Hyundai in Chile

Introduction

Hyundai Motor Company is a South Korean multinational automotive manufacturer and his headquartered is in Seoul the big capital of South Korea, was founded in 1967 and after 48 years it is the largest company in car manufacturing in South and in 2012 was the worlds fifth largest automaker in 2012 Hyundai sold over 4.4 million vehicles worldwide and if we add the sold by Kia together could were 7.12 million in sales. Currently Hyundai is the fourth largest vehicle manufacturer in the world. Hyundai vehicles are sold in 193 countries through some 6000 dealership and showrooms, and one of these countries is Chile, the Hyundai representative in Chile is Automotores Gildemeister, who belongs to Minvast Holding Gildemeister and this Holding is responsible for assembling auto parts, also works as a distributor and retail. Automotores Gildemeister was established in 1986 to manage the distribution of Hyundai vehicles in Chile. In that time Hyundai was unknown for the Chilean market, but now it is the second automotive importer and during 2014 has exceeded 12% of market share. Its distribution concept is mixed, because combines independent dealers whit its own branches and that includes 58 showrooms, 47 workshops and 53 spare part selling outlets. This fifty eight branches are distributed throughout the country that mean the headquarters and other 32 branches are located in the Metropolitan Region and the rest cover 2,000 kms to north and 1000 kms to the south of Chile.

Market Share

The first thing we noticed is the increase in July 2014, this happens because Hyundai is sponsor of FIFA, and at that time the World Cup was played in Brazil, the second thing we noticed is sustained growth in the share price between 2011 and 2014. But between 2014 and 2015 the price remains between $60 and $50 this happens because rise of the value of oil and the trend of sustainable growth.

In recent years to the automotive industry it declined and is project that by 2015 annual sales are 18,7% more lower than in 2014, this projection could be really truth because the sale of the first quarter is 10,7% less than in the 2014. This negative shock in the industry happens because there is an economic slowdown, the new green tax for new cars and growing distrust of consumers.

In this two graphs shows that despite the fact that the automobile industry is suffering from the economic and social developments, Hyundai grows and is positioned in the 3rd place by participation in sales during the first quarter of 2015. This is because it is perceived as an innovative brand; they invest in innovation and R&D; develop their market and their products also they adapt to market demands.

SWOT

Strengths-Large product line for the different segment in the Chilean market.-Have a good brand positioning, being considered as an innovative brand. (Letter j in reference)

-Original replacement parts these are easy to locate.

-Product Development. (Letter g in reference)

-Perception of a product of high quality and low price.

-Market Development. (Letter d in reference)-Investment in R&D.

Weaknesses-Geographic distances -Having only a concession undermines the price competitiveness

Opportunities-Globalization-FTA between South Korea and Chile-Good level of GDP-Technological Changes

Threats-Green taxes. (Letter k in reference) -The dollar rises. (Letter L in reference)-Economic slowdown. -Loss of consumer confidence in the market. (Letter H in reference)-High price of gasoline-Alternative market. (Letter I in reference)-Global trend towards the use of environmentally friendly energy sources.

Porters 5 Forces

Threat of New Entrants-Economy of scale: Hyundai it is a Company from South Korea and these mean they can produce large amounts of cars at low cost, in others words they make as entry barrier.

-Differentiated product: As the only differentiation has its added costs, since its design and image are not very important at the time of purchase.

-Capital requirements: the initial investment is high and also the costs of product distribution.-Distribution channels: Hyundai has several channels of distribution; the importance in the future is knowledge for everyone, the company now is evaluating options to create more.

-Low Price structure: the Company has a low price structure because they know how an efficient and effective management of distribution channels have in an international level.In conclusion the barriers to entry are high every way and these mean for Hyundai a great future and a low threat of new entrants, just they improve investment in Innovation and R&D.

Rivalry among existing competitorsWe must analyze the exit barriers.

-Number of competitors: in the market there are a lot competitor and theirs have products that compete on Price whit Hyundai products.

-Sector growth: for an economic recession and loss consumer confidence in the market (generally), and these cause a negative shock in this industry, so is estimated to grow less than other years, and indicates a less attractive sector.

-Lack of differentiation: this it is a big problem for Hyundai because the only way to stand out in the mind of the customer is with publicity and innovation.

-Fixed assets: since 1986 Hyundai is in Chile and now has 47 workshops and 53 spare part selling outlets and indicates big investment in capital more than other competitors.

-Strategic Interrelationships: it is important for Hyundai has good relationship with his suppliers and his dealers.

In conclusion in Automotive Industry have a high rivalry among existing competitors.

Bargaining power of buyersFor Automotive Industry dont exist one big customer, or a buyer that purchases several cars, these are the reason why the Company offer added services after selling a car like maintenance, specialized technical service, guarantee, etc.

Products are differentiated but Hyundai now must find a greater differentiation to help you increase sales.

Low switching costs because they have different models and prices for different consumers.

The client generally dont has greater information about the product and how the Company Works.

In conclusion the buyers have a low bargaining power.

