of the three levels that this application of quality major regions. The network maintenance centertools and techniques are set in motion. At this third level,engineers attend monthly (or more frequent) meetings in order 6to understand automation and quality control. The Korea Herald, January 22, 1997.
facilities cover 7 regions and 9 countries: NorthAmerica (USA and Canada), Central / South large-size passenger car is built in 1996. ThisAmerica (Chile), Western Europe (Germany), policy of establishing new sites aimed to weakenEastern Europe (Slovenia), East Asia (China and the labor union. On the other hand, Hyundai willThailand), Middle East (UAE), and Africa (South have its production specialized for different classesAfrica). of cars in each of the Ulsan and Asan plants. The hard competition in the world market With global linkages growing and globalizationprovided a catalyst for change of production continuing to make progress, national andsystems. The conventional production system has international markets are beginning to competebeen rapidly eroded by increased labor costs and with one other. Nowadays, no car maker is able topoor quality. It has caused labor disputes. dominate the world. In fact, competitive pressure isImmediate solutions were found in the reduction of forcing all the automakers in the world to adopt theunit cost by increasing volume, automation, and by best production processes and product innovation.elimination of waste. The efficient designing and Consequently, Hyundai is trying to preserve asmanufacturing of vehicles of high quality and many essential features of their home-grown modelmarket-segment are also strategic. Under the as possible to retain their competitiveness withantagonistic relations between management and globalization strategy both at home and overseas.labor, Hyundai built a new assembly plant on aGreenfield site located in Asan. Its Asan plant withproduction capacity of 300,000 units of medium toTable 1: Strategic Alliances of Hyundai in 1995 Components Partner & Country Window Reveal Moulding G.M., USA Gasoline Engine & Emission Gas Control device Mitsubishi Motors Corp., Japan TJ Type GKN Transmission Ltd., England CV Joint NTN Tokyo Bearing Co., Japan DOHC V6 3000cc Gasoline Engine A.V.L. Co., Austria G.F. Valve Unit Ube Industries Ltd., Japan Engine, Axle Sash, Body for Small Size Car Mitsubishi Motors Corp., Japan Torque Converter assy Auto T/M Daikin Manufacturing Co., Japan Gasoline V6 Engine & Emission Control System Mitsubishi Motors Corp., Japan Engine Technology Mitsubishi Motors Corp., Japan Auto Transmission F.F.D. USA Transmission F.F.D. USA Batteries for Electric Cars Energy Conversion Devices Inc., USA Sure Bond Type Seat Lear Seating Co., USA Road-load Acquisition System SFT, Austria CNC Girding M/C Seiko Seki Co.,Ltd., Japan X-3 Application & OBD-II System Robert Bosch GmbH, Germany Emission Control Technology Ricardo Consulting Eng.Ltd., England Large Diesel Engine Technology Ricardo Consulting Eng.Ltd., EnglandSource: Korean Auto Industries Co-operation Association, Yearbook of Automobile Industry, 1995 Seoul.
