Hyundai Motors India

HYUNDAI MOTOR
INDIA LTD.
GROUP 3
SECTION - A
Arenas
- Product
Categories:
Passenger Cars
- Channels: 451
dealerships and 647+

Authorized Service Centers
in 340 cities across India.
Hyundai Motor Plazas in
large metros.
- Market
Segments: Mid-sized &
semi-luxury, hatchbacks,
SUVs and sedans
- Geographic
Areas: Exports vehicles
to more than 110 countries

across Europe, Africa,
Middle East, Latin America
and Asia
- Core
technologies: The
Hyundai ix35 Fuel Cell
- Value Creation
Strategies: Vehicles
are certified by Hyundai

Engineers using 147 check
points
Vehicles
- Dealership:
Wide number of
dealerships and
authorized service
centers throughout
the country. HMIL has
415 dealers and over
1,100 service points
and 327 rural sales
outlets (RSOs) across
India.
- Acquisitions:
Acquired Kia Motors
and later divested
again as apart of its
plan to acquire engine
design technologies,
remains as the largest
stakeholder of Kia
Differentiat
ors
- Launching new
models by taking
advantage of the R&D
department, Hyundai
Engineering India ltd.
- Largest exporter of
passenger cars
- High brand equity Korean manufacturer
has become an Indian
brand due to its ability
to identify & cater to
the preferences of
Indian consumers
- Focus on styling &
technology
Staging
- Hyundai Motors
realized that next
millennium was going
to give a boost to
passenger cars
category, it boosted up
its resources and
focused on new product
development and built
up an extensive supply
chain network.
- It realized the
potential of Indian
market and entered it
at a very early stage
where there were only
five major automobile
manufacturers in India,
Maruti, Hindustan,
Premier, Tata and
Mahindra
Economic
Logic
- Hyundai products are
not as cost effective
since it doesnt
compromise on its
quality. Premium prices
due to unmatchable
service, styling and
technology
- However, Hyundai
Indias plant capacity
utilization is more than
95% helping the
company to reduce
costs by economies of
scale.
HMILS STRATEGY & KEY CHANGES
HMIL & ITS COMPETITORS

RETAINED EARNINGS
PLANT & MACHINERY
Retained Earnings (in crores)
Plant & Machinery(IN CRORES)
20,000.00
20,000.00
18,000.00
16,000.00
15,000.00
14,000.00
Retailned Earnings
12,000.00
10,000.00
Plant/ Machinery
10,000.00
8,000.00
5,000.00
6,000.00
4,000.00
0.00
2006
2,000.00
2007
2008
2009
2010
2011
2012
2013
2014
0.00
2006
2007
2008
2009
-5,000.00
2010
2011
Year
Year
Hyundai
Maruti
Ford
Toyota
Hyundai
Maruti Suzuki
Toyota Kirloskar Motor Ltd
Ford India
2012
2013
2014

CASH RESERVES
Profitability of Hyundai vs Maruti Suzuki

4,500.00
Cash RESERVES(in crores)
4,000.00
3000
3,500.00
2500
3,000.00
2000
Cash Bal(Rs Cr)
2,500.00
1500
In Crores
1000
hyundai
1,500.00
500
0
2006
2,000.00
maruti suzuki
1,000.00
2007
2008
2009
2010
2011
2012
2013
2014
500.00
0.00
Year
-500.00
Hyundai
Maruti Suzuki
Toyota
Ford India
Year

TOTAL RESERVES
SALES/ADVERTISING EXPENSES RATIO

SALES/ADVERTISING EXPENSES RATIO
TOTAL RESERVES (IN CRORES)
160
25000
140
20000
120
15000
100
80
10000
60
5000
40
0
2006
20
0
2006
2007
2008
Hyundai
2009
2010
Maruti Suzuki
2011
Toyota
2012
2013
Ford India
2014
2007
2008
2009
2010
2011
2012
Toyota
Ford
-5000
Hyundai
Maruti
2013
2014
service centers

Customer Service Rating
Number of service centers
900
3000
2500
2000
1500
1000
500
0
880
860
840
820
800
Company
Maruti suzuki customer service

