Introduction

Introduction: Hyundai Motor Company is the South Korean multinational automaker which is headquartered in Seoul, South Korea. It was founded during the year of 1967 and it, along with Kia, together comprises the Hyundai Motor Group, which is the world's fastest growing automaker as on 2011.In 2008, Hyundai (without Kia) ranked as the eighth largest automaker. In 2010, Hyundai sold over 3.6 million vehicles worldwide. Also reports fourth largest car manufacturer across the globe. Hyundai Motor India Limited is currently the second largest auto exporter in India. It is making India the global manufacturing base for small cars. Hyundai has two manufacturing plants in India located at Sriperumbudur in the Indian state of Tamil Nadu.Thus, in the following assignment we are going to critically analyze the structure of Hyundai and partner selection process and also the impacts of local factors. Automotive Sector in China: China today, is one of the most important automobile markets in Asia. From the beginning, China's automobile industry continues to grow rapidly. The automobile industry in China is composed of 120 vehicle manufacturers 9currently getting consolidated), employing nearly 2 million workers. In early days, there was a debate on whether automotive industry should be controlled by public enterprises or automotive industry should be restricted in the hand of private sectors. This debate has ended with the solution of joint venture. That is why today most of the Chinese automobile company runs in the hands of both public and private enterprises. FDI is also a major factor of the development of Chinese automotive industry. During the 1990s, China received more foreign investment than any other developing country as investors sought to reap some of the gains of China’s fast-growing economy. Much of this foreign investment in China was in the automobile industry. By 2001, more than 800 Chinese companies in vehicle-related industries (including component manufacturers) had received FDI and the total agreed investment was valued at $233 billion with actual registered capital of $12 billion. Despite China's growing auto industry, productivity lags behind the other Asian competitors, and industry lacks the ability to conduct research and development, relying on its foreign partners to develop new vehicles. Although Chinese automakers are presently creating new and more trade friendly policies and methods through foreign joint-ventures, but China's automotive industry still remains underdeveloped both technically and managerially. These conditions present a significant challenge for China's automotive industry, and it is expected to take a considerable amount of time before China becomes a global competitor in the automotive market. Automotive Sector in India: India is also an emerging market for worldwide auto-giants. Due to low cost of labor many multinational companies are investing in India. Its automotive industry has grown very rapidly from the middle of 1990’s. India is the second most populated country in the World, and the growth rate of Indian economy is very high, which indicates the presence of huge demand in different industrial sectors. Automobile industry is not the exception in this regard. Indian automobile sector has huge demands from its own country. This demand also attracts the giant automobile suppliers through out the world to come and invest in the Indian automotive industry. Due to the contribution of many different factors like sales incentives,introduction of new models as well as variants coupled with easy availability of low cost finance with comfortable repayment options, demand and sales of automobiles are rising continuously. Government has also contributed in this growth by liberalizing the norms for foreign investment and import of technology and that appears to have benefited the automobile sector. The production of total vehicles increased from 4.2 million in 1998-99 to 7.3 million in 2003-04. It is expected that by the year 2016, the turnover of the Indian automobile sector could grow to $145 billion. Today, this sector has emerged as a sunrise sector. However, the overcapacity problem is haunting many of the players as demand may not go up significantly. Hence, many players are looking for an external market for Indian automobiles. The prospect of component industry is quite positive. The leading local firms have established over 200 technical cooperation agreements with foreign firms to be able to reach international standards in cost and manufacturing. Hyundai’s operation in South East Asia: India: Hyundai Motor India (HMI), a wholly-owned subsidiary of Hyundai Motor, is the second-largest carmaker in India. Hyundai opened its second plant in India in February 2008, a decade after it began operations in the country. The US$1 billion new plant, which was