Reason for Volkswagen, Toyota, Hyundai Operating Globally - Case Study Example

International Business Multinational Organizations Research Report Name: Date: Affiliation: International Business Multinational Organizations Research Report Abstract Automotive industries are among the best fortune five hundred companies in the world. For instance, Toyota, Volkswagen and Hyundai have proved to the best automotive corporations in the world. Their success is attributed to the unique organization design, supply chain structure and eventually the strategies they employ in the production and marketing opportunities. The companies have boldly faced the entire world, creating a demand for their vehicles and ultimately supplying. The success of the company over each other is attributed to decisions made and strategies adopted to alleviate success. Introduction Automotive industries have been growing day in day out. The high demand of automobiles has led many companies to start creating strategies to market their automotives across the globe. The global demand of vehicles has created a global market opportunity, and the automotive corporations have exploited successfully. Some of the outstanding multinational automotive corporations include Toyota, Volkswagen and Hyundai. These are the leading companies in the supply of automotives in the global market. The leading corporation is Volkswagen, followed by Toyota, and the third is Hyundai. These companies share a similar global market, and their success over each other must be attributed to the ability of the company to produce quality products while at the same time considering the affordability. Volkswagen is a German-based corporation though it has opened other outlets all over the world. Second is Toyota, and it is based in Japan. The main centre is located in Japan though it has other manufacturing outlets in other countries like America and Asia. Lastly, Hyundai is a South Korean based company; it has also proved to be a significant competitor in the global market, since it has emerged third overall. These companies have a profound reason for joining the global market, and the impact is felt at national and global market. Moreover, there corporate strategies used in each of these companies are unique, and that explains why the growth of these companies is not similar. The organization design also plays an important role in ensuring that each of these companies is moving in the right direction. Moreover, the supply chain structure from the manufacturer to the consumer is instrumental to the success of the business entities. Conglomeration of these factors determines the success o f the corporations. Reason for Volkswagen operating globally The Volkswagen group is located in Germany where there are competitors like Mercedes, Daimler, and BMW among other automotive manufactures. These manufacturers create unhealthy competition and, therefore, the company had to get market outside Europe. In Europe, automotive manufacturing companies are many and therefore it would not be practical for the companies to make a significant profit. For instance, in Britain, there is Land rover and Peugeot that dominates the market (Haak, & Tachiki, 2004).). Therefore, the action of Volkswagen taking an initiative of joining the global market was for a good cause. Volkswagen found a long-term opportunity in the Chinese market, the fact that promoted its efficiency and productivity. The first attempt and initiative of the company to attempt discussions concerning the Chinese republic started in 1978 and it has continued to be effective over the years. In 1982, the Volkswagen and the Shanghai Tractor and automotives signed an agreement on the assembly of the Santana that was produced in South America and Europe. One year later, the Santana was rolling off the production line in Shanghai. The signing of the crucial agreement in 1984 represented further important milestone in the Volkswagen involvement in China. Along with the Volkswagen (50%) the joint ventures consists of three more partners on the Chinese side: Shanghai Automotive Industry Corporation (SAIC, 25 percent), the bank of China (BOC, 15 percent) and finally the china automotive industry Corp. (CNAIC, 10 percent). These partners have helped the company to have the upper hand in the global market (Haak & Tachiki, 2004).). The assembly of the Santana and the development of independent engine manufacturing facility were among the basic aims of the joint venture. Addition to the capital, the Chinese partners went ahead and provided the joint venture with land, labor, buildings, raw materials and energy. For its part, Volkswagen undertook to develop the manufacturing technology and impart the essential management expertise. In 1985, the Shanghai Volkswagen automotive company Ltd (SVW) joint venture went into the business. By 1993, Shanghais Volkswagen was producing over, 10,000 Santana cars, and an equivalent number of engines in the custom built factory. Two years later the production had managed to 160,000 vehicles that included 30,000 units of the Santana and 2000 successors’ models. All these vehicles were absorbed by the Chinese market showing the significance of approaching the global market. With increased profits and efficiency, the company had to