Hyundai Motor Company’s Market Consulting Project

Introduction

The automobile industry is the most attractive and stagnating industry in the world with no saturation point in production. It is one of the major sources of revenue for the country in terms of employment and productivity. The automobile was invented by a French Engineer named Mr Nicholas J Cugnot in the year 1739 which was empowered by the steam engine and which could be driven for hardly 10 minutes. The complete automobile was founded by Mr Henry Ford by the invention of his car named his own name Ford in the year 1914. Since that year the US was the only nation for automobile manufacturers globally with few competitors. The other key players came to the play only after the Second World War with Japan and Germany as the competitors to the US market. The major players in the current scenario are German Motors, Mitsubishi, Toyota, Hyundai, Volkswagen, Nissan, etc. Among the world economy, the US is the major producer of automobiles.

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The Company Overview

Hyundai Motor Company was founded in 1967 in South Korea by Mr Chung Ju Yung when there were other key players in the market. Despite the different agonies in the industry due to quality products and with the partnership of Ford Motors, it became the fifth producer of cars in the world. The first car launched by Hyundai Motors is Cortina in 1968 with collaboration with the US.

The company started manufacturing in 1975 with the courtesy of Japanese technology with Mitsubishi, where it developed its own engine. The entry to the US market was in the year 1986 with the model of subcompact Excel.

The first production of cars by its own technology was in the year 1988 by the launch of its Sonata model, through which they made entry into the export arena. In the year 1991, Hyundai Motors acquired KIA which was an incorporated company in the US. The vision of Hyundai Motors “is to secure world-best innovations and raise our profile as the premium automaker.” (R&D vision and strategy 2009). The mission of Hyundai Motors is to “create exceptional automotive value for our customers by harmoniously blending safety, quality, and efficiency with the diverse team; we will provide responsible stewardship to our community and environment while achieving stability and security now and for future generations.” (What is the mission statement of Hyundai motor company 2009).

The company has a lot of long and mid strategies; they are:

  • “We developed five mid–and long–term strategies: global management, higher brand values, business innovation, environmental management, and strengthening product competitiveness. Especially, we selected environmental management as one of our strategies to meet the needs of our stakeholders and the society we belong to. We also intend to promote sustainable development and preservation of the environment.” (Company overview 2009).

Define and Map the Market

Hyundai Motor Company is into the design; development of the protocol and the promotion of the vehicle. Hyundai Motors has two business segmentation; they are:

  • Non-financial industry
  • Financial Industry

Non-financial industry includes the design, development, and manufacturing of commercial vehicles of the company, and the financial industry deals with the purchase of vehicles or the leasing of vehicles in the industry. The customers of Hyundai Motors are scattered among the different people with vivid lifestyles. They may differ from the middle class to the highly professional class. Hyundai Motor aims at providing the cars at an affordable rate with a long period of warranty with prime importance to quality.

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Hyundai has a separate R&D wing for the identification of the needs and wants of the customer. They also have R&D centres in North America, Japan and Europe. They mainly plan to have a diverse presence in different markets like the Indian and the European markets. The main idea is to understand the purchasing power of the customer in each location and the product diversification in those regions. They have a huge market presence in the countries like Europe, Middle East, Africa, North America, Central Asia and the Pacific.

Value Chain Analysis

The value chain is a process that starts from product development. While developing the product the specifications for the product are also decided.

“The value chain is a systematic approach to examining the development of competitive advantage.” (Value chain analysis: lessons­ value chain analysis 2009).

It acts as the most powerful and useful tool for top level managers to identify the important activities of the firm that forms the value chain for the particular organization. The success of an organization depends upon how well the organization is performing its value chain analysis. The value chain analysis integrates all the functional departments towards the achievement of the goal and then assess whether the predetermined goals are achieved or not. The value chain analysis involves the combination of both core functions and support functions. The core function as per Michael Porter in 1985 includes:

  • “Inbound logistics
  • Operations
  • Marketing and sales
  • Outbound logistics
  • Service”

And the supporting functions include all the activities performed by the functional departments such as “human resources, information technology, finance, accounts etc.” (What is value chain analysis, 2009)

Inbound logistics: “Inbound Logistics represents one of the major business processes in transportation planning.” (Inbound logistics n.d.). In Hyundai, the inbound logistics activities are done from the home country Korea. The raw materials are transported from different places based on the quality of the suppliers. The production of automobiles is done in Alabama in the USA.