completed in a record 13 months, doubles Hyundai Motor’s capacity in India to 600,000 units a year. The new plant is located within the same 525 acre plot in Sriperumbudur, in the state of Tamil Nadu, adjacent to the first plant. The new plant is dedicated largely to the production of Hyundai Motor’s latest offerings in India — the i20 and the i10, winner of the most prestigious ‘Car of the Year’ awards from the leading automotive magazines and TV channels like Business Standard Motoring, CNBC-TV18, NDTV Car & Bike and Overdrive magazine. Building the i10 (A-segment) and i20 (B-segment) cars for world markets, the Indian subsidiary is Hyundai’s de facto global hub for small car production. In 2009, Hyundai opened a US$25 million R&D center in HITECH City in Hyderabad, India. The new facility will enable Hyundai to respond even more quickly to changing customer needs across the world and will serve as an important platform for the development of compact cars. China: Beijing Hyundai Motor Company (BHMC), a 50-50 joint venture between Hyundai Motor and Beijing Automotive Holdings, was established in 2002. It began operations in China by producing Sonata in December 2002 and in 2003, its first full year of sales reached 52,129 units, making Beijing Hyundai China’s thirteenth largest automaker. Sales soared to 144,088 units in 2004 and by 2005, sales had catapulted to 233,668 units making Beijing Hyundai China’s fourth best selling brand. In February 2008, Beijing Hyundai Motor Company (BHMC) set a record by surpassing one million units in cumulative production in just five years and two months, the shortest period among automobile companies in China. In the same year, Hyundai added a second plant to BHMC, doubling its production capacity to 600,000 units and is now in the process of building its No. 3 plant, which will boost production to 1 million units by 2012. In 2010, Beijing Hyundai’s sales rose 23.3 percent to 704,441 units from 571,234 units in 2009. Beijing Hyundai currently builds nine models: EF Sonata, Ling Xiang (NF Sonata), Elantra, Yuedong (China-exclusive Elantra model), i30, Tucson, ix35, Accent and Verna. Impacts: Hyundai Motor Corporation said that its Indian operations will return more profits than its other big Asian market--China. India and China have been Hyundai's two big growth markets over the last decade, and are largely responsible for the carmaker's climb in the top five biggest automobile companies in the world.  "During the last 13 years that we have been in India, we have never run into losses even for a single year," said H W Park, newly appointed CEO and MD, Hyundai Motor India Ltd. "Indian operations inclusive of the exports, account for 15 to 20 percent of the company's overall revenue. Our China operations are also very good and profitable. Next year (2010), in terms of profits we will be more than China."  In the first nine months of this year, Hyundai's operations in China have seen a 88 percent increase in sales volumes and a 124.5 percent increase in sales revenue. In India, the growth has been to the tune of 12.3 percent in terms of sales volume and 35 percent in sales revenue during the same period. Its US and Turkey plants have declined during the same period.  "India will continue to be a key market for us and we will concentrate on strengthening our dealer base," Park said. "From our current dealer base of 274, we plan to have over 320 dealers by 2010 to expand our footprint."  The company sells eight models across segments in the country but with the market predominantly being driven by small cars, Hyundai's success has also been limited in bigger cars. The company is already developing a car smaller than its entry level Santro to be launched in 2011. Hyundai’s success If Unilever, Bata and Alcan represent the story of MNCs which entered India very early on, the Koreans symbolize the picture in case of companies which have entered the country in the post reforms era. Take the case of Hyundai, which chose to enter the Indian market, with a small car (Santro) which offers value for money to the country's price sensitive consumers. Hyundai has also made very heavy investments in manufacturing facilities. After its initial success, Hyundai has started to widen its product range. Hyundai is one of the few MNCs to have established meaningful volumes in India in quick time. The company is among the top three car manufacturers in the country and is now emerging as a real threat to the market leader, Maruti in which Suzuki of Japan has a major stake. There are many lessons to be learnt from Hyundai. The company spent several months customizing Santro. Realising that Indian consumers attach much importance to lifetime ownership costs, Hyundai reduced the engine output of the Santro to keep its fuel efficiency high, priced its spare parts reasonably, and made various changes to