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International Business – Finance Economics Question and Answers
Hyundai is one of the largest automobile manufacturers in the world. The South Korean company gets majority of its sales from exports as the home country itself has very limited potential to grow due to small customer base. The case of Hyundai presented in the case study 'Hyundai: Leading the way in the global car industry' presents a good example of a business model that is sustainable and stable even in challenging business conditions. For instance, as explained in the case study of Hyundai, the global financial crisis of 2008 saw a steep decline in profits and sales of almost all major car manufacturers on global scale. However, in the same timeframe, Hyundai not only earned significant profits and revenue of US$1.3 billion, it also took recession as an opportunity to expand quickly (Time.com, 2009).
The success of Hyundai makes it clear that its business model and strategy have influenced its success potential in a positive manner. Evaluation of the business strategy of Hyundai is certain to reveal the various aspects of its business and the strategic decisions that allowed the company to become resilient even when the total market is shrinking. It is expected that many of the competitive advantages that Hyundai has comes naturally from its origin in the South Korean marketplace.
In the global automobile manufacturing industry, Hyundai, a South Korean manufacturer takes benefit of many competitive advantages that the company has over many of its competitors. While some of these competitive advantages are naturally present due to the organisational structure and home country benefits to the company, others are a result of careful designed business model and diversified market presence. Following are the major competitive and comparative advantages that Hyundai brand has in global car manufacturing industry along with the role these advantages play in Hyundai's success.
- Favourable exchange rates: as a South Korean business organisation, many of the operations of Hyundai are located in South Korea. As the South Korean won is a weak currency in comparison to most other currencies accepted in developed countries, Hyundai is able to sell its products in other countries as a lower rate than its competitors. The exchange rates make the Hyundai cars more lucrative to customers in foreign markets. Favourable exchange rates is a natural comparative advantage for Hyundai.
- Government policies of South Korea: the regulatory framework in South Korea is very strict and it mandates companies to engage in healthy business practices only. The policies implemented by South Korea for acquisition and expansion were strengthened more effectively after the 1997 recession in Asia (Jeong, 2004). Operating in the South Korean regulatory framework allowed Hyundai to have a business structure that was strong against recession period and allowed the company to grow and expand even with global recession impacting sales of rival companies. The supportive and business friendly government policies that Hyundai adheres to provide a natural comparative advantage.
- Demanding customers in South Korea: the small market of South Korea has the customers with high spending power. However, the customers in South Korea have the general tendency to expect state-of-the-art products and are very demanding from their purchases. Starting in South Korea and growing bigger in this market required Hyundai to enhance its services while improving the quality of all of its products significantly to survive in the market (Levin, 2015). These quality and service enhancements have helped the company in expanding to more customers worldwide. The customer base of South Korea is another one of the naturally available comparative advantage that Hyundai has over its global industry rivals.
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