Bargaining power of suppliers

Hyundai is backwards integrated with suppliers in South Korea, there was born the opportunities to offer low price in his products.

Other brands have the same kind of integration.

In conclusion the suppliers have a low bargaining power.

Threat of substitute products or services-Government restrictions: this year began to implement a new tax, was called green tax was created to reduce pollution and agglomeration in the cities, this tax is in addition to customs duty, IVA, etc. -Alternative market: this means the sale of used cars because that kind of car is cheaper than a new car and if we add the green tax is even cheaper, so the new car never can compete against an used car. In 2013 for each new car sold 3 used cars were sold.In conclusion there is a big threat of substitute products in this industry.

Keys of Success

Investment in Innovation and R&D: the company has investments in several project, some of these are: blue-link is an App used to turn off or turn on the car or find the car in a parking, zero-emission vehicle this is very important because global thinking is changing to a thought of sustainable growth and finally Hyundai plans 2020 debut for autonomous driving tech. Adaptations depending on to demand of the market: with its economy of scale, good relationship with suppliers and dealers, good marketing strategies have managed to effectively navigate the requirements and demands of the Chilean market. Market development and their own products: there is great synergy between Hyundai and Gildemeister, because this helps Hyundai to develop your market because the new headquarter Gildemeister, has 28 technical services, 2 showrooms and one of these is the first premium showroom in Latam. Be a considerate like an Innovation Brand: in 2014 GFK Adimark and Best Place to Innovate made a ranking together, this ranking is evaluated 5 different features: inspirational leadership, connected culture, consistent and reliable systems, flexible structures, and finally purpose, objectives and strategies. And in 2014 it was the number 25 in the ranking.

Porters Diamond Model in Chile

Factor Conditions-Strong Macroeconomic Policies.-Easily do Business.-Chilean economy is free, that means freedom of growth.-Developed physical infrastructure and strong administrative.-Sophisticate financial market.-Effective and efficient government institutions and agencies.-Excellent living standard.-Risk political is low.-Access to high quality business input.

Firm Strategy, Structure and Rivalry-A strong element is the association and cooperation to face the market.-Incentives to encourage investments and productivity-More than 57 trade agreements-In various clusters was born a strong domestic competition.- More than 19 countries have with Chile attractive tax policies.-Openness to foreign and local competition

Demand Conditions-Need a more effective collaboration between the public and the private sector.-Small internal market size.-Sophistication of local customers and needs; like strict quality, safety and environmental standards. -Overall local buyer sophistication.

Related and Supporting Industries-Lower level cluster-driven diversification of the Chilean economy.-Low state of cluster development.-Significant positions in number of clusters.-Presence of clusters instead of isolated firms.

In conclusion it has two favorable attributes factor condition and firm strategy, structure and rivalry, Chiles competitive advantage is based on these two attributes but long term is not sustainable if Chile dont invest to growth the other two attributes.(Reference letter m)

Conclusion and Suggestion

Despite that there is a negative effect on the industry, Hyundai is growing but if dont use a marketing strategy to position itself as the first automotive company in innovation and technology competitors could take his place in sales. Hyundai must create loyalty with consumers in Chile because clients buy Hyundai for its low, but at any moment may come one competitor offer whit similar characteristics of the car and half the price Hyundai, this could be the end of a company with a great future ahead.Hyundai within your corporate culture have the constant learning and training staff, especially sales staff, aim of this is strengthen the identity of the company and involve staff in strategies.In Chile after the Porter Diamonds Model, Chile must improves in a lot of thing like improve demand conditions in domestic market, improve attributes of related and supporting industries, improve education factor that means promote more research in technology which will lead to sustainable development and the government should facilitate the above attributes.

References

a) http://en.wikipedia.org/wiki/Hyundai_Motor_Companyb) http://worldwide.hyundai.com/WW/Corporate/InvestorRelations/FinancialInformation/FinancialStatements/index.htmlc) http://www.anac.cl/estudio-de-mercadod) http://www.minvestgroup.com/brochure/index.phpe) http://worldwide.hyundai.com/wcm/idc/groups/sggeneralcontent/@hmc/documents/sitecontent/mdaw/mdcz/~edisp/hw073495.pdff) http://www.otcmarkets.com/stock/HYMTF/quoteg) http://europe.autonews.com/article/20150331/ANE/150339974/hyundai-aims-to-have-autonomous-driving-tech-on-market-in-2020h) http://empleo.microdatos.cl/documentos/docs_encuesta_per/2015/Marzo/Presentaci%C3%B3n_IEE_Marzo_2015.pdfi) http://www.cavem.cl/sitio_socios/infocavem/Info-cavem-112.pdfj) http://static.america-retail.com/2014/11/Brochure-BP2I-para-entrega-en-evento-de-presentacion-de-Ranking-de-Percepcion-de-la-InnovAccion-2014.pdfk) http://www.latercera.com/noticia/negocios/2015/01/655-613992-9-hasta--2-millones-pagan-vehiculos-nuevos-en-debut-de-impuesto-verde.shtmll) www.chiledolar.clm) Chile-and-the-Chilean-Wine-Industry.pdf