the product specifications to suit Indian market conditions. In contrast, other global automakers have entered the market with vehicles with low gas mileage and high repair rates and after-sales service costs. Unlike many of the global auto manufacturers in India which source only about 60 to 70 percent of their components locally, Hyundai buys 90 percent. Hyundai has also plans to make India a global manufacturing hub that can serve other countries as the local market matures. Contrast Hyundai with players like Honda and Ford who have been very tentative about setting up full-fledged manufacturing facilities. The importance of commitment Commitment is important while competing in India. Commitment is often reflected in the entry strategy. Multinationals entering emerging markets often form joint ventures with local partners for a variety of reasons. These include their ability to influence public policy, to leverage existing products as well as marketing and sales capabilities, and to comply with regulatory requirements when foreign participation is restricted to less than 50 percent of a business. While joint ventures can facilitate quick access to important assets, especially in “strategic” industries like metals and mining and oil and gas, they often run into problems, down the line. As a recent McKinsey article[1] has mentioned, of the 25 major joint ventures established from 1993 to 2003, only 3 survive. Most ran into problems because the local partner couldn't invest enough resources to expand the business as quickly as the multinational had hoped. As a result, most of the multinationals that initially entered the market through joint ventures have disbanded them and pursued independent operations. The Korean multinationals, such as Hyundai and LG, have bypassed joint ventures entirely. They have retained management control and closely monitored the operations, making bold investments when the situation has demanded. Organization Structure: Worldwide Manufacturing Hyundai's manufacturing operations are based in South Korea. However, as of 2010, the company also has six overseas plants in China, India, Turkey, the United States, the Czech Republic and a Russian plant scheduled to open in 2011. Hyundai sells vehicles in 193 countries and has about 120,000 employees (as of 2010). Executives As of 2010, Hyundai's top executives include: Kang Ho Don, the co-chief executive officer (CEO) and vice president; Yang Seung, the president and co-CEO; and Chung Mong-Koo, the chairman and co-CEO. Vehicle Types Hyundai produces compact and luxury cars, sport utility vehicles (SUVs), minivans, trucks, buses and some commercial vehicles. In North America, Hyundai sells the Hyundai Accent, an economy car, and the Hyundai Sonata, a mid-sized sedan. Kia Motors In 1998, Hyundai became South Korea's largest automaker after acquiring a 51 percent stake in Kia Motors, which as of 2010, had been reduced to about 34 percent. Corporate Governance: Board of Directors: The Board of Directors makes decisions on matters defined by the laws or articles of incorporation, matters delegated by the general shareholders´ meeting, and key matters related to the basic guidelines for company operations and work execution. Moreover, we have the authority to supervise duties of directors and management, and consist of four internal directors and five external directors. The Board of Directors holds regular meetings and special meetings, if necessary. Committees under Board of Directors : The Audit Committee under the Board of Directors consists of four external directors. It is responsible for auditing finance and management of HMC. It has the authority to review reports on business management and financial status. The Audit Committee approves matters related to audit, the shareholders´ meeting, directors, and the board of directors. It can access business and management information for auditing.The External Director Candidates Recommendation Committee consists of two internal directors and two external directors. External directors should be recommended by the External Director Candidates Recommendation Committee. The 2007 Shareholders´ Meeting approved the directors´ compensation ceiling of 10 billion won. From January 1 to December 31, 2007, total compensation paid to internal and external directors was 7.737 billion won. Ethics Committee: Ethics Committee, which monitors internal transactions and supervises transparency and ethics management. The Ethics Committee consists of five external directors, one executive, and two advisors. It reviews matters related to the Anti-Trust and Fair Trading Act, transactions between parties in special relations specified in the Securities Trading Act, voluntary compliance with fair trading regulations, policies on ethics management and social contribution, and the Ethics Charter. -----------------------