Abstract
Hyundai hired Ted Chung as its new chief executive officer at a time when it was facing serious problems. Chung diagnosed the problems of this firm and realised that it lacked focus in the market. He led his team to identify a market segment and then he launched an aggressive market campaign to reach this target market. He also increased salaries of its employees to motivate them.
Background
Ted Chung Joined Hyundai at a time when the company was facing serious management problems. As the newly appointed chief executive officer at this firm, he quickly diagnosed the issues affecting the firm and realised that Hyundai was poised to lose about $ 2 billion within the next financial year. The firm’s problems were created by having a customer base that had no capacity to sustain the firm’s growth among other issues. He had to act very fast to save his company. He had to find a way of bringing the firm back to profitability and sustainable development. Chung decided to start by reviewing the management structure of the firm. Some of the firm’s management team could not deliver the results he wanted. They were used to doing things in a particular way, always avoiding strategies considered disruptive.
However, Chung came up with a raft of changes that had to be implemented to overcome the imminent crisis that the firm would face in case the current trend continued. It was a relief to see his strategies deliver the expected outcome. In fact, the firm’s market share started growing at 0.5% per month, something that phenomenon given that the industry was very competitive. He turned around the company, from one that was making huge losses to one that was making sustainable growth at unprecedented rates. He also managed to create a team of highly loyal and effective employees who understood the market dynamics and his unique management strategies.
Issue
When Ted Chung joined Hyundai, there were a number of problems that this firm was facing, making it difficult for it to achieve sustainable growth. First, he realised that the firm was poised to lose about $ 2 billion within that financial year he joined the firm. If that happened, then the firm would automatically be faced out of the market. It would be difficult to survive under such massive losses. He moved very fast to conduct a comprehensive review of the firm to determine where the firm had made wrong moves that led to such serious losses. He noticed that the firm had clients who could not sustain the firm’s grow in the market.
Most of them were people who rarely used their credit cards quite often. Another major issue that this firm was grappling with was the specific target market that would sustain its growth. The firm had no specific target market. It did not define the specific customers that it would target in its operations. In fact, the firm did not even know how to how to position its products in the market. According to Knight (2006), when conducting a promotional campaign, a firm must clearly define the target population. It must know the tastes and preferences of the targeted market in order to design a message that is suitable for them. These are some of the issues that were crippling this firm.
Facts and Information
This case study brings out specific facts about Hyundai and how its new chief executive was able to save it from an eminent fall. Ted Chung, the new chief executive officer of Hyundai, joined the firm in 2003. At this time, Hyundai had registered a massive growth in the market, but the growth was not sustainable. A careful review of the firm revealed that the outgoing managers had focused on acquiring a massive number of clients without carefully reviewing their quality. According to Pforr and Hosie (2009), having a huge customer base is one thing. Making them purchase the firms’ products is another thing.
Credit card companies operate in a market that is unique from other markets. The clients must be engaged in active use of their card for a firm to make sustainable profits. Chung realised that the growth that the growth that Hyundai had registered prior to his entry into the firm was only hypothetical. It was true that the number of people holding their credit cards had increased considerably. However, they were low quality clients. Most of them did not have the actual capacity to pay the necessary payments needed after using their cards. The firm lacked a clear strategy on how it could recover its money from these debtors. This meant that the much talked about growth in market share that the firm had registered was only a means that would lead to serious financial losses to the firm if care was not taken to address the issues at hand.
Based on the past and present records, Chung realised that of the credits extended to its clients within the past and current financial year, about $ 2 billion might not be recovered. The management may be forced to right them off as bad debts because the clients were not making the payments as was expected. This financial problem was serious. The chief executive officer realised that the solution could not be in cutting down the cost of operations because that was not the source of the problem. The problem was brought about by having clients who could not honour their promises and make payments at the right time. This was the area that had to be addressed to find a lasting solution to this problem.
The strategic action taken by Chung Ted to address this problem surprised everyone at this firm. It was a move that no one had anticipated. What most of the stakeholders at this firm expected was that Chung would tighten the firm’s expenditure to help reduce the expected loss at this firm. He did the opposite. He started by increasing the salaries and commission of all the employees as a way of motivating them and ensuring that all the best talents were retained within the firm.