Operations: The operations involve designing and production process of the products. Hyundai is having a huge building for its production process in Alabama. This production unit is equipped with all modern facilities and is considered as the largest production unit with the latest technologies in the USA.

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Marketing and sales: The marketing and sales mainly concentrate on sales promotional activities and identify the various ways to increase the sale of the product. This element analyses the customers’ tastes and preferences and creates brand awareness among the target customers.

Outbound logistics: The outbound activity mainly involves the distribution of cars across the world. Hyundai is having dealers all over the world. These dealers are responsible for making the products reach the ultimate customers.

Servicing: Servicing involves the value added services and the after-sales services provided by the company. Hyundai is having its own servicing centres all over the world. All these factors attract customers to buy Hyundai cars. All these value chain activities are depicted in a diagram.

Margins
Fig – 1

In the diagram, it is very clear what the customer value chain is. The process starts with the procurement of raw materials, processing it through various ways and finally making the finished products to reach the target customers. All the functional departments are also involved in the process of value chain analysis. From the value chain analysis, the organization can analyze whether the expectations of the customers are met or not.

Identify the Customer

Hyundai Motors treats the customers as the major asset of the company. The Company gives vital importance to customer satisfaction. Hyundai Motors was the one to launch the advanced customer communication program (ACCP) in the United States when they launched the first commercial vehicle. They also make use of the questionnaire through which the customers or the consumers can have a say in their opinion or for improvising the product in the market.

The value chain among the company deals with the different sets of procedures that are included in the marketing for competitive advantage from the procurement to the final promotion of the goods and services. The value chain can be internal and external to the organization, the internal deals mainly with the procurement of the resources and the external deals with the whole production and the promotion process.

Key Players in the value chain

Dealers

The dealers are the main form of the channel of distribution; they make the product available at the right time. They depend on geographical and psychographic features.

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Channels of Distribution

“Path or pipeline through which goods and services flow in one direction (from a vendor to the consumer), and the payments generated by the flow in the opposite direction (from consumer to the vendor).” (Distributional channel 2009).

The channels of distribution are the different sources through which the finished products reach the end-users or the customers. They can be different channels that are used in the distribution. The selection of the channel of distribution mainly depends on the product. In the case of an automobile, the distribution is made to the customers through dealers. The marketing managers are in charge of channels of distribution and they are responsible for making the right product available at right time to the customers.

The customers are identified through R&D activities, the main area to be focused on is the buying behaviour of the customers. The analysis is conducted with the purchase power parity, the automobile is scattered among the people of different statuses, and this is the major source of one analysis. The affordability is to be cross checked when they are in the selection process of the geographical location.

Selection of Suppliers

Hyundai is having a number of suppliers all over the world and the unit which is situated in the USA has its suppliers from the local places. The suppliers are selected on the basis of their experience and the level of trust they have maintained with the organization. Hyundai selects suppliers who give more value to the quality and who perform effectively for increasing the overall productivity and profitability of the firm. Hyundai identifies suppliers who are:

  • “Committed to growth
  • Committed to enhance quality
  • Committed to excellence
  • Committed to cost-effectiveness.” (Doing business with Hyundai, 2009).

The criteria that are considered when selecting a supplier are:

  • “Suppliers who are dedicated to providing exceptional services, products and support to our customers, employees and dealers.
  • Suppliers who are quality-driven and practice continuous cost improvement
  • Suppliers who bring Hyundai a significant competitive edge
  • Suppliers who are committed to ethical business practices
  • Suppliers with businesses that have been fully functional for at least two years
  • Suppliers with an experienced and professional staff.” (Doing business with Hyundai 2009).

The decision-making process

The decision-making process is the major risk involved in the business. It involves research, analysis and sample testing before ending up with the final conclusion. The key decision-makers are the top level management of the organization. The key decision making is to consider mainly the resources, revenue, competitors etc. Basically, there are six steps involved in the decision-making process.

