MOT in Hyundai Motors

Con

ten

ts

1. Overview

2. Key Innovation

3. Innovation Type

4. Technological Innovation Strategy

6. Suggestion for Strategies

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5. Analysis of the Present Situation

Worldwide Industry Descrip-tion

Overview

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Automotive In-dustry

Designs, Develops, Manufactures, Mar-kets, and Sells the world’s motor vehi-cles

Over than 70 million motor vehicles

Worldwide Industry Descrip-tion

Overview

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Pressures

Oil PriceExternalCompeti-tion

S. Korean Automobile Industry & Hyundai Motors

Overview

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Automotive In-dustry

5th largest in the world in terms of production volume6th largest in the world in terms of export volume

1955: Sinjin Motor Co. founded – 1st automotive company in Korea1968: Hyundai Motor Co. founded.

Hyundai Cortina, Hyundai Ford 20M, Hyundai Ford D-series, and Hyundai Ford DK-Series launched.

1973: Hyundai New Cortina launched.

1975: Government established "Systematization Promotion Act" for medium and small enterprises in automobile industry;

Hyundai Motor Co. established its own research insti-tute, and

produced Hyundai Pony, the first Korean-developed car, designed by ItalDesign and based on Mitsubishi technology;

1976: Hyundai Motor made Korean history by exporting the "Pony“ to the Republic of Ecuador; 1983: Hyundai Motors established Hyundai Auto Canada Inc.;

S. Korean Automobile Industry & Hyundai Motors

Overview

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1985: Number of vehicles registered in S.Korea exceeded 1 million 1986: Hyundai Excel nominated by Fortune magazine for the "Best Product 10" award 1988: Annual domestic automobile production volume exceeded one million units; Hyundai named "Official Car" in Seoul Olympic;

1990: Hyundai's cumulative exports to the U.S. surpassed 1 million 1993: Hyundai Elantra (new model launched), and was selected "Best Car of 1993" in Aus-tralia; 1995: Number of vehicles registered in South Korea exceeded eight million;

Hyundai's Accent earned "Canadian Best Buy Award", and also won the "Asia-Pacific" Rally;

1998: Hyundai began investing heavily in quality, design, manufacturing, and long-term research, and added a 10-year or 100,000 mile warranty to its vehicles in the United States;

51% of Kia Motors acquired by Hyundai Motor; 2004: Hyundai tied with Honda for initial brand quality, second in the industry behind Toy-ota, in a survey conducted by J.D. Power and Associates. 2006: Hyundai Motor Company exceeds 100 trillion won in sales 2008: Hyundai Motor receives Global Green Management Excellence Award, Global Reporting Initiative Award 2009: Exceeded an accumulated export sales of 1 million cars in Africa

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- A division of the Hyundai-Kia Automotive

- Group Headquartered in Seoul - The world’s fourth largest automaker in terms of units sold.  - The world’s largest integrated automobile manufacturing facility in Ulsan - Hyundai vehicles sold in 193 countries through 6,000 dealer-ships and showrooms worldwide.

Company Over-view

Overview

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Key Innovation

Background

1886

1937

1968

Mercedes-Benz, founded

Toyota, founded

Hyundai Car, founded1968

Hyundai Car, founded

Quality

Productivity

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Key Innovation

Six-Sigma

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Key Innovation

Define Problem

Measure Current Situation

Analyze Causes

Improve

Control the Improvement

Six Sigma

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QualityKey Innovation

Quality

1999

2000

2001

Trained Professionals & developed Q-star sys-tem

Expanded direct-quality Sections- Manufacturing Section- Research Section- All Partners

Expanded indirect-quality Sec-tions

• Trained 16 Gold Stars (Expert of Improvement)

• Solved the critical quality problems in the factory• Developed Hyundai-Style System

• Trained 200(+) Gold Stars• Expanded direct manufacturing and research sections• Expanded to major partners

• Trained 200(+) Gold Stars• Expanded indirect manufacturing sections• Expanded to all partners

• Trained 200(+) Gold Stars• Expanded to all parts and compa-nies

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2003

QualityKey Innovation

Unit field quality improved

Achieved

6 Sigma

First Pass Yield increased90%99%

of claim cost reduced50%

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97 163

244

346

375

420

1998 1999 2000 2001 2002 2003

257

224

189

175

145

143

Relationship Between Quality and Sales

IQS ( Complaint per 100 cars )

Number of Sales ( Unit : 1000 cars )