That came as a surprise to many. He then went ahead to increase the budget for products and brand promotions by $ 50 million. That also came as a shock to many stakeholders in the firm. The increase in expenses meant that within the coming financial year that Hyundai was expected to lose $ 2 billion, Chung increased the expenses by $ 100 million. To him, there was no difference between $ 2 billion and $ 2.1 billion if the firm was to go under.
Chung then focused on the management as another area that needed immediate redress. When he came to the firm, he engaged all the top managers of this firm responsible for all the departments. He noticed that most of them were used to a given pattern of addressing tasks within this firm. They were slow to change and would constantly oppose new approaches that Chung proposed. They claimed that there were specific ways of addressing tasks within the firm. He immediately realised that he could not work with them because he had planned for a raft of changes that would help this firm to come out of its current problems. He made the decision to replace them with more dynamic employees who were ready to take risks and embrace change within the firm. These measures that the new chief executive officer put in place proved successful. Chung helped Hyundai to come out of its financial woes to a path of economic prosperity.
Analysis
This case study brings out a number of critical issues about crisis management within a firm. According to Regester, Larkin, and Regester (2008), crisis management may not be very easy, especially when handling a large firm that is poised to lose about $ 2 billion within a single financial year. Many large firms such as Lehman Brothers and Enron collapsed in the face of major crisis. Others are forced to go under receivership as was the case with Kodak. However, Hyundai made a turn-around from the path of failure to a path of economic prosperity, averting a disastrous outcome that was expected within the coming financial year. In this section, the researcher will analyse a number of factors about the leadership style of Ted Chung and how he managed to rescue this firm.
Leadership styles displayed by CEO Ted Chung in overcoming the crisis
Ted Chung demonstrated unique leadership styles when he was faced with a serious crisis at Hyundai. He comes out as a visionary leader, a person who was able to see a different future for Hyundai that other stakeholders could not. As a visionary leader, he quickly realised that the employees of this firm would soon start looking for alternative jobs as soon as they realised that the firm was facing serious financial woes.
He knew that the problems of this firm would soon be known to the employees within a very short while, and this would cause them panic. He was not ready to lose some of his best talents in the face of the trying times ahead. That is why he put a brave face and increased their salaries at a time when most of them expected a pay cut. As a visionary leader, he knew that this move would pay off within a short while (Ray, 2009). This was not only meant to reassure these employees that everything was okay, but it would also help them remain focused in all that they were doing.
Ted Chung displayed principles of transformational leadership at this firm. According to Bernstein (2011), a transformational leader should always be a ray of hope in the face of despair. He should be seen to be leading the followers to conquer a battle that cannot be won under normal circumstances. Above everything, he should challenge the current trends within an organisation and convince employees that they have the capacity to achieve greater outcome if they put more effort.
This is exactly what Chung did when he entered this firm. First, he informed all the employees of this firm, including the managers, that there were changes that had to be made in the way things are run. He informed that that they had to b ready to deal with new management strategies that will help save this firm. He then gave everyone opportunity to adapt to his new style of leadership and the new trends dictated by the emerging market forces. However, some of the mid managers felt that they could not change the traditional methods they were used to within an organisation.
As Cook (2005) says, when a transformational leader is bringing change within an organisation, resistance is always expected. There are some employees who will always feel that they cannot conform to the new trends. Others may even try to sabotage the change process. A leader must be firm and ready to deal with such forces (Ashgate, 2009). If necessary, a leader may be forced to lay off some of the employees who may be a bad influence to others in the process of bringing positive change within an organisation. That is exactly what Chung did. He fired some of the employees who were not ready to embrace change. This enabled him to remain with a lean efficient and very dynamic workforce that could adapt to the emerging market trends.
