International Business Case Study

Question

This research paper is for International Business class. I want you to analysis Toyota and Hyundai, and compare these two car company in US market.

Answer

Analysis of Toyota Motor Corporation and Hyundai Motor Group in the US Market

Contents

Abstract 1

Corporate Background and Overview.. 2

Company Strategies. 4

Toyota’s Approach. 4

Toyota’s Generic Strategy. 4

Toyota’s Intensive Growth Strategy. 5

Hyundai Motor’s Global Strategy. 6

Global Expansion and Growth Strategy. 6

Product Pricing Improvement Strategy. 7

Market Positioning in the USA. 7

Prospects in the US Market 9

Profitability Indices. 10

SWOT Analysis for Toyota Motor Corporation. 12

Strengths. 12

Weaknesses. 14

Opportunities. 15

Threats. 16

SWOT Analysis for Hyundai Motor Group. 18

Strengths. 18

Weaknesses. 19

Opportunities. 19

Threats. 20

Competitive Advantage. 21

Recommendations. 21

Works Cited. 22

Abstract

Toyota Motor Corporation serves as the model and image for defining and implementing the bounds of a successful global business strategy. This view was particularly promoted by the company’s successful expansion into the highly competitive US automobile manufacturing market. The highly acclaimed company has built a strong reputation from manufacturing excellent products which are distributed globally. Contrary to many of its competitors, TMC has invested heavily in total quality management, research and development as well as overall employee empowerment. This has led to the company being branded as the number one global automobile manufacturer. It is for this reason that company exudes a high degree of flexibility and continuous improvement, both aspects of which form the basis of its success.

Hyundai Motor Group, on the other hand, has undergone transformation from a car manufacturer that was known for low quality vehicles and stumpy prices to a principal automobile manufacturer with a substantial market share in the US market. The company has successfully captured the attention of many customers from well-established industrial players all the way to delving into the luxury sector of the automobile industry. It has remained resilient even in the face of the global financial crisis in late 2007 that oversaw many automobile manufactures, both in USA and Europe, declares insolvency and were eventually kicked out of the market.  

The aim of this paper is to compare the strategies of both companies, their scopes of operation as well as their prospects in the US market. Furthermore, it will assess the key areas of performance, market positioning and profitability indexes in an attempt to determine which of the two is supreme.  A SWOT analysis will also be conducted to evaluate the successes and failures of both corporations to determine the competitive advantages of each and possibly recommend the best way forward for them, if at all they wish to continue increasing their shares in the US market.

Corporate Background and Overview

            Toyota Motor Corporation is a Japanese-owned multinational company that was founded in 1937 and engages in the design, manufacture, assembly and sale of cars, commercial vehicles and other related spare parts and accessories mainly in Japan, Europe, Asian and North America. TMC has its head office based in Japan. Through Toyota Financial Services, the company has also been able to extend consultancy services to its customers regarding finances and product purchases. Branding has been at the core of Toyota’s operations and its major brands include Lexus and Toyota as well as Scion, Hino and Daihatsu (Toyota Motor Corporation 2015). Furthermore, the company bought out a sizable share of Fuji Industries and Daihatsu to ensure that it privatizes and revamps its brands by defining its partnership with these organizations as one that is aimed at achieving quality. According to Toyota Motor Corporation (2015), the company has offered employment to about 333,498 workers across the different sectors. This goes to show just how successful this enterprise is in such a competitive industry. TMC owes its successes to its unrelenting desire to create high-end quality products.

            Hyundai Motor Group came into existence in 1967 after being established as a small automobile enterprise by Chung Ju-Yung. It has its main operational base in Seoul, South Korea. The company comes in fifth position as the leading automobile manufacturer globally. This is so because the company has one of the largest independent manufacturing plants situated in Ulsan. It is is here that the majority of the vehicles that hit the market are produced after a series of processes. Through this plant, it is able to produce approximately 1.5 million cars annually, setting its production rate at an all-time high.

