2Contents 1. Overview 2. Key Innovation 3. Innovation Type 4. Technological Innovation Strategy5. Analysis of the Present Situation6. Suggestion for Strategies
3OverviewWorldwide Industry DescriptionAutomotive IndustryDesigns, Develops, Manufactures, Markets, and Sells the world’s motor vehiclesOver than 70 million motor vehicles
4External Competition Oil Price Pressures Overview Worldwide Industry DescriptionPressuresExternalCompetitionOil Price
5OverviewS. Korean Automobile Industry & Hyundai MotorsAutomotive Industry5th largest in the world in terms of production volume6th largest in the world in terms of export volume1955: 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 smallenterprises in automobile industry;Hyundai Motor Co. established its own research institute, 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.;
61985: Number of vehicles registered in S.Korea exceeded 1 million OverviewS. Korean Automobile Industry & Hyundai Motors1985: Number of vehicles registered in S.Korea exceeded 1 million1986: Hyundai Excel nominated by Fortune magazine for the "Best Product 10" award1988: 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 million1993: Hyundai Elantra (new model launched), and was selected "Best Car of 1993" in Australia;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 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 Toyota, in a survey conducted by J.D. Power and Associates.2006: Hyundai Motor Company exceeds 100 trillion won in sales2008: Hyundai Motor receives Global Green Management Excellence Award, Global Reporting Initiative Award2009: Exceeded an accumulated export sales of 1 million cars in Africa
7OverviewCompany Overview- 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 UlsanHyundai vehicles sold in 193 countries through 6,000 dealerships and showrooms worldwide.
8Mercedes-Benz, founded Key InnovationBackground1886Mercedes-Benz, founded1937Toyota, founded19681968Hyundai Car, foundedHyundai Car, founded
10Six Sigma Define Problem Measure Current Situation Analyze Causes Key InnovationSix-SigmaSix SigmaDefine ProblemMeasure Current SituationAnalyze CausesImproveControl the ImprovementDefine ProblemMeasure Current SituationAnalyze CausesImproveControl the Improvement
11Quality Key Innovation Quality Trained 16 Gold Stars (Expert of Improvement)Solved the critical quality problemsin the factoryDeveloped Hyundai-Style SystemTrained Professionals & developed Q-star system1999Trained 200(+) Gold StarsExpanded direct manufacturingand research sectionsExpanded to major partnersExpandeddirect-quality Sections- Manufacturing SectionResearch SectionAll Partners2000Trained 200(+) Gold StarsExpanded indirect manufacturingsectionsExpanded to all partners2001Expandedindirect-quality SectionsTrained 200(+) Gold StarsExpanded to all parts and companies
1299% 50% Achieved 6 Sigma 90% 2003 Unit field quality improved Key InnovationQuality2003Achieved6 SigmaUnit field quality improved99%First Pass Yield increased90%1998, Hyundai’s IQS 2572000, Hyundai’s IQS 189 Average car company’s IQS 1572003, Hyundai’s IQS 143 Average car company’s IQS 1332009, Hyundai’s IQS 102 Toyota’s IQS 10150%of claim cost reduced
13Relationship Between Quality and Sales Key InnovationQualityRelationship Between Quality and SalesIQS ( Complaint per 100 cars )Number of Sales ( Unit : 1000 cars )25722418917514514397163244346375420Initial Quality Study (IQS) : measure of problems experienced within the first 90 days of ownership1021998, Hyundai’s IQS 2572000, Hyundai’s IQS 189 <-> average car company’s IQS 1572003, Hyundai’s IQS 143 <-> average car company’s IQS 1332009, Hyundai’s IQS 102 <-> Toyota’s IQS 101표로 어떻게 못만들까…??6601998199920002001200220032009In 2009, Hyundai’s IQS : Toyota’s IQS : 101
14Manufacturing Efficiency Key InnovationProductivityManufacturing EfficiencyAsan PlantHas short assembling linesUses buffer to reduce errorManufactures automaticallyHas information networksOver all manufacturing steps
15Operating ratio Key Innovation Productivity Ulsan Plant Asan Plant 87.7%97.5%89.5%107.6%20042006
16Types of Innovation Product Radical Competence - enhancing Innovation TypeTypes of InnovationTypes of InnovationProductRadicalCompetence - enhancingArchitecturalProcessIncrementalCompetence - destroyingComponent
17Quality Q star: Process Core Machinery Components: Radical Innovation TypeTypes of InnovationQualityTypes of InnovationProduct /ProcessQ star: ProcessRadical /IncrementalCore Machinery Components: RadicalSix Sigma: IncrementalCompetence-enhancing / Competence destroyingQuality rather than Technology:Competence-enhancingArchitectural /ComponentCore Machinery Components: Component
18Productivity Manufacturing Process: Process Innovation TypeTypes of InnovationProductivityTypes of InnovationProduct /ProcessManufacturing Process: ProcessRadical /IncrementalHyundai Asan Plant: RadicalLean-type Manufacturing Process: IncrementalCompetence-enhancing / Competence destroyingProductivity than Technology:Competence-enhancingArchitectural / ComponentManufacturing Process: componentProductivityProduct / ProcessManufacturing Process: Process InnovationRadical / IncrementalHyundai Asan Plant: Radical Innovation린 방식 Manufacturing Process: Incremental InnovationCompetence-enhancing / Competence destroyingProductivity than Technology: Competence-enhancing InnovationArchitectural / ComponentManufacturing Process: Architectural InnovationSources of InnovationQualityBenchmarkingConsulting Firms
19Car Infotainment Technological Innovation Strategies Choosing Innovation ProjectCar InfotainmentVehicles of the future will offer diverse information and entertainment 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
20Technological Innovation Strategies Choosing Innovation Project New Automotive Electronics Technology For CustomersDriver Information System(DIS)DIS is a comprehensive information system that provides easy control of multimedia, navigation and telematics functionsSmart Cruise Control (SCC)radar to help maintain a safe distance from other vehicles.Thus, the device helps prevents collisionsHologram HUDThis futuristic technology places various useful information in front of the driver on the windshield using a 3D hologramAuto-pilot DrivingUltimately, the goal is to create a car that can assess the traffic situation and operate without any manipulation from the driver
21Hybrid Car Fuel Cell Car Technological Innovation StrategiesChoosing Innovation ProjectHybrid CarHyundai introduced a new standard ofgreen vehicles in 2009 when they beginscommercial 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 cellelectric vehicle to accomplish zero-emission to reality. Fuel cell electricvehicles are powered by the electricity.Except water, the vehicles produce no-emissions and moreover the amount of energy is unlimited.Fuel Cell Car
22Motors and consolidate its first position in domestic market. Technological Innovation StrategiesCollaboration StrategiesIn March 1999, Hyundai Motors absorbed Kia Motors. By union with two rival companies, Hyundai took advantages from KiaMotors and consolidate its first position in domestic market.- First, Hyundai established a constituency for theiroverseas expansion- Second, Hyundai got Kia’s high technologies- Third, Hyundai could restrain foreign companies fromholding domestic market.
