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Global Expansion Strategies of Two Korean Automakers Essay

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Updated: Aug 2nd, 2019

This paper will discuss the challenges, faced by two Korean automakers, Daewoo and Hyundai. These companies take different approaches to marketing their products to the foreign consumers. At the present moment, Daewoo focuses mostly on the developing economies, particularly Eastern Europe because in these regions the company encounters practically no competition from local manufacturers, and this market is less sophisticated in terms of technology and management (Kim & Lee, 2001; Kim, n. d).

In contrast, Hyundai paid more attention to the domestic market and tried to distribute its products in the advanced countries, yet this campaign proved to be unsuccessful since Western European or American markets were already saturated, and Hyundai competitors were superior in terms of production capacity and technology use (Kim, n. d, p 7). Therefore, it is possible to argue that these two companies routes of globalization.

It seems that these enterprises ought to emulate the strategies, introduced by Toyota, more than thirty years ago, namely we need to mention lean and just-in-time production, which would allow them to increase the speed of internal operations and reduce the costs of production (Ōno, 1988). In part, Hyundai have already begun to put this policy into practice, for example, this company created production-and-sales-control department, which coordinates the efforts of suppliers and marketers.

Its key responsibility is to work out daily, weekly, and monthly production schedules (Hang, Duplaga & Harley, 2001, p 35). Furthermore, the company introduced a computerized information system that facilitates the flow of information between the sales department and manufacturing units. It helps the management avoid the risk of overproduction or underproduction.

We need to mention that one of the difficulties, faced by such companies as Daewoo or Hyundai is the so-called bullwhip effect. This phenomenon is often defined as the “demand variability amplification along the supply chain” (Dolgui & Proth 2010, p 119).

In other words, bullwhip effect means that even a small fluctuation in demand for the product requires each of the suppliers to increase its inventory and volume of production. In many cases, enterprises have to create the so-called safety stocks (inventory or raw materials) which are used only when the demand for the product exceeds the supply.

The key question, faced by many car manufacturers is how to reduce the amount of inventory. This is why such companies as Daewoo and Hyundai should make more extensive use of MRP (Material Requirements Planning) and ERP (Enterprise Resource Planning) systems.

MRP approach will enable these companies to determine the amount and type of inventory they would need throughout a certain period of time, for instance, half a year. On the basis of this information, they will be able to develop purchasing and production schedule. In its turn, ERP applications will help the management better coordinate the efforts of various divisions, especially the manufacturing facilities and marketing department. This application will allow the companies to reduce delivery.

The thing is that such companies as Hyundai or Daewoo take approximately ten or fifteen days in order to process the customer order (Hang, Duplaga & Harley, 2001). Manufacturing facilities of these corporations cannot always meet the increased demand because they are informed about it too late. This is why ERP is vital for the successful performance.

The success of such corporations as Daewoo or Hyundai will largely depend on their ability to reduce the cost production and to forecast the demand for their vehicles. To operate successfully in the foreign markets, such companies need to assume full control of their suppliers.

It can be done either by building manufacturing facilities abroad, as it is often done by Toyota, or by merging with already-existing suppliers. The key limitation of these strategies is their cost. Such companies would have to invest millions of dollars in such projects, which are normally very time-consuming. However, in this case, they would be able to better monitor inventories and regulate the pace of production.

Reference List

Dolgui A. & Proth J. (2010) Supply Chain Engineering: Useful Methods and Techniques. Springer.

Hahn C, Duplaga E, & Hartley J. (2000). Supply-chain synchronization: Lessons from Hyundai Motor Company. Interfaces, 30(4), 32-45. Retrieved from ABI/INFORM Global.

Kim B. & Lee Y. (2001). Global capacity expansion strategies: Lessons learned from two Korean carmakers. Long Range Planning, 34(3), 309-333.

Kim B. (n. d) Firms’ Global Expansion and Sustainability. KAIST Graduate School of Management. Web.

Ōno T. (1988). Toyota production system: beyond large-scale production. Productivity Press.

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IvyPanda. 2019. "Global Expansion Strategies of Two Korean Automakers." August 2, 2019. https://ivypanda.com/essays/global-expansion-strategies-of-two-korean-automakers/.

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IvyPanda. (2019) 'Global Expansion Strategies of Two Korean Automakers'. 2 August.

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