Hyundai’s vehicles are sold to over 193 countries and the company has employed an estimated 75000 people across the world. The company has had several mishaps along the way, particularly in management of its international operations, but it has managed to pull through. Its major break came in 1986 when it opened up a new base in California, enabling it to infiltrate the US market and gain a foothold in this market which, by then, was undergoing a recovery phase after a recession period. The company also has had its fair share of unparalleled success, and this has been mainly due to its unwavering focus on innovation and production of high-quality vehicles. It is because of this strategy that the company has gained a competitive advantage over its rivals since it capitalizes more on productivity and quality as opposed to technology. Through this approach, the firm has achieved brand loyalty since the majority of the market segments have been satisfied.

Company Strategies

Toyota’s Approach

            To begin with, TMC employs a two-pronged strategy: generic and intensive growth. The generic approach is primarily used to achieve global growth in line with the company’s vision. This technique sums up the process that TMC uses to ensure that it competes favorably in the international markets (Parnell p. 175). The intensive growth strategy broadly encompasses the various types of actions that Toyota uses to ensure unprecedented growth in the markets in the automotive industry. The success and innovation that TMC has exhibited is a perfect indication of the simultaneous implementation of both strategies and their corresponding positive outcomes.

Toyota’s Generic Strategy

Toyota’s generic strategy comprises two aspects: cost leadership and broad differentiation. The former aims at reducing operational costs and the selling prices while the latter deals with developing unique products that will grow the business, to reinforce Toyota’s competitive advantage (Parnell p. 175; Miller p.38). Intertwining the two approaches ensures that TMC reaches and satisfies its consumers across all the global market segments (Miller p. 40). These sentiments are echoed in TMC’s goal of reducing the operational costs so as to register optimal profits in the long-run (Miller p.39). This is achieved through the Just-In-Time (JIT) tactic directly addresses Toyota’s generic strategy. By doing so, the company is able to minimize waste, portfolio cost and the reaction time (Parnell p.177). This, in turn, helps to maximize on efficiency and ensure that production is at optimal levels.  In line with this, TMC has a premeditated objective of innovation to realize broad differentiation as an element of this strategy (Parnell p. 181). From a practical perspective, innovation does, in fact, lead to exceptional products which ultimately satisfy the needs of the targeted consumer segments.

Toyota’s Intensive Growth Strategy

These strategies have been incorporated to ensure that Toyota continues to grow at a steady rate in all markets worldwide. The approach is centered on improving the product features, infiltrating and expanding the global market (Parnell p.181). These strategies are an embodiment of the internationalization process that most Japanese firms tend to adopt particularly in respect to entry into the American market. The objective is to cushion the participating companies from the intense competition and uncertainty that is typical of all internalization efforts. It is within this context that aspects of product development have been applied to attract US customers to purchase the new products developed by the company. Since Toyota is known for its innovative progressions, it has more or less succeeded in using rapid innovation to back up its broad differentiation generic strategy by developing distinctive products that are bound to lure in customers (Gargasas & Mugiene p. 47; Varadarajan & Dillon p. 504)).

Market Penetration constitutes the principal intensive growth strategy employed by TMC. It ensures advancement of the company by reaching out and attracting more customers in the firm’s current markets (Gargasas & Mugiene p. 48). To achieve this, TMC makes sure that it develops custom made products that are tailored to suit the needs of every market segment. For instance, it has manufactured sedans, SUVs as well as luxury vehicles to cater to different customers (Varadarajan & Dillon p. 505). This tactic strongly concurs with the cost leadership component of the generic strategy in that it maximizes the sales volumes (Gargasas & Mugiene p.48).  This further translates to an overall increase in the company’s profit margins regardless of the relatively low selling prices (Gargasas & Mugiene p. 48).

In terms of market development it should be noted that from a practical standpoint, TMC already has a massive worldwide manifestation. As such, this method is inculcated to reinforce the company’s presence in the international markets (Varadarajan & Dillon p. 518). To register growth, the company taps into new markets or indulges in rigorous selling in these fresh market segments through a series of promotional methods such as advertising, showrooms among others (Gargasas & Mugiene p.49). Nonetheless, the company already sells its products to every market segment that it deals with. This is primarily the reason why this strategy supports the cost leadership program, in that it aims at maximizing the company’s universal market existence (Gargasas & Mugiene p. 52).

Hyundai Motor’s Global Strategy

            On the other hand, Hyundai’s strategy is entirely different from that of TMC since it is centered on value growth and cost structure improvement. This section will address these two strategies in detail.