Credit Rating
780
760
740
Company
Credit rating
720
Hyundai
A1+
700
Tata Motors
A1+
Maruti Suzuki
AAA
Mahindra
AAA
Honda
A1+

R&D Expenditure
450
Market Share
400
50
350
45
300
40
250
R&D expenditure
35
200
Hyundai
Maruti suzuki
150
30
Market Share
25
20
100
15
50
10
Year
Maruti suzuki
hyundai
Honda
Others
DRIVERS OF COMPETETIVE
ADVANTAGE
INTERNAL FACTORS- RESOURCES

Resource
Valuable
Rare
Imperfectly
Imitable
Organizationally
exploitable
Competitive
Implication
Innovation
YES
YES
YES
YES
Sustained
advantage
High Brand Equity
YES
YES
YES
YES
Sustained
advantage
Modern engine
shops
YES
YES
YES
YES
Temporary
advantage
High Capacity
Utilization
YES
YES
NO
YES
Temporary
advantage
High bargaining
power
YES
YES
NO
YES
Temporary
advantage
Intellectual rights
YES
YES
YES
YES
Temporary
advantage
INTERNAL FACTORS- VALUE CHAIN ACTIVITIES

DRIVING COMPETITIVE ADVANTAGE
Infrastructure - Computer controlled line that converts sheet metal to body panels in the press shop, Automated
robotic arms in body shop, environment friendly water based process equipment in paint shop, biggest engine
shops in the country equipped with modern tooling and testing facilities
Human Resource Management: Right mix of fresh & experienced people
Healthy relationships with labour union, Strong management with continuous evaluation Powerful whistle blower policy
Technology Development: High-tech information technology to integrate suppliers, Automated robotic arms are used for intricate welding
operations, biggest engine shops in India with modern tooling & testing facilities, 200,000 square-foot facility R&D Centre at Hyderabad
Ma
r gi
ns
Procurement: Minimize dependence on a single supplier, Leveraged strong buyer power into procurement of raw materials,
Strong long lasting relationships with suppliers, Efficient inventory management
Operations
Minimized costs by
outsourcing of
commodities,
66% of components by
119 suppliers,
In-house production of
engines preserves
their core competency
Outbound
Logistics
Marketing
& Sales
Reduced delivery
time, Increased
efficiency of finished
product warehousing
Partnerships with
BCCI to reach a wide
customer base,
efficiently readjusting
its product mix
according to consumer
demand
Service
Hyundai care
mobile app, Digital
showrooms with
realistic 3D
screens, 445
dealers and more
than 1,100 service
points across India
M
a
r
g
ins
Inbound
Logistics
Quality inspection
at supplier level,
Using JIT to
achieve efficient
inbound logistics,
Efficient inbound
warehousing
system
EXTERNAL FACTORS VALUE NET

PARTIES
Consumers
- Public transport
- Car Pooling
- However, no significant substitutes to replace
passenger cars
Substitutes
- Specialized products produced in-house

- Commodities are out-sourced
- Hyundai : 119 suppliers (66% components), inhouse (34%)
HYUND
AI
MOTOR
INDIA
Suppliers
- In 2015, domestic sales, the company achieved an

all-time high of 4,76,001 units with a cumulative
growth of 15.7 per cent.
- The market share of 16.3% was highest-ever with
strong performance of successful launch of new
models
Complements
- Diesel, Petrol Prices regulated by Government.
Hence, cannot exercise any control.
- However, launch of hybrid cars & electric cars can
help reduce dependence on diesel and petrol.
- Automotive components (commodities) market
has several players & hence has less power
RECOMMENDATIONS
- FAME India scheme

- Launch of National Electric Mobility Mission Plan 2020 in India to
promote hybrid and electric vehicles in the country
- Fluctuating fuel prices and tightening emission regulations are
creating opportunities for hybrid and electric vehicles.
- Mahindra acquired a majority stake in Reva to place itself in the
electric vehicle segment
- Maruti Suzuki planning to introduce Swift Hybrid in India by 2017
- Opportunity for Hyundai to leverage its hybrid car technology as

used in Hyundai Sonata (launched in US)
New
Existing
DRIVERS
Market Scope
LAUNCH OF HYBRID CARS IN INDIA (1/2)