to problems of after-sales service, poor quality and design. Since 1987, labor disputes in the main plant in Korea have been on the rise year by year. This has helped to bring about lockouts and the loss ofAFTER FAILURE OF THE FIRST cost-reducing opportunities. Consequently, they didTRANSPLANT IN BROMONT not supply assembly parts to the Bromont plant. That created an obstacle to increased productivity After it reached economies of scale, the growth and capacity utilization. No Korean componentstrategy of Hyundai has been based upon exports to suppliers invested in the area of Bromont becauseNorth America. They first entered the Canadian they did not want to take a risk due to the limitedmarket in 1984, and the American market in 1986. demand in that transplant. Another reason was theUntil 1988, Hyundai benefited from an well- intention to use the low cost production basis ineducated, disciplined work force that co-operated new emerging markets such as South Asia. At theclosely with management and accepted low wages end of 1996, machinery and equipment of theand/or bad working conditions. During this Bromont plant were shipped to India, whereexpansion phase of exports, Hyundai made a Hyundai set up Indias first fully foreign-owned cardecision to establish in Canada an automobile factory.manufacturing plant with 100,000 annual capacity. This transplant strategy is not yet complete.The factorys worth was over $300 million, and Hyundai opted for an indirect approach after itproduction began in 1988. The main motivation of withdrew from manufacturing in North America.this transplant was the access to attractive North Hyundai could simply not afford to build up aAmericas market. "Voluntary Restraint viable presence in the heart of the developedAgreement" (VRA) between Japan and the USA country. The new aspect of globalization strategyled to the construction of an assembly factory for was the build-up of knock-down export based onpassenger cars in Canada. This project is the first the emerging markets in the periphery. Under thisinvestment by a car maker from a NIEs in an strategy, strategic functions, such as product designadvanced country. Its Canadian and USA auto sales and R&D, remain centralized in the companysfailed to pick up, leading Hyundai to scale back its headquarters. The main motivation of this strategyproduction goal at its Bromont plant. As a result, is the access to emerging markets that may includethe Bromont plant failed in 1991 and is now closed. the need to overcome tariff and/or non-tariff A lot of reasons given to explain this decision barriers. The first stage of globalization betweenare still a hot issue among management. The major 1987 and 1995 saw Hyundai move from a world-reason of the closing of the first transplant of wide export strategy to a multi-domestic structureHyundai was the rather poor performance of the based on manufacturing sites in the differentplant in terms of quality and productivity. Total regions.production of this plant in 1990 and 1991 was Since the middle of the 1990s, Hyundai required27,409 and 28,201 respectively. This was far below a new globalization strategy due to increasingcapacity and expectation. At that time, this plant competitive pressure in domestic and overseashad a workforce of 1,200. This plant did not take market. The gradual loss of the market in Northpart in the process of the establishment of new America7 had also brought the effect ofproduction system, with increased flexibility and strengthening internationalization. The strategicparticipation in the concept of team work. The choice of internationalization has been toproduction system of this plant also is concentrate efforts on diversification of thecharacterized by the Fordist manufacturing system. international market. That is, diversification of theThis means that the production line only haslimited conversion flexibility. There were no 7 US remained the largest overseas markets for Korea in 1995attempts at using new concepts to achieve though its share of Korean auto exports declined. Korean autoincreased efficiency and quality in production. exports to North America decreased 14 percent from 234,904After a promising start in the mid-eighties, vehicles in 1994 to 203,785 in 1995. Shipments to NorthHyundai sales have been sluggish in the U.S. due America accounted for 20.7 percent of the total, down from 31.8 percent.