Global Expansion and Growth Strategy

Hyundai has incorporated a scheme whereby it has adjusted its selling prices on all products while decreasing the overall spending on its motivation plans to strike a balance that ensures the company remains solvent. This tactic is driven solely by the production of enhanced products and the brand value. In addition, the company uses this method to strengthen its presence in the global markets, especially in the USA. It is against this backdrop that it continues to advocate for sustainable development worldwide in addition to speeding up global management initiatives to boost production levels. Continuously, Hyundai has expanded production by establishing manufacturing bases in periphery areas.  This strategy, coupled together with the niche-market strategy, will ensure that the company will increase its market penetrations despite the amplified import barriers and dumping charges.

Product Pricing Improvement Strategy

By making good on the levels of globalization present in this industry, Hyundai has been able to implement an effective pricing mechanism that accommodates all consumer segments on a global scale. Consequently, the firm has taken a step further and implemented hedging, currency settlement and improving export Average Selling Prices (ASPs) in an attempt to counteract the effects of the gradually rising inflation levels. Consequently, the company has resolved to evolve from the multi-domestic strategy to a transnational one to increase the efficiency levels corresponding to both global and local responsiveness. In doing so, the company is now in a position to cater for the needs of different marketing segments that are manifested in different regions and their diverse preferences.

Market Positioning in the USA

            The global market is highly dominated by the top ten Original Equipment Manufacturers (OEM), which account for approximately 81% of the annual sales realized in the global automotive industry. Toyota broke news when it was declared as the largest automaker by volume in 2008, surpassing General Motors. At the time, TMC had a market share of 13.8% against GM’s 12.8% in the US market. All in all, TMC continued to reinforce its position in the US market and it grew its market share to 11.0% by 2015 against TM’s 10.8%.  As at 2016, TMC had a market share of 15.2% in the USA and this enabled it to solidify its position.  Currently, it accounts for about 33% of the global consolidated vehicle sales in the USA alone. The graph below shows the Company’s market share between 2018 and 2015.

A bar graph showing Toyota’s global market share

In contrast, Hyundai has established its position in the US market by responding promptly to the fast-changing consumer trends and the growing customer demands. For instance, the company hit a record of sales 703,007 units in 2012. This translated to an 8.9% increase in sales from 2011. Throughout November 2016, Hyundai sold close to 712,700 vehicles in the USA and this represented a 2.1% increase in sales when compared to 2015. It is evident that the company stood at 8.0% in market share as compared to TMC which boasted a whopping 14.4%. The graph below shows the market share held by HMG as at 2015.

A line graph showing US market share for leading car manufacturers in the country between 2000 and 2015.

Prospects in the US Market

            Toyota Motor Corporation has recently slashed its forecast for USA sales from 2016 by approximately 60,000 units of vehicles. The company has expressed that it is expecting a decline even in 2017 following American consumers are shifting their focus away from fuel guzzlers like the Prius hybrid and are slowly taking up trucks and SUVs. It is within this context that registered a slight drop in profits since it leaned more towards extending heavier incentives that were just enough to sustain the deliveries and keep operations afloat. Its senior management’s view is that there is no room for expansion of the Company in the US market. Furthermore, Takahiko Ijichi, an Executive Vice President, firmly asserted that the market in the USA recently grew weaker towards the end of 2016 and the company was forced to somehow cut back on operations to avoid going beyond the breakeven point. To worsen the situation, the company registered a 43% decline in quarterly operating profits in 2016.  Besides, it is still projecting that the operating profits will plummet by about 40% to $16.3billion in the fiscal year ending in March. Evidently, the prospects for TMC in the USA seem bleak, and it is for this reason that the need for urgent commencement of an aggressive change management process cannot be overlooked.

            It is not shocking the Hyundai Motor Group Chairman, Chung Mong-Koo, shares the above sentiments too. 2016 was quite a challenging year for the company since growth in the US auto market was inhibited by a weak global economy, an economic downturn and a diminishing market demand for vehicles. Due to this predicament, the Company posted its tenth straight decline in quarterly profits in October 2016. As of the start of 2017, things still do not look bright for the US market as well as other major markets such as Korea. This is primarily due to the fact that consumers are expected to scale down their living standards to cope with the snowballing effects of a slow economy and stagnating income growth. As such, the overall demand in 2017 is going to be low due to increasing household debts and a slow-moving job market. Despite the numerous efforts to extend incentives to customers, the demand for cars will remain unchanged. However, the sale of Sedans and SUVs will still be high whereas that of compact vehicles will continue to deteriorate.