exploit the global markets (Haak & Tachiki, 2004). Reason for Toyota operating globally As posited above, Toyota is the second best automotive corporation in the world. Toyota found a good reason of joining the global market after realizing that the public accepted their products. The popularity of the company grew significantly, and it started to produce cars in areas where its market was located such as Western Europe and North America. Later on, the company managed to identify major business opportunities in newly industrialized countries such as Taiwan, Korea Hong Kong and Singapore (Moon, 2010). Moreover, the developing regions such as the BRIC (Brazil, Russia, India and China).However, Toyota quickly realized that its model could not adapt the developing countries taste due to lack of knowledge on the local level. In an attempt to solve the predicament, the company managed to develop global production and the supply network that will help in solving the problems at the local production. In particular, it managed to launch the innovative international multipurpose vehicle project (IMV) which was designed to pay attention to the local needs of different areas of the world. As part of the enlarging the global market, Toyota managed to upgrade and expanded Thailand, Indonesia, Argentina and South Africa plants in an attempt to ensure that the global market has been exploited fully. Toyota joined the global market to increase its sales and produce a variety of automotives that will suit the local needs of the people (Moon, 2010). Reason for Hyundai operating globally The Hyundai motor company started in 1967 in Korea, and it was a branch of the Hyundai business group. The company has expanded to become the third best automaker company in the world. As of 2004, the company was selling approximately 1.5 million vehicles worldwide, and the company has the ability to produce at least 2.4 million vehicles. Approximately 1.2 million of this production is located in Korea while the other portion is located in the Korean overseas plants. The plants in India and turkey are the leading with a total capacity of 500,000 vehicles. In the beginning years of the production, the company operated under the license of Ford but after seven years since inception, it was able to build the necessary expertise to design and develop independent model known as pony that was unveiled at the 55th Turin motor show. The aim of the company hitting the global markets was to ensure that it was getting more recognition that would translate to increased profit (Spulber, 2007).). In 1981, the Hyundai motor company and the Mitsubishi motor company managed to sign a technical agreement that enabled technological transfer between the companies (Saee, 2007). The engine was fast becoming one of the world’s elite motor companies. The penetration of Hyundai cars into the Turkish market started with the foundation of the Assan Hyundai MAS as the distributor of the Hyundai cars towards the end of 1990.the ASSAN Hyundai remained in charge of the Turkish market operations until the forfeit of the disbursement rights to the Hyundai Assan Otomotiv Sanayi ve Ticaret. The company does not only serve the local market, but it also serves other international markets such as Europe, Middle East among other areas. The company aim for reaching the global market is achieving ultimatum growth and increase profits (Saee, 2007). Corporate strategy for Toyota First, Toyota Company decided to increase the production of the automotives as one of the strategies of ensuring that it has remained in the market for a long time. According to the Global vision Toyota document released in April 2002, the company aimed to increase the production by at least 50 percent in the next nine years. This was a strategy to ensure that it has increased its market share at the same percentage the greater good (Gottschalk & Kalmbach, 2007). If it were successful, it would increase the market share from 10 to 15 percent hence challenge General motors for the title of the largest company in the world. The company would later seek to grow in the share particularly in North America while retaining its dominance in Japan. Moreover, it was seeking major growth in India and china possibly through the joint ventures. It is crucial noting that it had already entered into technical co-operation alliances with the rival companies such as PSA Peugeot, Citroen to produce a new and smaller car in the Czech Republic. It had also made a similar agreement with the local car companies in China, FAW Group Corporation on cars and Guangzhou automobiles on car engines. In the year, 2005 Toyota president became concerned that the real meaning of Global vision2010 is often not understood (Gottschalk & Kalmbach, 2007).He continued and posited he put 15% target forward as a common ambition which would unite employees worldwide as they pursued it and gave them the impetus to win out in fiercely competitive markets. In his view, the companies that lose the appetite for growth normally stagnate. Secondly, Toyota has embraced the development of environment friendly vehicles that will fetch markets in many countries and in the process make Toyota, the leading producer of the vehicles. It is a hybrid –vehicle strategy over the last ten years