export markets to developing countries in Asia and units. In 1996, Hyundai has been producing aboutSouth America. In this context, Korean car 15,000 units on an SKD basis with South Africamanufacturers are seeing the need to expand into absorbing 95% of the output. The company hasthe European market. To promote exports, Korean scheduled the Accent, New Elantra/Lantra andauto makers are improving quality and Sonata for assembly at the plant. This model willstrengthening marketing in the US and West roll out in 1998. Manufacturas AutomotrizEuropean countries in particular. The 1990s will Venezuela S.A., Hyundais local partner, is thesee Koreans increasingly set their high-quality sole investor in the plant. This brings Hyundaiinexpensive cars against the more expensive one step closer to the Latin America markets. TheWestern Europe competition. Now, European CKD plant assembles the Excel at the annual ratecountries are the second largest markets for Korean of 10,000 units. HMC provides core parts likecar assemblers. engines and transmissions to this assembler, The other strategic choice of globalization is while tires, batteries and door trim (accountingexpansion of knock-down kits and/or joint for 30% of content) are supplied locally. Theventures investment in the less developed Turkish plant is scheduled to start producingcountries of the automobile industry to avoid 50,000 units of the Accent and the H-100intensifying trade friction. Two parallel patterns of (Minibus) in 1997. By the year 2000, the plantsHyundai activities are likely to continue. On the production capacity is expected to expand toone hand, they will continue to be heterogeneous 120,000 units. Hyundai will put the new Lantraforms of enterprise, namely project-based into production at a future date in order tocollaborations, licensed manufacturing or joint diversify its model line-up in the region. In theventures. On the other hand, Hyundai is early stage of production, Hyundai willestablishing new transplants through the concentrate on the Turkish domestic market,acquisition of local existing car assemblers and/or but it will eventually start exporting its vehiclesthrough direct investment. In the second half of the to neighboring countries. Hyundai will provide1990s, the international structure of production the joint venture company with key parts suchappeared to be based on an axis between two as moulds, jigs, machinery and other productionregional poles: facilities along with core parts such as engines• One new pole of integrated activities in and transmission. Turkish suppliers will provide Southeast Asia, extended to China, Europe and tires, batteries and other parts in an effort to Africa. obtain a 30% local content rate at the very• One new pole in Latin America based in outset. By 1999, a press plant will be added to Venezuela. increase the domestic content rate to 50% and After initial export successes in North America, by 2002 the rate will increase to 60%. Hyundaithe Bromont plant was incurring tremendous losses and PT Citramobil National, which is controlledwith few prospects for internationalization. by President Suhartos second son BambangTherefore, Hyundai now emphasizes joint ventures Trihatmojo, will jointly assemble 10,000 units ofand/or license manufacturing in periphery regions. Hyundais subcompact, Lantra, annually. Also, it The internationalization of automobile will produce commercial vehicles jointly withmanufacturing by Hyundai started mostly in Renault of France in Malaysia from 1997.Southeast Asia operations (see Table 2); Egypt Connected with the change in strategy is(20,000 unit per year), Botswana (20,000 unit per difference in the relationship between domesticyear), Zimbabwe (10,000 unit per year), Thailand and foreign sites. Up until then there was a(10,000 unit per year), Philippines (12,000 unit per hierarchy in which the domestic core plantsyear), Malaysia (12,000 unit per year), Indonesia were outfitted with the respective companys(10,000 unit per year), Venezuela (10,000 unit per latest technology and they delivered their productsyear), Vietnam (20,000 unit per year), and China in core countries of the North America and(60,000 units per year). Europe8, whereby the peripheral plants applied Hyundais CKD plant in Botswana is the onlyassembly plant of foreign auto makers inBotswana. It has an annual capacity of 40,000 8 This strategy does apply to build the Asan Plant, which operated in 1996.
"used technology" to supply the peripheral limited to the periphery area, which does not havecountries. the hard competition of advanced auto makers. In this Phase, the internationalization strategy of Otherwise, KD export by Korean manufacturer asHyundai is characterized by niche-market strategy.This means that the overseas production site isTable 2: Overseas Manufacturing Sites of Hyundai Country Local Partner Model Capacity Begin of Production China Wuhan Wangdong Minibus 60,000 1996 Taiwan N.A. Accent, Avante 20,000 1997 Egypt Ghabbour Excell 20,000 Jan. 1995 Botswana Sabot Excell, Lantra 20,000 1996 Pakistan N.A. Accent 10,000 July 1988 Vietnam 990 Co., Excell, Minibus 20,000 July 1996 Turkey Hyundai-Assan Accent, Minib 50,000 July 1997 India 100% Accent 100,000 1998 Zimbabwe N.A. Excell 10,000 1993 Thailand N.A Lantra 10,000 1995 Philippines N. A Excell 12,000 1995 Indonesia Bimantara Mini truck 10,000 