Profitability Indices

            Toyota Motor Corporation recorded a higher-than-expected 35% decline in annual profits for the year 2016 due to, among many reasons, the exponential appreciation of the Japanese Yen. This sharp drop in ended the three-year profit streak for the company due to a weakening currency. Moreover, the profits for the year ending in March 2017 are expected to dwindle further to around $13.81billion. The earnings that have been recorded by the company in previous years are partly driven by the foreign exchange rates. For the company, this essentially means that lower profits will make it even harder for Toyota Motor Corporation to invest in new technologies and products. This will drive sales downwards because the competition in the automotive industry has intensified as many other key competitors continue looking into the prospects of manufacturing alternative-energy vehicles particularly for the US market (Toyota Motor Corporation, 2015).

            Conversely, Hyundai Motor Group sold approximately 4,963,023 vehicles in early 2016 to post 91.9587 trillion Korean Won in sales, 6.3579 trillion Won in operating profit and 6.5092 trillion Won in current income. This translates to an overall 3% increase in sales when compared to the previous year. Nonetheless, profits and income degenerated by 15.8% and 14.9% respectively. Likewise, the profits-to-sales ratio fell by 1.5% to 6.9%. In the USA, domestic volumes rose up by 4.2% to 712,313 whereas overseas markets had theirs g down by a slight 0.6% to 4,250,710. This situation sprung up because of the intense competition as well as the sharp depreciation of the foreign currencies in the areas where the company’s manufacturing plants are located. This caused the profitability levels to decline tremendously. All in all, it is quite evident that the uncertainties that are surrounding the global automotive industry and market as well will linger around for quite some time. This calls for all key industrial players to make necessary adjustments to their business strategies to ensure that they remain in play, despite these tough times. It is a fundamental rule that inefficient companies and businesses enterprises are eventually kicked out of the market if they fail to keep up with the emerging changes (Kotler & Keller p.163).

SWOT Analysis for Toyota Motor Corporation

Strengths

            TMC enjoys quite a number of strengths that have impacted on its current success while simultaneously safeguarding its competitive advantage. One of these strengths is its just-in-time (JIT) strategy. This approach to manufacturing forms the backbone of the company’s unmatched decades-long success. This concept provides fast and equally flexible response in terms of quality determination and improvement while fostering the development of systems and mechanisms that are efficient and environmentally-friendly (Yasuhiro p.57). The theory behind this method is to avail the right product, at the opportune time, while maintaining the high standards of efficiency and cost control (Yasuhiro p.60). It has yielded massive success, particularly in ensuring that there is no backlog in inventory and that running costs are always minimized.

            The company also has a strong brand recognition and market position in different geographical locations across the world. From its inception, TMC has been introducing high-quality cars which have helped it to create a reputation. The enterprise has also established its dominance in international markets as is seen from its collective 29.9% market share in different regions encompassing North America to Europe (Nkomo p.5). Evidently, it is no doubt that with such a substantial amount of shares, the company has gained competitive edge over its rival counterparts and has even tapped fresh markets across the globe (Nkomo p.5). Much to it, TMC holds an admirable portfolio of strong brands in the automotive industry such as Lexus and Scion. From this angle, it is evident that the company’s affiliation with such a strong market position accords it a significant competitive advantage in both domestic and foreign markets by ensuring it realizes higher sales growth and profit margins (Nkomo p.5).

            The production and dissemination grid that TMC has is vast and highly effective in delivering its products. The organization in conjunction with its affiliate companies continuously produce automobile and corresponding spare parts and components via more than 50 manufacturing plants that are scattered across 27 countries and states, including Japan. For instance, during the 2012-2013 financial year, the company managed to produce 7,435,781 vehicles, with 3,940,000 coming from the manufacturing industries in Japan and the rest from other expanses (Nkomo p.5). The production rate exhibited by these figures is an accurate reflection of the effectiveness of the Just-In-Time (JIT) stratagem. Toyota Production System (TPS) has yielded accomplishment in allowing the company to increase its production efficiency levels while simultaneously decreasing the overall manufacturing time. On the other hand, the extensive distribution complex provides a broader outlet channel for the company to distribute its products to all segments, leading to higher Returns on Investments (ROIs) and profits as well.

