The auto industry is intensely competitive. Dozens of firms in this industry are struggling to obtain a share of the limited market. As part of their efforts to outperform their rivals, these firms have resorted to innovation. Hyundai is among the firms whose success can be attributed to its innovative strategies. In addition to these strategies, the company has also leveraged various advantages to ensure its success. Hyundai serves as evidence that even in harsh economic climates, firms can grow through innovation and the development of strategies that exploit competitive advantages.
Role of Comparative and Competitive Advantages
Comparative and competitive advantages allow firms to outdo their competitors. Essentially, comparative advantages refer to the resources and exclusive benefits that enable a firm to produce at lower costs compared to their competitors (Head, 2007). On the other hand, competitive advantages are the wider resources that enable firms to gain an edge over their rivals (Head, 2007). Both competitive and comparative advantages have played critical roles in driving Hyundai’s success. These roles include enabling the company to produce cheaper cars, exploit the competent workforce in South Korea, establish a global presence and invest in new technologies. For example, thanks to the support that it receives from the South Korean government and its partnerships with suppliers, Hyundai is able to produce cheap cars that meet the needs and expectations of its customers.
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Abundant Factors
The factors proportions theory is among the models that can be used to explain the success that Hyundai has witnessed. Basically, this theory identifies labor and capital as the key resources that firms and countries need to compete effectively (Kennedy, 2014). Hyundai’s success is largely the result of its ability to leverage its capital and human resources. For example, the company is headquartered in South Korea which is home to a large competent workforce. This country also encourages savings and investment. As a result, huge amounts of capital are available to finance the operations of such firms as Hyundai. Hyundai perfectly exemplifies the factors proportions theory since its success is directly linked to the availability of labor and capital. Perhaps the only way that Hyundai defies the theory is that its success is the result of factors beyond labor and capital. For example, its international operations, partnerships with suppliers and innovation have played critical roles in fueling the company’s growth.
Hyundai and National Competitive Advantage
Hyundai is one of the largest car makers in the world as it enjoys a significant market share and has a presence in dozens of countries. The company’s competitiveness can be linked to the national competitive advantage that South Korea offers. Some of these advantages include those concerned with demand conditions, factor conditions, supporting industries and the strategy and structure that Hyundai has adopted. As regards demand conditions, the company has managed to establish customer loyalty in South Korea and other markets in which it operates. It has achieved this through competitive pricing and excellence in customer service. Factor conditions such as the availability of capital and labor have also driven the company’s success. The company has also established close ties with suppliers who provide it with parts for its cars. Moreover, Hyundai has created a network of dealers for the distribution of its products. Such strategies as diversification are among the elements of Hyundai’s structure that continue to fuel its growth. The company has also invested in marketing and research and development as it seeks to dominate the auto industry. One would expect that the intense rivalry in the auto industry would limit the company’s growth. While the rivalry has made it difficult for Hyundai to achieve its full potential, it has inspired the company to continue innovating and entering new markets.
Role of Korean Government
The South Korean government is among the stakeholder to whom the success of Hyundai should be attributed. Ensuring that finances for investment are available is one of the measures that the government has undertaken in its quest to facilitate the operations of such firms as Hyundai. The government has also offered protection to some industries. While the efforts of the government are commendable, more needs to be done. Some of the measures that the government can adopt to further drive the success of Hyundai is to lower taxes, ensure political and economic stability, and continue to invest in education so as to provide the company with an endless supply of qualified and skilled workers. I would urge the government of my country to implement such measures as protecting vulnerable industries against intense competition and stimulate consumer spending on cars so as to boost the auto industry.
Advantages Held by Hyundai
Dunning’s eclectic paradigm identifies some of the considerations that a firm should make before investing in a foreign market. These considerations are ownership advantage, comparative advantage and internalization advantages (Stoian & Filippaios, 2008). Some of the ownership advantages that have allowed Hyundai to excel include such brands as Genesis which represent the company’s innovative spirit. Handling such functions as marketing in-house is one of the key internalization strategies behind the company’s success. The company has been able to exploit its expertise to ensure that its marketing approaches are in line with its objectives. Availability of labor and capital are some of the comparative advantages that Hyundai has enjoyed. Given that it is strongly positioned, it can be expected that as it enters the future, Hyundai will further cement its place in the auto industry.
References
Head, K. (2007). Elements of multinational strategy. New York: Springer.
Kennedy, M. N. (2014). International economics. Delhi: PHI Learning Pvt. Ltd.
Stoian, C., & Filippaios, F. (2008). Dunning’s eclectic paradigm: a holistic, yet context specific framework for analyzing the determinants of outward FDI: evidence from international Greek investments. International Business Review, 17 (3), 349-67.