has led to the Priusamong the first cars to have an engine that switches between petrol and electric power depending on the situation of the road. In the first year1998, the Prius sold 50,000 units and by 2004, and the figure had risen to approximately 300,000 units per year and the sales are still growing fast. In encouraging the wider use of the technology, Toyota was offering patent hybrid systems to rival car manufacturers (Gottschalk & Kalmbach, 2007). It claimed to the world leader in environmental engine technology. We are convinced that hybrid technology will become the core technology in the creation of the ultimate eco car. Third, Toyota has opted to stand-alone. In around, 200, Toyota identified its purpose to take over the global market leadership by 2010.It called this its 2010 Global vision strategy. During the 1980s and 1990s, the company targeted North America as its prime strategic focus along with Honda. Toyota launched cars of superior quality and with lower manufacturing costs than its US competitors did. During the three years 1991-2002, the main three US companies GM, Ford, and Daimler Chrysler lost over 21 percentage share points of the American car market to the Japanese and European competition. The combined losses of the three major US companies in 1991 alone were US $ 7.5 billion. The US car manufacturers were only saved by the three changes; launching the specialist vehicles such as sports utility vehicles, minivans and the pickups. Second, severe economic recession in Japan which made Toyota Japanese home base difficult and finally the substantial rise in the Japanese Yen which made Japanese exports to the US less profitable(Gottschalk & Kalmbach, 2007). Corporate strategy for Volkswagen The Volkswagen group has been recognized as the long-term opportunities in the entire Chinese market very early on. The preliminary discussioons concerning Volkswagen operations in the People’s Republic took place in 1978.In 982, the Volkswagen and the Shanghai Tractor and automotive corporation signed an agreement on the assembly of the Santana that by then was produced in South America and Europe. A year later, the Santana was rolling off the production line in the Shanghais (Haak & Tachiki, 2004). The signing of the reknown joint venture in October 1984 represented further important millstone in the Volkswagen involvement in China. This strategy was crucial in ensuring that the company would continue surviving in the market. The joint ventures that are adopted by Volkswagen such as investing EUR 240 million in building new engine factory in Shanghai are crucial steps in ensuring that the company has a greater share in the market. Volkswagen produces automotives that have a high percentage of technology, and it is supported by the high involvement in the northeast china in the Changchin. A successful entry into the market in Shanghai, the next step to expansion in these Chinese markets was the conclusion of a licensing agreement between Volkswagen AG and the First Automobile works (FAW).the Audi production started in North China province Jijilin in the town of Changchun in 1998. The second joint venture in china in 1991.Volkswagen-owned 40% of the FAW Volkswagen automotive company Ltd. (FAW-VW) In Changchun. Today, the products manufacture are the VW,Jetta, the New Jetta and various Audi models. In September 1999, the first Audi A6 rolled off the line. VW strategic technology leadership is seen clearly in the market segment. Audi is in 2004 testing the new Audi A6 for the Chinese market (Haak & Tachiki, 2004). Taking into account that European carmaker, Volkswagen is the largest carmaker in china, its strategies and policies have enabled the company to reach that point. The key success of the company is attributed to strong vertical differentiation and pioneering behavior. However, the competitive position in China has been threatened since 2003, due to lack of differentiation and the development strategy (Chen & Yao, 2006).The Volkswagen had been the colossus of China’s car since the 1980s when it entered the market and scooped more than half of the market share before China could enter into WTO. As the pioneering foreign carmaker in China, it was the only one to thriving in restricted market dominated by the fleet sales to government and the state companies. The Volkswagen two joint ventures still lead the local family, and the luxury car segments hence producing the best selling Santana model in shanghai, and making the market-leading Audi A6 in Changchun. Volkswagens successful brand strategy makes china to be the second-largest and most profitable global market (Chen & Yao, 2006).). Corporate strategy for Hyundai Hyundai have taken advantage of the global market, and it has embarked on forming alliances with other companies in the international arena. Through forming unions and alliances, it has been able to scoop a great market share hence becoming among the best automotive industries in the world. For instance, the ASSAN Hyundai has continued to be in charge of the market operations until the forfeit of the distribution rights to Hyundai Assan Otomotiv Ve Ticaret As (which was to be known as the Hyundai Assan)( Kim & Han, 2008). The Hyundai Assan plant in Turkey not only serves the local market, it also