1998 Venezuela Automotriz Venezuela 10,000 1997 Malaysia Renault/Malaysian government 10,000 1997an internationalization strategy has been lifted from countries, creating a regional division of labor, andthe import quota system of auto importing linking the factories in India and Indonesia into acountries. They have been able to increase network of global sourcing of components andHyundais overall market penetration despite parts. Hyundai continues to expand in markets itincreased import barrier or raise dumping charges has already entered and influences through itsagainst foreign-made cars. exports, with the internationalization of its sales, based on existence of sales and after-service network as a basis upon which to make investmentsTHE TRANSITION TO MULTI-REGIONAL in production.STRATEGY IN THE LATE 1990S In Southeast Asia, the company was to start production and sale of a specific vehicle destined for these markets (Asian Car), on the basis of a The implementation of multi-regional strategy platform shared with Korean products (Accentinvolved the decision to integrate Southeast Asia Model). This led Hyundai to utilize its componentsoperations in terms of products and manufacturing. and platforms to the maximum. On the other hand,Ultimately, Hyundai created a single vehicle, this platform strategy permits the accelerated pacelaunched in India in 1998 and the following year in of product replacement in the home market. SinceIndonesia and Thailand. An organizational the late 1996, Hyundai has begun the constructionstructure is emerging which is based on three world of its largest manufacturing plant excepting Korearegions: Asia, North & South America and Europe. in Chennai, India. Hyundai will be investingHyundai has made significant regional advances as approximately US$ 1.1 billion in the Hyundaifar as it Asia-Pacific operations are concerned, as it Motor India Chennai Plant by the year 2001. Thehas attempted to co-ordinate the activities of its India project is divided into a two-phasevarious subsidiaries spread out among the ASEAN construction plan. The first stage of this
construction project will be completed by 1998 Asian Car project. For the production ofwith an annual production capacity of 120,000 passenger cars, China permitted three large andunits. In this phase, Hyundai will manufacture three small production bases: SAW-Citroen and1300cc and 1500cc Accents. And by 2001, the FAW-Volkswagen, and Shanghai Volkswagensecond phase will be completed, when Hyundai Auto Company Ltd., and the latter refers to Sino-plans to manufacture additional models in India. American Beijing Jeep Company Ltd., TianjinThe Hyundais Chennai Plant will consist of shops Dafa Auto Company Ltd., and Guangzhoufor engine, transmission, press, body, paint, Peugeot Company Ltd. Under this Chinese policy,assembly, and plastic injection moulding. Also in Hyundai has little chance to set up a productionthe plan is an R&D center, Proving Ground, base in China. However, the company has a jointand a vehicle performance test center will be built venture production site for minibus in Wuhan.in the plant. These facilities will enable the To get a license for production of passenger cars,Hyundais Chenani plant to become a self- Hyundai will take over the Peugeot owned stock ofsufficient manufacturing and production site for Guangzhou Peugeot Company Ltd, of which 22%developing cars that meet the needs of its local is owned by Peugeot. After merger betweenmarket. Peugeot and Citroen, the French producer cannot Hyundai is in tune with the global trend of hold two differential joint ventures in China.10offshore expansion and is setting a precedent in Guangzhou Peugeot operates in the red owing tothe worlds auto industry. Particularly, 16 Korean the poor quality, high production cost and hardparts and components suppliers to Hyundai will competition in the Chinese market. Thebe setting up their facilities jointly with their negotiation between Hyundai and P.S.A islocal Indian partner near the Chennai Plant. ongoing. Hyundai regards China as a secondSuppliers also faced pressure to contain or domestic market. Therefore, the penetration of thereduce costs in order to reduce the cost of Chinese market, combined with ongoing hardassemblers. They belong to two typologies firm competition in core markets, has stronglywithin the Hyundai Group or independent Korean influenced Hyundais multi-regional strategysuppliers. In the parallel direction of internalization focused on Southeast Asia.of production by assembler, the supplier industry In this respect, Hyundai will attempt thealso move forward to the relocation of their launching of an "Asian Car" by 1999, especiallyproduction sites with low wage costs like China conceived for intermediate emerging countries inand Southeast Asian countries.9 The investment Southeast Asia. During thi s first phase,strategy