QualityKey Innovation

Initial Quality Study (IQS): measure of problems experi-enced within the first 90 days of ownership

2009

102

In 2009, Hyundai’s IQS : 102 Toyota’s IQS : 101

660

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ProductivityKey Innovation

Has short assembling lines

Uses buffer to reduce error

Manufactures automatically

Has information networks

Over all manufacturing stepsManufacturing Efficiency

Asan Plant

Operating ratio

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ProductivityKey Innovation

Ulsan Plant

Asan Plant

87.7%

97.5%

89.5%

107.6%

2004 2006

Types of Innovation

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Types of Innova-tion

Innovation Type

Product

Radical

Competence - enhanc-ing

Architectural

Process

Incremental

Competence - destroy-ing

Component

Quality

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Types of Innova-tion

Innovation Type

Types of Innovation

Product /Process

Q star: Process

Radical /Incremental

Core Machinery Components: RadicalSix Sigma: Incremental

Competence-enhanc-ing / Competence de-stroying

Quality rather than Technology: Competence-enhancing

Architectural /Component

Core Machinery Components: Component

Productivity

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Types of Innova-tion

Innovation Type

Types of Innovation

Product /Process

Manufacturing Process: Process

Radical /Incremental

Hyundai Asan Plant: RadicalLean-type Manufacturing Process: Incre-mental

Competence-enhanc-ing / Competence de-stroying

Productivity than Technology:Competence-enhancing

Architectural / Compo-nent

Manufacturing Process: component

Choosing Innovation Project

Technological Innovation Strate-gies

Car Infotainment• Vehicles of the future will offer diverse information and en-tertainment for drivers and greater safety features than ever before. This car would be called Smart car. Smart cars with infotainment systems will also offer the latest electronic technologies and equipment so that driving will be more comfortable and enjoyable as well as safer

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Choosing Innovation Project

Technological Innovation Strate-gies

New Automotive Electronics Technology For Customers

Driver Information System(DIS)DIS is a comprehensive information system that provides easy control of multimedia, navigation and telematics functions

Smart Cruise Control (SCC)radar to help maintain a safe distance from other vehi-cles. Thus, the device helps prevents collisions

Hologram HUD

This futuristic technology places various useful informa-tion in front of the driver on the windshield using a 3D hologram

Auto-pilot Driving

Ultimately, the goal is to create a car that can assess the traffic situation and operate without any manipulation from the driver

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Choosing Innovation Project

Technological Innovation Strate-gies

Hybrid CarHybrid Car

Hyundai introduced a new standard of green vehicles in 2009 when they begins commercial mass production of the Elantra(Avante) LPI hybrid, which runs on LPG.Hyundai started world’s first mass production of LPI hybrid electric vehicles in July 2009.

Hyundai is trying to develop fuel cell electric vehicle to accomplish zero- emission to reality. Fuel cell electric vehicles are powered by the electricity. Except water, the vehicles produce no- emissions and moreover the amount of energy is unlimited.

Fuel Cell CarFuel Cell Car

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Collaboration StrategiesTechnological Innovation Strate-gies

In March 1999, Hyundai Motors absorbed Kia Motors. By union with two rival companies, Hyundai took advantages from Kia Motors and consolidate its first position in domestic market.

- First, Hyundai established a constituency for their overseas expansion- Second, Hyundai got Kia’s high technologies - Third, Hyundai could restrain foreign companies from holding domestic market.

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Collaboration StrategiesTechnological Innovation Strate-gies

In May2008, Hyundai collaboratedwith Microsoft to develop infotainment for next generation’s car together.

Microsoft will focus on developing software platform for car and Hyundai will adopt those technologies.

They will also promote car IT venturecompanies to advance global market

In Dec 2005, Hyundai collaborated withLG telecom to start navigation ser-vice,telematics, based on cellular phone

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S W

O T

• High brand awareness• High quality• High market share• Diverse vehicle types• Customer Value Program• High technology in Green Car

SWOT AnalysisAnalysis of the Present Situation

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World Best Brand Rank 69

S<Interbrand>

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SWOT AnalysisAnalysis of the Present Situation

S W

O T

• High brand awareness• High quality• High market share• Diverse vehicle types• Customer Value Program• High technology in Green Car

• Frequent recalls• Bankruptcy of middle/small sized companies supply-ing components