  • “Defining the problem
  • Develop alternatives
  • Evaluate the alternatives
  • Make the decision
  • Implement the solution
  • Monitoring the solution.” (6 steps to decision-making process, 2009).

Defining the problem: In order to make the correct decision, first, the problem has to be identified. Without a problem, there is no need to make decisions.

Develop alternatives: After identifying the problems, the next step is to develop several alternatives that may help to solve the problems.

Evaluate the alternatives: After developing various alternatives, the next step is to evaluate those alternatives.

Make the decision: After evaluating, the best alternative is taken and is considered as the decision is taken.

Implement the solution:The selected alternative is put into action.

Monitoring the solution: The solution which is implemented is monitored by analyzing the gap between the customer expectation and the actual value of the product

Identify the Key Buying Decision making Criteria

The decision making responsibility is mainly vested in the hands of the top management. Before making decisions there are certain factors that must be taken into consideration. Usually, it involves some common factors such as:

  • Economic factors: The economic factors mainly involve the economic condition of the country, whether it is in the boom period or in depression. It also involves the financial capacity of the firm.
  • Political factors: All government rules and regulations are included in this factor.
  • Social factors: It involves the responsibility of the organization towards the society or it can be said as the corporate social responsibility. Hyundai is employing nearly 30,000 American employees in its production units in Alabama which reflects the corporate social responsibility of the concern.
  • Cultural factors: As Hyundai is selling its products across the country, the culture in different countries should be taken into consideration
  • Technological factors: Improvement in technology should be considered before taking any organizational decision.
  • Global factors: The company should also consider the policies and procedures in the international trading market and must also concentrate on the taste and preferences of the consumers across the world.

Identify and validate segments

The important objective in segmenting the market is to clearly understand the segments that possess identical needs and preferences and design the products based on the needs of the particular target market. By segmenting the market the company can easily identify the needs and wants of the segment and thus they will be able to meet the expectations of the customers from each segment. “Market segmentation is the division of a market into distinct groups of buyers who might require different products or marketing mixes. (Kotler et al, 1994).” (Marketing 2009).

The marketing strategy of Hyundai is differentiated marketing. Most companies undertake the market segmentation process based on certain market segmentation strategies, namely geographical segmentation, demographic segmentation, psychographic segmentation and behavioural segmentation.

Geographical Segmentation

“Geographical segmentation is very beneficial to any business. It helps the marketing team to identify and segregate the market into units on the basis of:

  • language
  • climatic conditions
  • lifestyles.” (What is geographic segmentation 2009).

Geographic segmentation mainly involves dividing the markets or customers based on different geographical units. This type of segmentation is mainly used to identify the taste and preferences of the consumers in different geographical areas. The customer’s preferences, characteristics and usage of the product differ according to the place. In the USA, Hyundai is more concentrating in North America – mainly places like California, Alabama and Michigan. The taste and preferences of the customers in these three places differ; so, based on the need of the different market segments the products are made available.

Demographic Segmentation

“Demographics originated from the word ‘demography’ which means a ‘study of population’. The population can be divided into age, gender, income, and family lifecycle amongst other variables.” (Market segmentation n.d.). Demographic segmentation involves dividing the customers based on certain variables such as gender, age group, education, lifestyle, income level, religion and nationality of the consumers. In North America itself there are certain differences in preferences based on the above-mentioned variables. Hyundai Motors produces cars for all types of customers irrespective of their age, income etc. The target customers are Executive class people who are of the age group between 21-65 years. Based on the income level, Hyundai is targeting both middle and upper-class income professionals who emphasise the true value of money for which they pay and also require safe and comfortable travelling. The college going students are also attracted towards certain models specifically in the case of i10 and Hyundai Pa’s.

Psychographic Segmentation

“This type of segmentation divides the market into groups according to customers’ lifestyles.” (Market segmentation- psychographic segmentation n.d.). Psychographic segmentation divides the customers based on psychological factors. Some people buy cars to show their image in the society, some will have a passion to buy latest model cars and when Hyundai car is concerned all types of customers are welcome because based on the requirements of the various target segments the company has designed different models. The customers who like sports vehicles are also considered as the target customers.