            In addition to the above, Toyota has a firm focus on research and development (R&D).  The underlying principle that steers this R&D process is the enhancement of the product portfolio and the improvement of functionality, quality, welfare and environmental compatibility of all the goods released to the consumers (Nkomo p.6). The company has set up approximately 14 facilities to conduct its R&D processes globally to produce state-of-the-art products and improve the capabilities of the current ones.

Weaknesses

            TMC has undertaken numerous vehicle recalls in the last few years, and this could potentially affect the brand image as well as the overall sales performance. For example, looking back at 2011, the company recalled about 111,000 Lexus and Toyota brands due to the significant damage to the main body components and the impending shutdown of the faulty hybrid systems infused in these vehicles. Later in that same year, TMC recalled another 181,000 automobiles in Japan due to the incessant reports made by consumers about anomalous oil leakage and noise that emanated from loose bolts following sub-transmission and rear wheel discrepancy. The recall incidences made the company susceptible to preliminary investigations from the government and the National Highway Traffic Safety Administration, and this tarnished the brand’s image.  Furthermore, the penalties incurred from the numerous lawsuits filed against the company due to vehicle failure resulted in a considerable decline in the operational and revenue margins realized in those years.

            The company’s Return on Equity (ROE) and Return on Assets (ROA) are lower than that of its rivals because of its poor resource allocation. This situation is evidenced by the low ROE registered by TMC when weighed against its competitors. For instance, in 2012, TMC’s ROE stood at 2.7% whereas that of Nissan and Honda Motors was at 8% and 4.8% respectively. This spells doom for the company since a lower ROA and ROE serves as a clear pointer that the company is not utilizing the shareholder’s money proficiently. Furthermore, it portrays a degree of incompetency and complacency in the corporation since it is not generating higher returns for its shareholders. This could result in the loss of confidence among the stakeholders in the business in the long-run.

            Another primary weakness is the lack of a strong presence in the emerging markets. Such markets have the potential for growth and development if exploited at early stages to determine the market gap and the various consumer segments present. Doing so put a company at a vantage point because it can satisfy the needs of the primary market without having to compete with others who have an equally hard time convincing customers about the quality of their products and services. In TMC’s case, tapping such markets like China and India would ensure higher sales volumes since fuel-efficient vehicles have a greater appeal here. However, companies like Hyundai have swept in and established a foothold in these areas, leaving TMC at a massive disadvantage.

            The declining sales in the focal geographic segments also threaten the company’s position and its reputable brand image. The company has experienced deteriorating sales in previous years, with the notable one being 2012. The markets in North America, Asia, and Europe were among the hardest hit areas which accounted for about 60.8% cumulative loss in company revenues due to inflation and foreign exchange risks. Such a high figure in the company’s stronghold areas could exert immense pressure on the income and profit generating sectors of the firm, and this is an issue that cannot fly well with the shareholders.

Opportunities

            There is an opportunity for TMC to exploit, grow and expand in new and foreign markets through partnerships and acquisitions. In mid-year 2012, TMC signed a partnership agreement with BMW that was aimed at establishing and benefiting from a long-term collaboration in the industrial arena (Nkomo p.6). Such a deal is bound to increase the market share and intelligence as well as ensure asset accumulation. The growing partnership between the two firms is also projected to expand the boundaries of technological expertise of the companies and result in the production of new and improved products that will, in turn, increase the sales volumes and revenues in the future (Marisela & Paredes p. 12). Consequently, the two companies are working towards devising cost-effective mechanisms that will reinforce the goal of optimizing operational limits to boost the sales performance (Nkomo p.6).

            The recovery and growth of the global automotive industry could provide TMC with an opportunity to build on its clientele and increase revenues. It is a well-known fact that this industry was adversely affected by a surge of the economic downturn in 2008 and 2009 that oversaw the complete decline in the revenues realized during these periods (Nkomo p.6). However, the Renaissance period came in 2011-2012 and has continued to date. The industry grew by 8.9% in 2012 and currently stands at 14.4% according to MarketLine (2015). Numerous opportunities have paved this industry such as the development of green vehicles. TMC can capitalize on this dynamic shift since most consumers are focusing their interests on hybrid and electric vehicles because of the rising costs of fuel and the foul emission alarms that have steadily degraded the environment (Marisela & Paredes p. 12) (. Much to it, staying up-to-date with the rapidly changing consumer tastes and preferences will enable Toyota to develop new products and models that will cater to these needs adequately.