23Technological Innovation Strategies Collaboration StrategiesIn May2008, Hyundai collaboratedwith Microsoft to develop infotainmentfor next generation’s car together.Microsoft will focus on developingsoftware platform for car and Hyundaiwill adopt those technologies.They will also promote car IT venturecompanies to advance global marketIn Dec 2005, Hyundai collaborated withLG telecom to start navigation service, telematics, based on cellular phone
24S W O T Analysis of the Present Situation SWOT Analysis High brand awarenessHigh qualityHigh market shareDiverse vehicle typesCustomer Value ProgramHigh technology in Green CarOT
26S W O T Analysis of the Present Situation SWOT Analysis High brand awarenessHigh qualityHigh market shareDiverse vehicle typesCustomer Value ProgramHigh technology in Green CarFrequent recallsBankruptcy of middle/smallsized companies supplyingcomponentsOT
27WHYUNDAI IS RECALLING 531,894 MY ACCENT, ENTOURAGE, SONATA, MY 2007 AZERA, ELANTRA AND SANTA FE, MY TUCSON AND MY VERACRUZ VEHICLES. THE STOP LAMP SWITCH IN THE AFFECTED VEHICLES MAY MALFUNCTION. 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.
28S W O T Analysis of the Present Situation SWOT Analysis High brand awarenessHigh qualityHigh market shareDiverse vehicle typesCustomer Value ProgramHigh technology in Green CarFrequent recallsBankruptcy of middle/smallsized companies supplyingcomponentsSolved Labor & Mngt problemsRemoved customs(KOR-US FTA)Increased brand awareness inforeign countriesRisen demand of small carsOT
29OWhile 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.
30S W O T Analysis of the Present Situation SWOT Analysis High brand awarenessHigh qualityHigh market shareDiverse vehicle typesCustomer Value ProgramHigh technology in Green CarFrequent recallsBankruptcy of middle/smallsized companies supplyingcomponentsSolved Labor & Mngt problemsRemoved customs(KOR-US FTA)Increased brand awareness inforeign countriesRisen demand of small carsDecreasing world automotivebrand valueLow rate of R&D in KoreaForeign cars importedin cheap pricesOT
32Very difficult to found a new car company Threat of Potential Entrants5 – Force ModelLot of component companies → Low BargainingpowerDeveloping new tech → HighBargaining powerBargainingPower of supplierPrice offoreign cars ↓→ Gradual increase in bargaining power of buyerBargainingPower of buyer`There’s no competitor for Hyundai Motors in domestic car market.Hyundai Motors established their position in market quite well.Intensity of competitive rivalryShort Distance - Bicycle, SubwayLong Distance – KTX, AirplaneThreat of Substitute Product
33Vision of Hyundai Motors Balanced ScorecardVision of Hyundai MotorsGlobal orientationRespect for human valuesCustomer satisfactionTechnology innovationCultural creationIf Hyundai vision succeeds, how will Hyundai differ?Increasing salesamountsFinancialReducingthe recall rateCustomerFamiliar BusinessEnvironmentInternal BusinessGreen carStrategyInnovationLearning
34Development ofnew technologyFinancialContinuousCustomermanagementWhat are the critical success factors?EmployeesManagementInternal BusinessProducingthe hybrid carInnovationLearningWhat are the critical measurements?Sales amountsof carsFinancialRecall rate &CustomerSatisfactionRate of strikein a yearInternal BusinessAmounts ofSold hybrid carInnovationLearning
35O T S W Suggestion for Strategies Hyundai Motor Co. should occupy US middle-classed consumers by releasing various small carsUsing increasing brand awareness, Hyundai Motor Co. could apply premium price on their hybrid or fuel cell vehiclesHyundai should have stable growth focused on domestic salesHyundai should establish policy to widen chance to select car models, developing new productsWHyundai should supplement their weakness in supply network by adding additional supplying companiesHyundai should decrease strikes and labor conflicts building stable relationshipHyundai should quit producing unprofitable modelsHyundai should minimize their export to unprofitable foreign markets