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WHYUNDAI IS RECALLING 531,894 MY 2006-2007 ACCENT, ENTOURAGE, SONATA, MY 2007 AZERA, ELANTRA AND SANTA FE, MY 2005-2007 TUCSON AND MY 2007-2008 VE-RACRUZ VEHICLES. THE STOP LAMP SWITCH IN THE AFFECTED VEHICLES MAY MAL-FUNCTION. A MALFUNCTIONING STOP LAMP SWITCH MAY CAUSE THE BRAKE LIGHTS TO NOT ILLUMINATE WHEN THE BRAKE PEDAL IS DEPRESSED OR MAY CAUSE THE BRAKE LIGHTS TO REMAIN ILLUMINATED WHEN THE BRAKE PEDAL IS RELEASED. A STOP LAMP SWITCH MALFUNCTION MAY AFFECT THE OPERATION OF THE BRAKE-TRANSMISSION SHIFT INTERLOCK FEATURE SO THE TRANSMISSION SHIFTER WOULD NOT BE ABLE TO BE SHIFTED OUT OF PARK POSITION. IT MAY ALSO CAUSE THE ELECTRONIC STABILITY CONTROL (ESC) MALFUNCTION LIGHT TO ILLUMINATE, AND IT MAY NOT DEACTIVATE THE CRUISE CONTROL WHEN THE BRAKE PEDAL IS DEPRESSED.

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SWOT AnalysisAnalysis of the Present Situation

S W

O T

• High brand awareness• High quality• High market share• Diverse vehicle types• Customer Value Program• High technology in Green Car

• Frequent recalls• Bankruptcy of middle/small sized companies supply-ing components

• Solved Labor & Mngt prob-lems• Removed customs (KOR-US FTA)• Increased brand aware-ness in foreign countries• Risen demand of small cars

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OWhile Korea exports about 700,000 cars it only imports 7,000 U.S. cars. Korean car companies have about 5 percent of the U.S. auto market share.

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SWOT AnalysisAnalysis of the Present Situation

S W

O T

• High brand awareness• High quality• High market share• Diverse vehicle types• Customer Value Program• High technology in Green Car

• Frequent recalls• Bankruptcy of middle/small sized companies supply-ing components

• Solved Labor & Mngt prob-lems• Removed customs (KOR-US FTA)• Increased brand aware-ness in foreign countries• Risen demand of small cars

• Decreasing world auto-motive brand value• Low rate of R&D in Korea• Foreign cars imported in cheap prices

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Decreasing WorldAutomotive BrandValue <Interbrand>

Very difficult to found a new car company

Threat of Potential Entrants

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5 – Force Model

` There’s no competitor for Hyundai Motors in domestic car market. Hyundai Motors established their position in market quite well.

Intensity of competitive rivalry

Short Distance - Bicycle, Subway Long Distance – KTX, Airplane

Threat of Substitute Product

Price of foreign cars ↓→ Gradual in-crease in bar-gaining power of buyer

Bargaining Power of buyerLot of compo-

nent companies → Low Bargain-ing powerDeveloping new tech → High Bargaining power

Bargaining Power of sup-

plier

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Balanced Scorecard

Vision of Hyundai Mo-tors

Global orientationRespect for human values

Customer satisfactionTechnology innovation

Cultural creation

Increasing sales

amounts

Financial

Reducing the recall rate

CustomerFamiliar Busi-

ness Environment

Internal Busi-ness

Green carStrategy

InnovationLearning

If Hyundai vision succeeds, how will Hyundai differ?

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Development of

new technol-ogy

Financial

ContinuousCustomer

management

Customer

EmployeesManagement

Internal Busi-ness

Producing the hybrid car

InnovationLearning

What are the critical success factors?

What are the critical measurements?

Sales amountsof cars

Financial

Recall rate &Customer

Satisfaction

Customer

Rate of strikein a year

Internal Busi-ness

Amounts ofSold hybrid car

InnovationLearning

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Suggestion for Strategies

1. Hyundai Motor Co. should occupy US middle-classed consumers by releasing various small cars

2. Using increasing brand awareness, Hyundai Mo-tor Co. could apply pre-mium price on their hy-brid or fuel cell vehicles

1. Hyundai should have stable growth focused on domestic sales

2. Hyundai should establish policy to widen chance to select car models, devel-oping new products

1. Hyundai should supple-ment their weakness in supply network by adding additional supplying com-panies

2. Hyundai should decrease strikes and labor conflicts building stable relation-ship

1. Hyundai should quit pro-ducing unprofitable mod-els

2. Hyundai should minimize their export to unprof-itable foreign markets

O T

S

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