Decision-making process adopted by the CEO Ted Chung to coordinate with his team
The decision-making process that Chung has taken is also unique. According to Temporal (2010), when a new chief executive officer takes control of a firm, most of them will always try to dictate how things should happen. However, this was not the case when Chung joined this firm. He embraced dialogue when it came to making decisions. His move to fire some of the employees may be seen as being dictatorial in his decision-making process. However, it is important to note that they were fired after they failed to take opportunity presented to them to change their strategies and approaches. He engaged them at first, and realised that they were too rigid to accept the changes as he proposed.
Chung demonstrated that he cherishes principles of strategic leadership when it comes to making very important decisions that may affect many stakeholders within the firm. As a strategic leader, one must understand the current situation of a firm and come up with effective strategies that would ensure that the future is a success. Sometimes this may involve taking risks and engaging in activities that other normal managers would want to avoid. A strategic leader may use simple strategies to solve very complex problems. When coming up with such decisions, it is important to engage everyone to ensure that there is unity.
These are some of the actions that Chung made when he joined Hyundai. Increasing the advertising expense was seen as a strategy that would increase expenses at this firm. While the former head of this firm considered this move an additional expense that was unnecessary, Chung realised that this was a golden opportunity to transform this firm. He used this simple strategy of increasing the firm’s promotional campaign to change the future of Hyundai for the better. Everyone knows that a small raise of the salaries of the employees may lead to impressive output they display because they will be motivated. He used this simple strategy to bring success in this firm. At every stage of making these important decisions, he ensured that everyone was actively engaged in helping to save this firm.
Change strategy adopted by the CEO Ted Chung
The researcher strongly agrees with the change strategy that was adopted by Chung Ted to transform the prospects of Hyundai. Chung first understood the problems that were affecting this firm. He realised that the firm had no clear sense of direction in terms of its target market. He then identified the appropriate target market that would enable the firm to achieve the much needed sustainable growth. This chief executive than reviewed its workforce.
According to Aaker (2009), after defining the path that a firm needs to take, the next most important thing is to identify a team that would be ready and capable of walking along the path of success despite the expected challenges. This is what Chung did by firing some of the employees and hiring others to ensure that he created a workforce that would enable him to achieve success. He then increased their salaries as a way of motivating them and assuring everyone that the future is bright if every stakeholder addressed his or her task effectively. Finally, he launched an active promotional campaign to inform his new target audience about its products and why they were superior to that of the existing market rivals. The outcome was an impressive performance of a firm that was almost collapsing.
Comments
The solution that Chung came up with to help Hyundai to come out of its problems, as discussed above, was very effective. This firm was faced with a crisis that was going to render it unsustainable in the near future. At the time when he joined the firm, Hyundai was faced with a major threat of financial loss. He immediately realised that some of the best employees of this firm would consider getting other jobs as soon as they realised that their employer was faced with serious financial problems. He also had to deal with this threat of loss of important employees with the right skills and knowledge in this important industry.
He made major decisions that many people would have avoided given the situation in which this firm had to operate. Under normal circumstances, a leader would be expected to use non-monetary policies to motivate employees and ensure that they do not consider quitting the firm. However, Chung noticed that these employees needed more than just a reassurance. They had developed fear after noticing the dwindling revenues of the firm. They needed a stronger reassurance that their future at this firm was not under threat. To do this, he increased their salaries. He then went ahead to increase expenses. This created the confidence in his employees that he so much desired. His approach was unique and very effective.
Conclusion
Hyundai credit card’s case demonstrates how extraordinary leaders may use ordinary ways to solve extraordinary problems within a firm. Hyundai Credit Card business was under a serious threat. The firm had clients who were not sustainable and something had to be done to save it. Chung came and resigned the products of this firm to target a specific market segment. He then launched an effective marketing campaign that target the specific segment of the market. Internally, he was forced to lay off unproductive employees and hire others who were dynamic and ready to face the challenge ahead. He then increased their pay to motivate them further. The outcome was a success of this firm.
References
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Knight, G. (2006). Entrepreneurship and Marketing Strategy. Journal of International Marketing, 8(2), 12- 32. Web.
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Temporal, P. (2010). Advanced brand management: Managing brands in a changing world. Singapore: John Wiley & Sons. Web.