Friday, May 28, 2010

HYUNDAI: REMARKABLE LT SUCCESS STORY IN A SECTOR NOT REALLY USED TO SUCCESS ANYMORE

A SUCCESSFUL 'FOUNDER'S SON': SOMETHING SPECIAL IN INTERNATIONAL BUSINESS

The Los Angeles Times reported on a remarkable success story (the original story is attached at the bottom of this blog entry). Under the leadership of the son of founder Chung (Chung junior is often addressed as 'MK") who took over as CEO in 1999 - at a time when Hyundai but also its affiliate KIA Motors were not exactly known for its quality - the growth of the brand was a well-orchestrated long-run success story. Globally they are one of the fastest growing car manufacturers.

MK Chung, the son of Hyundai's founder, who took over in 1999 as CEO of the South Korean brand, is definitely a top entrepreneur. He understood that his main task was to ensure that the brand wouldn't be treated as 'garbage' during the big auto shows. 'Quality at a reasonable price' instead of pure price competition was the firm's business model.

It worked in an industry that wasn't exactly an easy growth story. Most competitors are struggling. Chung didn't finish his work yet and set himself the goal to be among the top-5 car manufacturers in the world.

Successful founder's son:
Hyundai's CEO MK Chung

WHAT TO EXPECT OF HYUNDAI?

But unlike the world's nr 1 Toyota - who are now struggling with recalls and quality issues - the South Korean car maker is not pushing sales to the max, thereby sometimes forgetting quality. Over the years the firm has learned at all the car shows it has participated in what it means to be 'that periphery brand with lousy reputation'. With a focus on how to get that quality image while at the same time maintaining a relatively low price, the firm has been able to increase satisfaction levels of its customers.

Latest research indicates that 56 percent of people trading in an old Hundai get themselves another one back. This is a relatively high percentage by international standards.

When looking at the firm's international growth track record, we can see that it was especially growth in China and India - next to its US growth - that explains why the firm scored its highest profit ever at a time when the world tries to get back in shape after a global crisis and the auto industry in general tries to get back in shape after an even longer period of struggling.



Some researchers have indicated that the automotive industry will be dominated by 10 or even less players 20 years from now with probably half or more of that market being dominated by Chinese firms that we don't even know that well yet. When asked who the others will be most people believe that there will always be space for the well-known luxury brands like Mercedes and BMW. And the other Germans aren't doing bad either. But when asked if they will all still be the independent firms they are now, doubts begin.

Some kind of concentration through M&A's in the automotive industry seems unavoidable. But could it be possible that the Koreans of Hyundai will be among that group of survivors. Ten years ago we would have laughed. But at the moment we are not so sure anymore.

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