Hyundai Consultant Report
Our group conducted an analysis of Hyundai Motor Company to determine whether or not the company should continue to sell their luxury cars under the Hyundai brand, to sell them under a different brand name, or to discontinue certain car lines. After an examination of the US automotive industry and of the Hyundai Motor Company itself, our group focused on three different analysis tools to help answer the strategic decision issue: an RBV analysis, a Value Stick analysis, and Game Theory analysis. Ultimately, we conducted an exhaustive study of the pros and cons of the possible options Hyundai has and made our recommendation.
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They are limited in the sense that they cannot carry more than two passengers and you must have a different type of license to drive them. Bicycles are inexpensive compared to cars, however they do not provide the speed that comes with autos. It will take more than double the time of a car to get to your destination. Airplanes are capable of traveling overseas, however it is more expensive and the routes are limited. Also, one needs a means to get to and from the airport, which complicates this form of transportation. Walking is great for short distances but not useful for long ones. Although there are many pros and cons for each substitute, there are many different transportation methods to choose from which makes the threat of substitutes high for the automobile industry. That being said, these substitutes have been options for many decades and the automobile industry has not suffered because of them. Therefore, the threat of substitutes is moderately high.
Threat of New Entrants
Due to high barriers of entry, the threat of new entrants is low for the automobile industry. The industry utilizes a large economy of scale due to maturity, which deters entry. Product differentiation is high due to the competition within the industry. Large capital investments are required to enter this industry, specifically start up costs. One must have access to distribution channels, which is difficult without knowledge and relationships with suppliers. Switching costs are high due to the amount of investment it takes to switch from one project to another. There are a many government policies regarding the industry such as pollution and emission guidelines on each automobile, carbon credits to companies with eco friendly operations, and mileage requirements. The retaliation is high due to the high competitive nature of the industry.
Threat of Suppliers
Suppliers of the automobile industry maintain a relatively low bargaining power. This being said, steel has a high impact on the industry since it is the major raw material used. Relations between manufacturers and suppliers are strong, and a high switching cost within these relationships has been built in to the industry. There are many different steel suppliers and many different suppliers to make a car in general. This lowers suppliers’ bargaining power and gives manufacturers many different options to obtain their parts. However, the top suppliers in terms of quality produce for Honda and Toyota because they have built those relationships and value quality. These quality suppliers are able to charge more for their products, but this gap is closing as suppliers are continuously improving their materials.
Threat of Buyers
While the suppliers hold very little bargaining power, the buyers maintain a very tight grip on the industry. Just recently the economy was in a downturn and the automobile industry was one of the hardest hit industries. Consumers started having less money to spend on cars and...