GLOBALIZATION STRATEGIES OF

KOREAN MOTOR VEHICLE

INDUSTRY: A CASE STUDY
OF HYUNDAI
INTRODUCTION
Globalization trend
Due to the relocation of production sites and management strategies
Opportunities for sharing risk and cost in R &D
Companies not only need to engage in FDI and joint venture but
they also need to develop buyer-supplier relation.

Pattern followed by automobile makers in terms of
globalization:
Export ( a car that fits in the world wide category)
Expansion of export ( setting up transplants in major market
regions)
Complete localization & establishment of global business networks
GLOBALIZATION, FIRM ORGANIZATION
& INTERFIRM MARKET RELATIONS
In 1980 Hyundai began to explore strategies to increase access
to over seas market
Joint venture with foreign car makers
Technical cooperation with Mitsubishi
Early 1980 established its first front wheel drive car and in
1986 entered US market
Next it saw the need to diversify
Developing countries more attractive
In late 1980s Hyundai adopted lead production system to
improve quality and productivity

329 firms of suppliers were in the system so Hyundai
could completely control the logistics
Bilateral relations were developed with suppliers
In 1985 Japanese style subcontracting system was
introduced a kind of supplier association with 265
firms
Hyundai gave them technical, management advise
money and machines
This resulted in cost reduction and lead time
High technology is essential for this reason Hyundai
operates 5 research institutes in Korea and overseas.
In 1997 an institute in Yokohama Japan, another in Los
Angeles and Ann Arbor Michigan
To join the top rank of automobile manufactures it has a
network of sales:
2 agencies in North America
37 agencies in Europe
40 agencies in Latin America
44 agencies in Middle East
29 agencies in Asia
The establishment of logistic center in Lummen City
Belgium enhanced the after sale service

AFTER FAILURE OF THE FIRST TRANSPLANT IN
BROMONT
When Hyundai reached economies of scale its
strategy was based upon exports to north America

Hyundai first entered Canadian market and then in
American market .

Hyundai benefited from well educated, disciplined
workforce that cooperated closely with management
and low wages or bad working conditions.

EXPANSION PHASE OF EXPORT
During this phase Hyundai decided to establish an
automobile manufacturing plant in Canada
Main motivation of this transplant was the access to
attractive north Americas market
Voluntary restraint agreement between Japan and USA
led to the construction of an assembly factory for
passenger cars in Canada.
Because of this agreement the Canadian and USA auto
sales of transplant in Bromont failed to pick up leading
Hyundai to scale back its production goal at Bromont
plant, as a result Bromont plant failed and closed.

REASONS FOR THE FAILURE OF THE PROJECT

The major reason of the closing of this project was the
poor performance of the plant in terms of quality and
productivity.
This plant did not take part in the establishment of new
production system with increased flexibility and
participation.
Production system of this transplant was characterized
by forbid manufacturing system which means that
production line only has limited conversion flexibility
There were no attempts of using new concepts to
increase efficiency and quality in production.
After a promising start in mid eighties Hyundais sales
slowed down in US due to problems of after sales poor
quality and design
In 1987 due to labor disputes in main plant in Korea ,they
did not supply assembly parts to the Bromont plant that
created an obstacle to increased productivity and capacity
utilization
No other Korean components supplier invested in the area
of Bomont plant due to limited demand of that transplant.
At the end of 1996 machinery and equipment of Bromont
plant were shifted to India where Hyundai set up India's
first fully foreign owned car factory


HYUNDAIS INDIRECT APPROACH
Knock down export system
Diversification of export markets
The other strategic choice
Expansion of plants production by the year 2000

THE TRANSITION TO MULTI REGIONAL
STRAREGY IN 1990s
Multi regional strategy included integration of southeast
Asia operations in terms of production and manufacturing
An organizational structure is emerging on three world
regions i.e. Asia, North South America and Europe
Hyundai launched its single vehicle in India
The company then began to coordinate the activities of its
various subsidiaries in ASEAN countries limited to
periphery area where there is no hard competition
Knock down export by manufacturers created regional
division of labor linking factories in India and Indonesia

Hyundai also continued to expand in its already
existing market through export based on sales and
after service network
In the southeast Asia company started to produce and
sell a car for Asian market called ASIAN CAR
In 1996 Hyundai began the construction of its largest
manufacturing plan in Chennai India which was
divided into two phases
In the first phase Hyundai will manufacture 1300cc
and 1500cc Accents
Second to manufacture additional models in
India


The Hyundais Chennai plant would have shops for
engine, body, paint, assembly and plastic injection
molding
16 Korean parts and components suppliers to
Hyundai will be setting in India
To reduce their labor cost the supplier industry
moved to China and Southeast Asian countries
Hyundai regards China as its second domestic market
and for the production of passenger car China has
permitted three large and three small production
bases

CONCLUSION
Hyundai's Trajectory is characterized by transition from a
world-wide export strategy to multi-domestic strategy
based on manufacturing sites in the differential regions
In this transition process, Hyundai has adopted three
ways:
Extended production sties with knock-down
manufacturing base in periphery areas.
For the core markets it holds the direct export strategy
In transition the multi-domestic company Hyundai will
develop "Asian Car"
Hyundai faces critical challenges:

KD knit is throughout Asia, but that means hard
competition between Korean automobile, Southeast
manufactures in the periphery
The task is to stimulate the set up of the international
suppliers network
To survive the fierce sales competitions in core
markets, Hyundai should exert its best efforts to
improve technology and quality.