Hyundai Five Forces Analysis
Hyundai is one of the most well-known and innovative automotive brands in the world. Despite several uncertainties and challenges in 2017, Hyundai continued to perform well. The brand has retained its focus on achieving faster growth globally and is investing in technological innovation and marketing to remain one of the most liked brands.
Apart from a global presence and high sales, Hyundai is also great in terms of manufacturing capabilities. It owns a few of the largest and most efficient manufacturing facilities in the automotive industry. Apart from these things due to increased competition in the automotive industry, Hyundai is also focusing heavily on marketing.
It has remained an official sponsor of several international soccer competitions and continues to invest in sponsorships for the purpose of marketing. Marketing, as well as research and development, have continued to remain important areas of focus for the automotive giants. Hyundai invests heavily in CSR and sustainability as well. This is a five forces analysis of Hyundai Motors that analyses the competitive strength of the brand in the current market environment. Michael E Porter had developed his five forces model in 1980 with five important forces at its core that are a part of every market and industry. Using this model, business managers can understand the competitive strengths of their business and exploit opportunities for growth.
Bargaining Power of Suppliers:
The bargaining power of Hyundai suppliers is low. In the automotive industry overall, the suppliers have comparatively lower bargaining power than automobile brands. It is because while the suppliers are spread throughout the globe, most of them are smaller in size and do not exert significant bargaining power. Other factors that limit the bargaining power of Hyundai suppliers include Hyundai’s financial strength and its brand image.
Moreover, the brand selects its suppliers based on their commitment to quality and ethics and not on the basis of race or geographical location. It partners only with qualified, value-driven, and experienced partners for its supply chain. Apart from that, the suppliers are required to follow the quality and sustainability criteria developed by Hyundai. Overall, the bargaining power of Hyundai suppliers is low.
Bargaining Power of Customers:
The bargaining power of the customers has increased a lot in the 21st century which is due to several reasons. First of all, the number of brands in the market has increased and the level of competition is high. Several brands are competing to attract the same customer. Moreover, brands are investing a lot in marketing and are being more customer-oriented and driven by quality and user safety than ever before. Another factor that has increased the bargaining power of customers in the 21st century is the availability of information.
Every customer has the information required to evaluate and make well-informed decisions available at his fingertips. This also makes the race tough and competitive rivalry intense. The size of each purchase in the automotive industry is large and that is why each customer matters. Even if it’s an affordable family car, the size of individual purchases is significantly large. Brands are not just focusing on product quality but also on after-sales and service. The factors that limit the bargaining power of the customers are a brand’s image, its financial strength, marketing strategy, and the level of technological innovation. The overall bargaining power of customers is high.
Threat of New Entrants:
The threat of new entrants in the automotive industry is low. It is because of the high barriers to entry in the industry. Apart from the initial investment required for infrastructure, human resources, and marketing, there are large barriers in the form of legal regulations. Any brand trying to enter the automotive industry would have to make a significantly large investment that is in billions. Moreover, exit barriers are also high. All these factors result in low threat from new entrants. Even a large brand with sufficient capital will need time to establish itself since only capital cannot help a brand win in a hypercompetitive market and industry environment. For example, Tesla whose platform was mainly based on innovation, no other new brand has been able to find a similar level of success in the international markets.
Threat of Substitutes:
The threat of substitutes is moderate in the case of Hyundai. Apart from the products by the rival brands, the means of public transportation also act as substitutes for the Hyundai products. There are a large number of car brands catering to various customer segments. The ride-sharing businesses that have somewhere caused the demand for such services to grow like Uber are also among rivals of Hyundai.
From the lower-end small car segment to the luxury market, there are several brands selling modern and stylish vehicles. Hyundai also sells to a very large customer segment. The factors that decrease the threat from the substitutes include its brand image, its financial strength, and focus on technological innovation and driver safety. The overall threat from substitute products for Hyundai remains moderate.
Intensity of Competitive Rivalry in the Industry:
The intensity of competitive rivalry in the industry has continued to grow. While there are a large number of brands competing for market share, each one invests heavily in marketing as well as research and development. These factors have also led to growth in the competitive rivalry between vehicle brands. Moreover, the 21st century has brought an influx of new technologies. Apart from digital technologies and AI, the focus is higher on the use of sustainable materials and manufacturing processes.
Brand image has also become an important factor in the consumers’ choice of products and it is why automotive brands are investing a lot in branding and marketing. They also care for their brand image by providing better after-sales service and maintenance. CRM is also integral to maintaining a good brand image. Overall, the level of competitive rivalry in the industry is very high.
Conclusion:
Overall, the competitive position of Hyundai is strong. It holds sufficient bargaining power against its suppliers. Apart from that, it is also a popular brand and has a large and loyal customer base. While the threat of substitutes is a major challenge and the competition in the industry also, the brand can manage them through its focus on product innovation and marketing. It is one of the most well known and strong brands in the automotive industry. Its investment in R&D also ensures that it remains the favorite of its customers and brings new and innovative products that match its consumers’ preferences.
Sources:
https://www.hyundaiusa.com/about-hyundai/diversity/supplier/