ANS: Demand in South Korea is too low to sustain indigenous automakers like HMC and Kia, thus exporting is a necessity to attain the economies of scale needed to remain competitive in a tough industry. South Korea enjoys various national competitive advantages in the provision of cars such as abundance of production factors in cost-effective labor, knowledge workers, high technology, and capital. The South Korean government devised a partnership system of close government/business ties, including …show more content…
Exporting was a necessity. Late 1970s HMC began an aggressive effort to develop engineering capabilities and new designs. Instead of FDI (as in Canada), HMC began exporting to the U.S. market with the Excel as an economical brand with a $4,995 price tag. The car was soon a big success with exports rising to 250,000 units per year. HMC produces about a dozen models of cars and minivans, as well as trucks, buses, and other commercial vehicles. Popular exported models are the Accent, Elantra, and Sonata.
4) The Korean Government has been instrumental to Hyundai's success. In terms of national industrial policy, what has the government done to support Hyundai? What can the government do to encourage future success at Hyundai? What can the government in your country do to support development or maintenance of a strong auto industry?
ANS: The government participates in the firm’s success by developing a partnership with the firm, giving credit, import restrictions of goods and products related to the firm, and sponsorship of specific industries. In time of bankruptcy, the government can always be there to support the firm by inflowing money in it.
5) Consistent with Dunning's Eclectic Paradigm, describe the ownership-specific advantages, locations-specific advantages, and internalization advantages held by Hyundai. Which of these advantages do you believe has been most instrumental to the firm's success? Justify your