MARKET
DEVELOPME
NT
DIVRSIFICATI
ON
MARKET
PENETRATIO
N
PRODUCT
DEVELOPME
NT
Existing
New
Product Scope
LAUNCH OF HYBRID CARS IN INDIA

(2/2)
COST
LEADERSHIP
DIFFFERENTIATI
ON
FOCUS COST
LEADERSHIP
FOCUS
DIFFERENTIATI
ON
GROWTH THROUGH BACKWARD

INTEGRATION (1/2)
VERTICAL INTEGRATION (BACKWARD)
-To manufacture tyres for Hyundai.
Benefits
Risks
-Secure source of raw materials

-Simplified procurement and
administrative procedures
-Increased Capital expenditures

-Loss of flexibility
SHOULD HYUNDAI GO FOR VERTICAL INTEGRATION?
-Fairly predictable demand

-Reduce dependence on suppliers like Michelin and Hankook.
-Hyundais competencies include technical know-how, expertise in engineering, innovation, production
efficiency etc. help in executing the strategies.
-Potential pitfall maybe the hampering of the relationship with existing stakeholders like Michelin and
risk of production of tyres of low quality.
GROWTH THROUGH BACKWARD INTEGRATION - PROFIT POOLING (2/2)
Operating margins Passenger

Cars
Operating margins Tyres
Generation of huge revenues doesn't mean generation of huge profits.

The margins on tyres is more than on cars historically.
If Hyundai can produce a differentiated product using its R&D, it can command an even
higher margin.
AREAS OF IMPROVEMENT TO CATCH UP

WITH MARUTI
Considering the market
share, It is better for Hyundai
to increase the R&D
expenditure and aggressively
innovate products which can
provide a superior value
curve vis--vis Maruti Suzuki
Low in price availability, R&D
expenditure and
serviceability
Can create products to meet
this preferred value curve
120
100
80
60
SCALE
40
20
0
Maruti suzuki
Hyundai
Preferred
SETTING UP OWN DEALERSHIP CENTRES

VERTICAL INTEGRATION (FORWARD)
- To setup and operate their own dealership centres
Benefits
Risks
-Secure distribution channel

-Cost effective
-Simplified procurement and
administrative procedures
-Coordination effectiveness may

get hampered
-Barriers to exit will be high
SHOULD HYUNDAI GO FOR FORWARD INTEGRATION?

-Fairly predictable demand
-Reduce dependence on third party dealerships
Research &
Developm
ent
Enhanced
Production
Marketing
& Sales
Customer
Service
-eliminates the possibility of market foreclosure or unfair prices and insulates companies from short-run supply
and demand imbalances
-Can move closer to their customers
ENTER INTO COMMERCIAL VEHICLE

SEGMENT (1/3)
IN INDIA
ACROSS
THE WORLD

SEGMENT (2/3)
Market yet to be tapped
Major players - Tata Motors, Ashok Leyland
Parenting advantage the positive contributions of the corporate office to a
new business as a result of expertise, insights, dispassionate reviews, and
support provided
Low cost drivers: economies of scale, superior technology, proven product design
Differentiation drivers: Premium brand image, high quality, unique styling

SEGMENT (3/3)
UNRELATED DIVERSIFICATIONPORTFOLIO MANAGEMENT
Recent example- Mercedes-Benz,
started building sub-premium
large and medium trucks in 2012
under the BharatBenz brand and
has taken a 4.6% share in truck
market
Hyundai also can compete in
financial economies by efficiently
maintaining a portfolio of
businesses in India.
Its commercial vehicle business
is already a proven success in
foreign markets.
EXPORTS SCENARIO
Volume of Exports
300000
Suspended export of i10

