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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Globalisation gave the opportunity to develop countries to open their sales in different countries and becoming international firms. South Korea, for example, is the perfect illustration of this process, just after the Korean War (1950-1953) thanks to the investments from the USA and Europe, the South Korean economy had the possibility to improve. One of the companies that could represent this improving process is Hyundai Motor Company, founded in 1967 by Chung Ju-Yung firstly, they decided to focus on the repairing sector for huge western companies like Ford, this led Hyundai to achieve a high level of knowledge completely different from other Asian's vehicle producers. On 1975 Hyundai started producing cars under the brand name. Just after the settlement of the local production, the former CEO decided to plan different strategies in order to expand the production mostly in China, Europe and the USA. Nonetheless, due to the presence of the Asian Crisis (1997) the company decided to focus on the local production and to buy the 34% of the Kia motors stocks, this strategy was useful since Kia was the only local competitor for Hyundai in that period. Even though the production was focused on the local level Choi never stopped analysing the global possibilities and in 1996 the worldwide expansion started through different internationalization strategies for all the different markets. Nowadays, Hyundai is well known worldwide and, thanks to the huge variety of products Hyundai placed sixth in the world vehicle production list. In 2017 Hyundai had a global value of almost $31.9 billion and their product are assembled and sold in almost 193 countries.  

The main aim of this essay is to analyse the internationalization process applied by Hyundai in order to show the weakness and strengths for the future. Analysing the international strategy is crucial since it shows the uniqueness that emerging countries apply in their plan and gives some suggestions for other companies whose want to expand their markets. The essay will be divided into three different parts: firstly, will be presented the main theories that explain the reasons and the methods used for the internationalisation process; secondly, these theories will be applied through the case study of Hyundai in China and finally the comparison between Hyundai and other western-based companies.

In order to analyse the internationalisation process business academics focused on different theories that could represent the different behaviours applied by firms. To analyse Hyundai international strategy the Uppsala model seems to be the most effective theory among the field. Created in 1977 the Uppsala model's main aim was to describe the different steps that a company had to achieve for becoming an international company (Chowdhury: 2015 p. 75). This theory is well known for being a risk avoidance strategy, according to the Uppsala model following all the steps will ensure a positive opening in a different market. Therefore, during the 80s and the 90s, the Uppsala was considered the most effective strategy by numerous theories (Johanson: 2009 p.1418). In order to be effective, a company needs to fulfil every step before working on the next one, with this method the time needed is extended, but the positive results on the long-run will be certain.

According to the Uppsala Model, the first step for a company is to have the most stable conditions for expanding their profits overbroad. In order to open internationally a company needs to have: a solid brand image, this is important for building strong relationships with consumers, partners and employees (Kim: 2008 p.4); high investments rate, since opening in a different country, needs a high capital level for marketing research and infrastructure building there is a need for a company to have a sufficient currency for these process. Regarding high investments, numerous developing economies receive supports from the local government in order to improve the hole local economy (Chari: 2014 p.262). And finally, a strong position in the local market, since the company will be more focused on the other new market's plan the local market needs to keep giving profit without any issue.

After the accomplishment of these favourable conditions the company need to choose a market where it could have a positive profit, the main point for an affordable market is the cultural, economic and geographical advantages (Hilmersson: 2012 p.99). These advantages will accelerate the internationalisation process and also will require less investment for the market research in the future since the company already have the basic information regarding the interest nation (Chouwdhury: 2015, p.74).

After having a focus on the most profitable market the company needs to focus on a rigorous analysis of the new market. The main aspects to check are the level of competitiveness, the government policy and all the cultural aspects of the new market. (IBID: P.76) These three points are useful for different reasons: competitiveness is fundamental since the firm needs to choose a market where there is the perfectly competitive level; low level of competitiveness is not profitable since consumers may be not interested in the product but also high level of competitiveness is risky since the entrance in the market could be blocked by  market barriers (). Also, the new market government should be considered, governments could apply unfavourable laws that stop the import of different goods or even the creation of foreign headquarters without the government's supervision. Therefore, the company should analyse the also the political aspects of the new market and, if necessary, working with the host government during the first stages of the internationalisation (). Cultural aspects finally must be measured since some cultural characteristics could be led to the need of modifying some aspects of the product in order to look more appealing ().

After a successful analysis the firm needs to step in the new market through exports or franchising, the company have no physical sales or production facilities located in the interested nation. This step is useful for analysing the possible advantages like the availability of raw material or cheap labour forces and the market expansion opportunities. This step is crucial since it shows the actual possibility for a firm to become international. After the analysis, the firm could decide to start building a chain production and even a headquarter or it could also decide to step back from the entrance in the new market.

