MOT in Hyundai Motors

1. MOT in Hyundai Motors

2. Contents 1. Overview 2. Key Innovation 3. Innovation Type 4. Technological Innovation Strategy 5. Analysis of the Present Situation 6. Suggestion for Strategies

3. Overview Worldwide Industry Description Automotive Industry Designs, Develops, Manufactures, Markets, and Sells the world’s motor vehicles Over than 70 million motor vehicles

4. Overview Worldwide Industry Description Pressures External Competition Oil Price

5. Overview S. Korean Automobile Industry & Hyundai Motors Automotive Industry 5th largest in the world in terms of production volume 6th largest in the world in terms of export volume • 1955: Sinjin Motor Co. founded – 1st automotive company in Korea • 1968: 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 institute, andproduced Hyundai Pony, the first Korean-developed car, designed by ItalDesignand 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.;

6. Overview S. Korean Automobile Industry & Hyundai Motors • 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 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 10-year or 100,000 mile warranty to its vehicles in theUnited 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 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

7. Overview Company 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 Ulsan • Hyundai vehicles sold in 193 countries through 6,000 dealerships and showrooms worldwide.

8. Key Innovation Background 1886 Mercedes-Benz, founded 1937 Toyota, founded 1968 1968 Hyundai Car, founded Hyundai Car, founded

9. Key Innovation Quality Productivity

10. Key Innovation Six-Sigma Six Sigma Define Problem Measure Current Situation Analyze Causes Improve Control the Improvement

11. Key Innovation Quality Quality • Trained 16 Gold Stars • (Expert of Improvement) • Solved the critical quality problems • in the factory • Developed Hyundai-Style System Trained Professionals& developed Q-star system 1999 • Trained 200(+) Gold Stars • Expanded direct manufacturing • and research sections • Expanded to major partners • Expanded • direct-quality Sections • - Manufacturing Section • Research Section • All Partners 2000 • Trained 200(+) Gold Stars • Expanded indirect manufacturing • sections • Expanded to all partners • Trained 200(+) Gold Stars • Expanded to all parts and companies 2001 Expanded indirect-quality Sections

12. Key Innovation Quality Achieved 6 Sigma Unit field quality improved 99% 90% First Pass Yield increased 50% of claim cost reduced 2003

13. Key Innovation Quality Initial Quality Study (IQS): measure of problems experienced within the first 90 days of ownership 257 Relationship Between Quality and Sales 224 189 102 IQS ( Complaint per 100 cars ) 175 Number of Sales ( Unit : 1000 cars ) 660 145 143 2009 In 2009, Hyundai’s IQS : 102Toyota’s IQS : 101 97 163 244 346 375 420 1998 1999 2000 2001 2002 2003

14. Key Innovation Productivity Asan Plant Has short assembling lines Uses buffer to reduce error Manufactures automatically Has information networks Over all manufacturing steps Manufacturing Efficiency

15. Key Innovation Productivity Ulsan Plant 107.6% Asan Plant 89.5% 97.5% 87.7% 2004 2006 Operating ratio

16. Innovation Type Types of Innovation Product Process Radical Incremental Competence - enhancing Competence - destroying Architectural Component Types of Innovation

17. Innovation Type Types of Innovation Quality

18. Innovation Type Types of Innovation Productivity

19. Choosing Innovation Project Technological Innovation Strategies • Car Infotainment • Vehicles 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

20. Choosing Innovation Project Technological Innovation Strategies 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 vehicles. Thus, the device helps prevents collisions Hologram HUD This futuristic technology places various useful information 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

21. Choosing Innovation Project Technological Innovation Strategies Hybrid 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. Fuel Cell Car 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.

22. Collaboration Strategies Technological Innovation Strategies 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.

23. Collaboration Strategies Technological Innovation Strategies In May2008, Hyundai collaborated with 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 venture companies to advance global market In Dec 2005, Hyundai collaborated with LG telecom to start navigation service,telematics, based on cellular phone

24. Analysis of the Present Situation SWOT Analysis S W • High brand awareness • High quality • High market share • Diverse vehicle types • Customer Value Program • High technology in Green Car O T

25. S World Best Brand Rank 69 <Interbrand>

26. Analysis of the Present Situation SWOT Analysis S W • 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 supplying • components O T

27. W HYUNDAI 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 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.

28. Analysis of the Present Situation SWOT Analysis S W • 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 supplying • components • Solved Labor & Mngt problems • Removed customs • (KOR-US FTA) • Increased brand awareness in • foreign countries • Risen demand of small cars O T

29. O While 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.

30. Analysis of the Present Situation SWOT Analysis S W • 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 supplying • components • Solved Labor & Mngt problems • Removed customs • (KOR-US FTA) • Increased brand awareness in • foreign countries • Risen demand of small cars • Decreasing world automotive • brand value • Low rate of R&D in Korea • Foreign cars imported • in cheap prices O T

31. Decreasing World Automotive Brand Value <Interbrand> T

32. 5 – Force Model Bargaining Power of supplier Bargaining Power of buyer • Lot of component companies → Low Bargaining • power • Developing new tech → High • Bargaining power • Price of • foreign cars ↓ • → Gradual increase in bargaining power of buyer Intensity of competitive rivalry • ` • There’s no competitor for Hyundai Motors in domestic car market. • Hyundai Motors established their position in market quite well. Very difficult to found a new car company Short Distance - Bicycle, Subway Long Distance – KTX, Airplane Threat of Substitute Product Threat of Potential Entrants

33. Balanced Scorecard Vision of Hyundai Motors Global orientation Respect for human values Customer satisfaction Technology innovation Cultural creation If Hyundai vision succeeds, how will Hyundai differ? Financial Customer Internal Business Innovation Learning Increasing sales amounts Reducing the recall rate Familiar Business Environment Green car Strategy

34. What are the critical success factors? Financial Customer Innovation Learning Internal Business Financial Customer Internal Business Innovation Learning What are the critical measurements? Rate of strike in a year Producing the hybrid car Employees Management Amounts of Sold hybrid car Sales amounts of cars Recall rate & Customer Satisfaction Continuous Customer management Development of new technology

35. Suggestion for Strategies O T S Hyundai Motor Co. should occupy US middle-classed consumers by releasing various small cars Using increasing brand awareness, Hyundai Motor Co. could apply premium price on their hybrid or fuel cell vehicles Hyundai should have stable growth focused on domestic sales Hyundai should establish policy to widen chance to select car models, developing new products W Hyundai should supplement their weakness in supply network by adding additional supplying companies Hyundai should decrease strikes and labor conflicts building stable relationship Hyundai should quit producing unprofitable models Hyundai should minimize their export to unprofitable foreign markets