Behavioural Segmentation

“Refers to why people purchase a product or service.” (Psychographic segmentation n.d.). In this type of segmentation, the customers are mainly segmented based on certain criteria such as the attitude of the customers towards the product, knowledge about the product, use of the product by the consumers and the response of the consumers towards the product. It is very difficult to understand the behaviour of the customers because it differs from person to person and from place to place. As far as Hyundai is concerned the customers who aspire to buy luxurious with different and new body styles which possess high quality are the target customers.

“Hyundai took the bull by the horns in this bear market and scored big.” (Barr 2009).

By using behavioural segmentation, Hyundai analyzed the reason as to why the prospects were keeping a distance from buying the cars. After analysis, it was discovered that the main reason that restricted the customers to stand away from buying a car was the customer’s fear of losing their job. “David Zuchowski, vice-president of national sales for Hyundai noted in a New York Times article, “It doesn’t matter how many zillion dollars you put in rebates, or what APR you give them. If people are worried about their job, they don’t really care and they’re just not going to get off the fence.” (Barr 2009).

In order to help the customers to overcome this fence, a strategy was developed by the company. For this segment, the company released an assurance programme which said that if any customer has financed or leased a new Hyundai and if the customer loses his job or income, then the company will let the customer return it. After adopting this method, when the company sales report came, it was one among the few companies hitting the largest sales record. This depicts that the company’s behavioural segmentation is playing a significant role in increasing the profitability of the concern by increasing the number of loyal customers.

Hyundai’s target market is the Executive Class People from 21 – 65 years and also includes college students. Among the different models, the i10 has secured more demand and has innovated to produce its diesel version and soon it will be introduced in the market, it is basically for the executive class people.

Customer Value Proposition

The customer value proposition of Hyundai America is by using their product differentiation strategy. Hyundai is positioning its different car models as the most stylish, versatile, economic and convenient for its target customers. The company is focusing on promoting the car as the most stylish and quality car for the coming generations. In order to achieve customer satisfaction, the company should focus on customer value proposition so that the company will be able to understand the needs of the consumers and produce products according to their tastes and preferences. Customer satisfaction can be increased by considering the feedback of the customers and clarifying the queries that are put forward by the customers. Peter Drucker once made a nice remark: “The aim of marketing is to know and understand the customer so well that the product or service fits him or her and sells itself.” (Define the value proposition 2008).

Marketing Mix

The marketing mix is the combination of all the essential elements of marketing. “Marketing mix is a general phrase used to describe the different kinds of choices organizations have to make in the whole process of bringing a product or service to market”. The four Ps of marketing are as follows:

  • “Product (or Service)
  • Place
  • Price
  • Promotion.” (The marketing mix and 4 ps 2009).

Product: The products of Hyundai compose of different varieties based on the preferences of the different customers. Its sporty and stylish nature distinguishes the Hyundai car from the others.

Place: Hyundai is producing and distributing cars all over the world. In America, Hyundai was earlier remarked as low-quality cars but now most of the American customers prefer Hyundai cars because they meet the highest quality with the respective prices.

Price: The price of the cars depends upon the technology and the body style. Hyundai produces cars that range from moderate prices to very high prices. High priced cars are luxurious cars that are used as status symbols.

Promotion: “Promotion is the business of communicating with customers.” (Marketing mix (price, place, promotion, product) 2009). Promotional activities are mainly carried out by the company to create awareness in the mind of the consumers or to tell them about the new model that has been launched in the market. Hyundai advertises its products through television, magazines and the internet.

Conclusion

In the present scenario, in each home, at least one car will be there. Automobiles have become an essential part of the human living style. Hyundai Motors in America has created a position in the minds of the customers and more American customers prefer the brand value. In America, Hyundai was before remarked as low-quality cars but now most of the American customers prefer Hyundai cars because they meet the highest quality with the respective prices. The sales of the company in the USA are increasing each month and this shows that the company has laid the foundation in the US market. It is expected that the company will earn huge profits in the coming days by introducing more stylish and quality cars based on the customer’s requirements.

Reference

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