Although this theory was considered useful and solid for several decades, Jan Johanson (2009) discover the need to focus on a different aspect: the network, that consist in different relations that a company need in order to have a bigger possibility to open in a foreign market, since the nationalisation process is speeding up companies should focus their attention on building durable and convenient relations that could help them in sales and in the long run (Johanson: 2009 p.1413).

Hyundai internationalisation strategy is well represented by the Uppsala model. Since the beginning in 1967 the company already planned to expand the profit and tried to build connections with different countries. Moreover, thanks to the collaboration with the Ford, Hyundai had the possibility to learn the new technologies in a faster rate than any other Asian country, this element put Hyundai in a higher position among all the other firms (). Moreover, in the Korean market, Hyundai had a solid brand image thanks to the high quality of their products and the rigorous working environment. Also, the Korean government, through a series of economic laws, helped huge companies like Hyundai with numerous incentives and funding, this led Hyundai to obtain stability into the Korean market (Chari: 2014, p260). Consequently, due to these positive factors, Hyundai started to focus on the analysis of several potential markets to expand in like the USA, Turkey and China (.  Firstly, Hyundai decided to focus on the Chinese market for several positive aspects like the small competition in the sector, the high number of possible consumers and cultural similarities. Chinese started their auto sector through the technical knowledge supplied by the Soviet Union during the 1950s, but the improvement remains undeveloped until the 1980s (Kim:2008 p. 6). Therefore, Hyundai had the possibility to expand their sales in a nation where the numbers of competitors were small, and the technologies used were outdated. Additionally, the urbanisation process in China during the 1980s directed people to move from the Urban area to Cities and that led to the need of higher number of vehicles needed, with a new part of the population who could become new purchasers. Moreover, the location of China was extremely valuable for future expansion since it was central and near other nations with profitable markets, like India, Thailand and Malesia.

With this positive market analysis, Hyundai started to export the best-seller vehicles in the Chinese market in order to promote their product in the new market and have stable connections with sealers and consumers. Through this first entry in the Chinese market Hyundai discovered three main problems linked with the brand image, several political issues and the differentiation of the Chinese taste. As elucidated before, Hyundai brand image was solid in South Korea but on the Chinese market the impression was different, Hyundai's vehicles were sold in small showrooms or in resales shops. The main problem was the design that seemed less attractive than other imported cars. In order to overcome these two problems, Hyundai decided to actuate a ‘quality management' system (Kim:2008 p.1). This new management system was focused on the promotion of the technologies used by Hyundai and on the creation of a brand- new image of the companies linked with luxury and high quality (Knowles: 2011 p.11).

Another issue was linked with the Chinese government, during the market entrance Hyundai decided to treat China as a unique market with no local differentiation, but just after few months, Hyundai discovered that every city was handled by a local government who oversaw the import and export decisions. Since the liberalisation of the market occurred just a few years earlier than the Hyundai entrance in the market the imported products were under a lot of regulations and mostly penalised by the local government laws. Therefore, Hyundai had to focus their sales strategy just in a city where the local government was willing to have connections with the firm. Hyundai decided to focus on Beijing since it had the highest number of population and it was the most urbanised city in China. In 2003 the ‘Beijing Hyundai' was created, both parties received advantages, the government had a central role in the industry's production while Hyundai created important connections with Chinese citizens. Thanks to the new company Hyundai raised the production system and introduced more than 30 different models in the market. Moreover, through the collaboration with the local government, Hyundai decided to develop new designs that were more appealing for Chinese buyers.

As a result of these market implements, Hyundai had the possibility to build several construction chains and to implement sensibility their sales in different part of the country. Having the opportunity to open their production chains in China was a crucial point since the Chinese labour forces were cheaper than the Korean one, moreover, the number of possible Chinese employees gave Hyundai the opportunity to supply a higher number of vehicles in new markets. Additionally, since the Chinese location was strategic Hyundai had the possibility to export their vehicles in different parts of the world also, they started analysing other strategic markets, this led Hyundai to open other headquarters in Asian nations and to become one of the most appreciated brands worldwide.

Even though the application of the Uppsala model seemed extremely effective in the Chinese market the result in the long-run were not favourable enough. Hyundai sales in China increased until 2008 then due to a ferocious price war in the sector Hyundai started to lose market share in the country, in fact, the Chinese local government decided to focus their attention on the local companies and to block the sales from foreign firms. Also, tensions between the Chinese and the South Korean government are disadvantageous for the Korean companies (Shirouzu: 2017). The network built over the years by Hyundai in the long-run is resulting less effective than expected. Moreover, even though the Uppsala system seemed to reduce the risk level the long timing between one phase and another led Hyundai to waste more time than necessary and also not to build any possible solutions in this case.

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