of suppliers is initially of a follow-the production is located in India, while in the futureclient type, actually encouraged by Hyundai, it is planned for China, the Philippines, Thailand,aiming at diversification of world clients. Indonesia and Malaysia. This "Asia Car" strategy,Obviously, this parallel overseas penetration of especially oriented to emerging markets in whichsuppliers with assembler has improved the the demand has i ncreased 14% a year, mayeconomies of scale. This strategy will help to expect a major new stage in the Hyundaiestablish the global sourcing that is becoming a globalization process in the late 1990s. Hyundaileitmotiv of Hyundai. Hyundai Motor India plans will produce a total of 500,000 units from itsto export cars and key parts, such as engines and auto plants in Southeast Asia by 2005, while thetransmission, to the KD plants and neighboring planned car production in its overseas plant will beSoutheast Asian countries. 225,0 00 units in 1997 through a knockdown This new trajectory may lead Hyundai toward formula.11 For the automobile markets in Europea new configuration on the basis of pragmatic and North America, however, Hyundai willglobalization. Hyundai is also planning maintain the present direct-export system for theexpansion into the Chinese market in term of its time being. Under this globalization strategy, Hyundai will attain the 10% market share of this9 emerging market. In the first phase of the Asian By 1995, approximately 74 Korean parts suppliers hadconstructed plants in China and Southeast Asian countries. Car project, local contents will achieve 50% andMore recently, Korean parts suppliers have established 10facilities on their own initiative in order to reduce the The Hankyoreh News Paper, December 18, 1996. 11production costs. The Korea Herald, January 22, 1997.
is generally growing. By 2005 it will attain 80%. company. Nevertheless, Hyundai faces criticalThe company plans to develop the global challenges:network system for Southeast Asia. For this The logical target for transplants by the KD knitpurpose, they will also set up Asia Regional is throughout Asia, but that means hardHead-quarters in a bid to attain further competition between Korean automobile, Southeastimprovements in global linkages. manufactures in the periphery. Otherwise Asia is already dominated by Japanese auto makers. It may be that Hyundai access for these regions may need important strategic challengers. In response to the growth of the Asian market, Hyundai shouldCONCLUSION be equipped with modern technology and operate under modern management concepts in overseas Nowadays, Hyundais Trajectory is plants in Asia.characterized by transition from a world-wide In spite of the pressures globalization creates,export strategy to multi-domestic strategy based on the strategy of global sourcing and localization is inmanufacturing sites in the differential regions, its infancy. Obviously, the major task is tobecause they cant continue to depend on the stimulate the set up of the international suppliersdomestic market for sustained growth and loss to network. It may be that Hyundai may need to bethe vast potential market. In this transition process, secured through Korean sourcing from suppliers inHyundai has adopted three ways that become clear Southeast Asia.as follows: To survive the fierce sales competitions in core Continuously, Hyundai has extended production markets, Hyundai should exert its best efforts tosites with knock-down manufacturing base in improve technology and quality. Quality and highperiphery areas. Through niche-market strategy, technology are preconditions for survival. Theythe company has been able to increase its periphery also must improve their own image, which is amarket penetrations despite increased import reputation for poor quality cars in the main exportbarriers or raised dumping charges. market. Hyundai can succeed with appropriate For the core markets, they will hold the direct human resource development in order to improveexport strategy. To increased quality, they are to quality.complete a new modern factory with the respective It is still unclear whether or not Hyundai iscompanys latest technology and new work effective in responding to its challenges.organization. Hyundai is at a critically important cross In transition the multi-domestic company, roads in the globalization process. TheHyundai will develop the "Asian Car" based on the globalization of Hyundai depends on hownew transplant in India. efficiently the global sourcing network and The success of Hyundais trajectory and humane resource management will be set up.enhanced position in the world car market depends The future of Hyundais trajectory is hard tomore on the competitive foundation of the predict. Myeong-kee CHUNG Han Nam University, COREE DU SUD
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