Threats

            The international automotive industry is highly competitive. TMC is also exposed to this stiff competition especially from other large automotive manufacturers present in the different markets. Most companies have diversified their operations due to globalization (Nkomo p.6). Key auto players have taken to developing hybrid and electric vehicles while others have restructured and realigned their operations to compete effectively in terms of models and pricing strategies. Other factors that are influencing competition in this industry include production time, safety standards, dependability, customer service and the fuel frugality (Nkomo p.6).  It can be argued that the stiff competition exhibited in this market will ultimately result in lower car sales and a huge buildup of inventory. TMC may be forced to lower its car prices to compete favorably and to avoid being kicked out of the market. This could result in negative implications as far as financial prospects are concerned since the revenues will decline as a corresponding effect.

            The appreciation of the Japanese Yen is also a growing concern for Toyota. The risk of conducting business in a foreign currency places a company at the mercy of foreign exchange rates. TMC is in such a predicament since it is exposed to the variations of the Japanese Yen, US Dollar and the Euro. In such a case, it is tough and highly improbable that one currency say the Yen will be strengthened against the US Dollar because of the fluctuation in the foreign exchange market (Nkomo p.6). Again, this would imply that the Japanese market will benefit in terms of conducting financial operation whereas the one in the US will suffer unpleasantly because of a lower currency value. All in all, Toyota currently registers “lower profits” when the revenues realized in US Dollars are converted to the Yen because the Dollar has a better value than the Yen. This is a primary threat that is yet to be addressed.

            Finally, there is the risk of natural disasters as many of Toyota’s manufacturing plants are located in countries that are prone to such hazards.  This often leads to a downtime in these facilities.  For instance, the company has its primary operations based in Japan- a country that is predisposed to major earthquakes that are known to disrupt its economy. A good example of this calamity was seen back in 2011 when a devastating earthquake hit the Tohoku region, prompting the company to terminate its production processes in the major domestic auto manufacturing industries (Nkomo p.6). It is evident that such catastrophes have the power to severely affect the production yield of TMC because of the work stoppages. Consequently, there is a corresponding increase in the costs due to the repairs and interruption as well, leading to a decline in the general production volumes and profitability levels (Nkomo p.6).

SWOT Analysis for Hyundai Motor Group

Strengths

            Hyundai exudes excellence in vehicle safety and overall design. The company has made remarkable improvements to the safety features installed in their vehicles, thus being regarded as the safest car brand in the world. The numerous awards and accolades presented to the company serve as markers for their success. The company has won thirty safety awards during the last six years. Besides these efforts to upgrade the existing safety mechanisms, the multinational corporation has also enhanced its design in cars. For example, in 2015, the Sonata and Tucson models were acknowledged as the best designs of the year, receiving the Red Hot Design and Product Design Awards respectively.

            The company has also developed new innovative cars through its active research and development (R&D) process. In 2015 alone, the company invested $1.847 billion in R&D, the largest amount that has ever been spent on this sector. The firm utilized this investment by introducing the Sonata and Ioniq car models that took the market by storm in 2015 because of their spectacular abilities to run on electricity. In fact, Sonata’s hybrid engine thrashed Toyota’s Prius model since it was able to run on electricity only for a longer period. The company has also made a huge breakthrough by producing the first bulk of its Tucson vehicles that have the capability of running on hydrogen fuel cells technology, placing the company far ahead of its competitors in 2017.

Weaknesses

            Just like TMC, Hyundai also suffers from a high rate of product recalls which damages the brand’s reputation. 2015, which was the most successful year for the company, oversaw the company recall close to 470,000 Sonata models to repair the engine problems and a further 305,000 to address the issue of a failing braking system. This wave also spilled over to 2016 where 170,000 vehicles were recalled in the USA alone. The high number of vehicle recalls indicated the severity of this issue since it harms the consumers trust in the brand and paints the image in a negative light. The effects are also felt in the lower revenues and the operating profits accrued with time.

