ï»¿Hyundai and Kia Case Study Analysis
Hyundai and Kia are the largest automobile manufacturing group in South Korea. Due to their large volume of exports, Hyundai and Kia are the fourth largest auto manufacturer globally. In 2006, the host currency of the company experienced high appreciation. Since both companies rely on price competiveness as a main strategy the stronger currency meant lower profits. Hyundai and Kia decided to expand production to the United States as a hedge against the volatility of exchange rates.
Is expansion in the United States a good idea?
For Hyundai and Kia to continue expansion in the United States, they must consider how currency exchange rates ...view middle of the document...
On the other hand, it can be argued that if the won depreciates, Hyundai and Kia made a wrong decision to invest in the United States. However, it is important to consider that Hyundai Motor Co.â€™s investment in the United States offers a safeguard against future fluctuations in exchange rates. Furthermore, Hyundai Motor Co.â€™s decision to expand helped maintain their low-price strategy during an uncertain economic time.The automotive industry as a whole took a hit during the recent recession. However, Hyundai and Kiaâ€™s preserved low-price strategy made their vehicles more attractive for purchase than most during difficult economic times. Although profits decreased in 2008, Hyundai and Kia were the only companies to experience an increase in car sales in 2009. In the long run, it can be said that Hyundai and Kia made a good decision to build plants in the United States.
The success of United States plants led Hyundai and Kia to augment production in 2009 by building additional production lines resulting in a 60,000 unit production capacity increase. This additional production capacity in North America supports Hyundai and Kiaâ€™s sales goal of 10 million cars per year.
In 2013, Hyundai and Kia shifted their focus from expansion to plant efficiency, improving quality and boosting customer satisfaction (Ohnsman, 2013). This decision followed major recalls for companies like Toyota and Honda, as well as having reached their own production capacity limits. The companyâ€™s focus on plant efficiency at their Hyundai plant in Montgomery, Alabama resulted in an increase of nearly 31,000 units.
In 2014, Hyundai Motor Co. announced plans to build two additional production plants in China with operations expected to begin in 2016 (Jin, 2014). The expansion decision was aimed toward protecting their market share of 10 percent in China, as the future demand growth outlook for the region is increasing. Hyundai and Kiaâ€™s sales in the United States and Europe have not met growth expectations; therefore, it is important...