and i20 models to Europe
in 2014
Wanted more production
space for domestic use
40% of exports in 2013
went to Europe
Chennai plant Utilization
reduced from 6.8 lakhs to 6
lakh units production
As there is no complete
utilization of plant in India,
Hyundai can continue its
halted export business with
Europe
Bring in a new production
plant in the country to
meet the demand of
250000
200000
150000
100000
50000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EON VS ALTO (1/3)
Hyundai EON
Maruti Suzuki Alto 800
Price is higher (2.84 lakhs-Base model)
Price is lower (2.42 lakhs Base model)
Less fuel efficient (21kmpl)
High fuel efficiency (23kmpl)
Quality issues
High value
Hyundai attempted to change the strategy from differentiation to low cost strategy
Resulted in a disaster
12,000 sales vs 5,000 sales(10,000 sales twice only)
Compromised on quality (Engine noise, unstable at high speeds)
For improving the situation, the strategy needs to be reverted
SALES OF EON VS ALTO (2/3)
CHANGE IN STRATEGY (3/3)
Broad
Segment
Low Cost
EON
Narrow
Segment
Low Cost
Narrow
Segment
Differentiat
ion
ENTRY INTO LUXURY SEGMENT
Existing Market
This is a diversification strategy (Ansoff

matrix) (Concentric diversification- the
product is related to the same industry)
New Market
Hyundai has its customer segment in the

moderate income group. It can extend
its customer base in the luxury segment
also. It is currently in the phase of
manufacturing smart cars by leveraging
its R&D capabilities and transforming
them into smart technology. This will
generate a new source of profit pool for
the company
Market
Developme
nt
Diversificat
ion
(Smart
Cars)
Market
Penetration
Product
Developme
nt
Existing
Product
New
Product
THANK YOU

Hyundai Motors India

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HYUNDAI MOTOR

dealerships and 647+

to more than 110 countries

Hyundai ix35 Fuel Cell

are certified by Hyundai

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMILS STRATEGY & KEY CHANGES

HMIL & ITS COMPETITORS

PLANT & MACHINERY

Retained Earnings (in crores)

Plant & Machinery(IN CRORES)

Toyota Kirloskar Motor Ltd

HMIL & ITS COMPETITORS

Profitability of Hyundai vs Maruti Suzuki

Cash RESERVES(in crores)

Cash Bal(Rs Cr)

HMIL & ITS COMPETITORS

SALES/ADVERTISING EXPENSES RATIO

TOTAL RESERVES (IN CRORES)

HMIL & ITS COMPETITORS

Number of service centers

Maruti suzuki customer service

HMIL & ITS COMPETITORS

INTERNAL FACTORS- RESOURCES

High Brand Equity

INTERNAL FACTORS- VALUE CHAIN ACTIVITIES

EXTERNAL FACTORS VALUE NET

- Specialized products produced in-house

- In 2015, domestic sales, the company achieved an

- FAME India scheme

- Opportunity for Hyundai to leverage its hybrid car technology as

LAUNCH OF HYBRID CARS IN INDIA (1/2)

LAUNCH OF HYBRID CARS IN INDIA

GROWTH THROUGH BACKWARD

-Secure source of raw materials

-Increased Capital expenditures

SHOULD HYUNDAI GO FOR VERTICAL INTEGRATION?

-Fairly predictable demand

GROWTH THROUGH BACKWARD INTEGRATION - PROFIT POOLING (2/2)

Operating margins Passenger

Operating margins Tyres

Generation of huge revenues doesn't mean generation of huge profits.

AREAS OF IMPROVEMENT TO CATCH UP

SETTING UP OWN DEALERSHIP CENTRES

-Secure distribution channel

-Coordination effectiveness may

SHOULD HYUNDAI GO FOR FORWARD INTEGRATION?

ENTER INTO COMMERCIAL VEHICLE

ENTER INTO COMMERCIAL VEHICLE

ENTER INTO COMMERCIAL VEHICLE

Suspended export of i10

EON VS ALTO (1/3)

Maruti Suzuki Alto 800

Price is higher (2.84 lakhs-Base model)

Price is lower (2.42 lakhs Base model)

Less fuel efficient (21kmpl)