Louis O. Rollins
Marketing 506: Marketing Management
Dr. MaryAnn Lamer
Case Analysis Summary
Hyundai and Kia have humble beginnings in South Korea, Hyundai was founded 29 December 1967 and KIA 9 June, 1944. KIA was a company that was a manufacturer of steel tubing for bicycles, and then in 1951 they started building complete bicycles, later in 1957 stared building motorcycles, trucks in 1962 and cars in 1974. KIA opened its first automotive company in 1973. Hyundai was derived from the Hyundai Engineering and Construction Company in 1947. The Hyundai Motor Company was established in 1967.Both companies had early dealings with the Ford Motor Company that produced cars for the international market which included the American market. In 1986 Hyundai began to sell cars in the United States and KIA started sales operations in the Pacific Northwest in 1994, they were incorporated in the U.S. in 1992. The two companies were brought together by an Asian financial crisis that occurred in 1997. In 1998 Hyundai acquired its main rival KIA motors. Hyundai bought a controlling 51% interest of the company the irony is that Ford who had dealings with both companies was outbidded by Hyundai.
Hyundai in the beginning was concerned with offering an affordable car with competitive amenities that were offered by comparable US models. Hyundai officially began selling cars in the USA on 20 February 1986, with just one model, the Hyundai Excel. The vehicle was offered with a variety of trims and body styles. The model was successful and Hyundai set a record with 168,882 units. The “honeymoon” phase disappeared when it was found out that coat cutting methods used in production had detrimental effects on quality. This naturally plummeted dramatically. Some dealerships had to earn profits by repairing the vehicles and some abandoned the product altogether, the defects even became a butt of jokes by comedians.
In response to the insults and the slumping sales Hyundai began investing heavily in the quality, design, manufacturing and long term research of its vehicles. They researched groups and found out that the average customer wanted a car that offered the luxuries of a more expensive car but they wanted value (low price) high MPG (miles per gallon) and most of all reliability. This concept caused the Chairman, Chung Mog-koo to challenge Hyundai’s product-development team to lead the industry and not follow trends of the other major automotive companies. This happened circa 2004 with the emergence of the Hyundai Genesis coupe, it received enthusiastic reviews in the United States. Differentiation that separated Hyundai was complex and followed certain expectations that they had gathered when they were developing their own style. They offered pleasing interiors, not composed of cheap materials as did other companies when they approached the “middle class” sector. The engines were sophisticated and comparable to anything that Germany or Japan was producing at the time. Further distancing from the other major manufacturers was the fact that Hyundai concentrated on two main strategies, when it came to the United States market. Design and fuel economy, 86% of all vehicles that Hyundai sells in the United States have four cylinder engines. It’s a concept that as of now no other car has managed to duplicate. The new design and the quality investment had paid off, the vehicles produced by Hyundai and KIA were no longer considered “knock-off” models of Toyota, Honda or Nissan. The different body styling, engine performance and expensive trims at a reasonable price attracted that crowd who wanted the “glitter” but didn’t have the money to afford the top-of-the-line trimmed models. The offering made them very competitive against all other makers considering that the packages that they were offering were priced against the competitors “base” models. All of a sudden Hyundai and KIA