            The company has a lower market presence in the USA and no presence at all in the Japanese market.  The USA is the principal market for automobiles in the world and has a broad range of opportunities and prospects for reaping substantial profits, particularly from the sale of pick-ups and trucks. However, Hyundai has not yet managed to tap into this market entirely, and its sales here are less than 10% of what the US market registers annually. The company is missing out of the massive benefits that the USA has to offer. On the other hand, the firm has no market at all in Japan since it pulled its plug on all operations in 2009. This beats logic because Japan is among the top ten market hot-spots in the world.

Opportunities

            Hyundai has a chance to take hold of the improving state of the US economy to realize higher market shares and increase profit margins. The interest rates in the USA have always been relatively low, and this trend seems to remain so in the predictable future. The economy has exhibited signs of resurgence as evidenced by the higher vehicle sales made in 2015 that translate to a 5.7% increase when compared to2014. As such, the future for Hyundai looks bright in the US economy.

            Hyundai is in a better position to release new models in the market to utilize the benefits of appropriate timing. Timing and frequency are the key drivers of the automotive industry if at all a company aims at increasing its market share. The strong R&D process of Hyundai places it in a better situation to release new models into the market frequently, following the competitive nature of this industry. The only area that the company needs to address is cost-effectiveness in implementing such initiatives to make the most out of its competitive advantage.

Threats

            The world is making a move towards achieving an ecologically stable environment free of pollutants. New emission standards are being introduced on a global scale to this effect. This could pose a challenge for Hyundai since it will be forced to make more investments towards the development of new technology to meet these criteria. The same goes to Toyota. This implies that the profits accrued by both companies will diminish, to a large extent, because of the increase in production costs. It is also equally challenging to recover the amounts spent on such endeavors given the highly competitive nature of this industry and its susceptibility to price changes.

            Increased competition is also a threat to Hyundai. There is stiff competition from domestic automotive companies as well as from the new players in the market. The company’s rivals such as Toyota and Ford have launched aggressive campaigns that all aim at competing by offering quality products at consumer-friendly prices. Additionally, these rival firms have also tapped into the China market which is the central market for Hyundai, as wells as the USA and Europe. Innovative products are being produced, further pushing the boundaries of competition to newer heights.

Competitive Advantage

            From the SWOT analysis on both companies as presented above, it is evident that Toyota has the upper hand in the automotive industry. The company’s strong market position across the USA and Europe enables it to amass higher sales growth and revenue margins even in the domestic markets. This gives it a competitive advantage over its competitors, including Hyundai.  This predicament is backed up by the robust R&D focus that allows the company to maintain its technological bravado and prowess in the majority of its product segments. This often results in high-quality products that boost the sales performance in general. The Kaizen strategy coupled together with Toyota’s production system are also a huge source of the company’s competitive advantage (Davis p.67).

            Hyundai also holds some advantage in the industry when it comes to its products design. Its designs are unmatched and unique to it (Mukerjee p.28). The company can produce high-quality vehicles that guarantee reliability and overall safety (Mukerjee p. 28). This assertion concurs with the fact that the corporation has developed vehicles that run on electricity and hydrogen fuel cells technology, a development that no other company has been able to imitate successfully. The future holds so many promising prospects for Hyundai should it manage to keep up this trend and launch new generations of fuel cars that will ensure it solidifies its position in the field.  This will be the epicenter of its competitive advantage.

Recommendations

            Toyota should consider speeding up its expansion initiatives into the quickly emergent markets by monitoring the prevailing market conditions. Doing so will ensure that the company will be in a position to introduce and supply products that are best tailored to satisfy the needs of each market segment efficiently.  Consequently, it is prudent that the company devises a coherent production and supply chain that will ensure ideal product pricing so as to avail a wide range of products and services to customers across the different market sectors worldwide (Rothaermel p.237).

            Hyundai, on the other hand, should strengthen its management platform by enforcing cost structure reforms to promote business. This will allow the company to respond to changes at a faster rate to enhance business and grow its shares in the both the new and current markets (Rothaermel p.239). This strategy should be centered on raising the corporate value without overstretching company resources in order to strike a balance that will ensure that it remains competitive in this industry.

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