serves as a strategic beachhead for serving markets in Europe and the Middle East, as described by the Hyundai motor company executives. Although Hyundai is the third largest automaker in the world as per now, it faces subtle challenges in distribution and reaching the entire world. Most of the Hyundai cars are concentrated in Asia that is growth challenge. In a reiteration, the company has adopted strategies for creating dealers in the entire world where their cars can be easily accessed. Moreover, they have provided spare parts that make it possible for clients to access them when needed(Kim & Han, 2008). Organization design for Toyota, Volkswagen and Hyundai Organizational design is the way individual and the teamwork is coordinated within an organization. In an attempt to achieve the goals and the objectives, the individual works needs to be managed and coordinated effectively for the greater good. The structure is always a valuable tool that is used in achieving coordination, and it specifies the reporting relationships, delineating the formal communication channels and describes how the individuals are linked together. Toyota Corporation has often been known to as the gold standard in the automotive industry(Liker, 2004). The Toyota production system is clinged on the principles of just in time whereby the raw materials and the supplies are normally delivered in the line of assembly when they are used. Therefore, the system has little room for the slack resources, and it emphasizes on the importance of efficiency when it comes to the employees and reduces the resources that would have been wasted. The TPS empowers the employees who are in the frontline, and the assembly line workers are empowered to pull cords and stop the manufacturing in case of a problem. The company has also been ensuring that clients are satisfied. The customer’s satisfaction is among the policies that the company has been using to create a good rapport between the company and the clients. For instance, if the vehicles are found to have some defects, the company takes them to the factory where they are rectified accordingly. These actions have created a good reputation for the company. Moreover, the organization design gives an opportunity for the company’s employees to grow through exposing to the challenging environment that eventually alleviates the problem-solving and analytical skills. These skills have been very instrumental in facilitating the growth of the company (Liker, 2004). Volkswagen has embraced an organization design that has enhanced significant growth in the corporation. The organization design for the company is founded under the six principles, which include; serving for the good of the people. If the company serves for the good of the people, the activities that they engage in will always work for the greater good. For instance, they produce quality vehicles that ensure that the requirements of the people are met effectively. Moreover, they acknowledge that the business that serves for the good of the people will require competition and, therefore, they will do their best to compete effectively. Merit, is the third principle. They posit that for a company to excel, their activities must be based on merit. Merit will ultimately guarantee the company success and that why they acknowledge it as the significant aspect. Sustainability and responsibility are also crucial in determining the success of the company, and the company has embraced them as the guiding principles. In terms of employee relation, they allow creativity and problem-solving skills that create a good working environment. On the side of the clients, the company values customers since they are the backbone of the business. All their activities are directed towards customer’s satisfaction that is crucial for any business(Mikler, 2013). Hyundai has a unique organization design, and this has enabled the company to grow significantly and ultimately achieve the desired goals. The organizational design is centralized and yet locally responsive. The HMC assembly plants and the subsidiaries are all over the world though the organizational structure and the approach are still similar to the footprints of the company. Hyundai is a top-down hierarchical company, and it employs the hands-on management that is authoritative (Barraza, 2011). For instance, the CEO Chung was famously known for his Bulldozer leadership style that was perceived as a surprise to many people. He could even visit the sites and occasionally pulling the executives on the sites to show them the issues of concern. Moreover, the decision-making for the company is quick and decisive, and this worked for the greater good of the company. The company has also formed alliances with international non-Korean teams so that they can pick up the local market needs, the available opportunities, and suddenly turning them into tangible products. This initiative has been the instrument in facilitating the growth of the company (Saruta,2006 ). Supply chain structure for Toyota, Volkswagen and Hyundai The three motor corporations have a common way of enhancing the supplies and the extent of success, may be attributed to these factors. First, Toyota has formed alliances with other companies like in North America motor company, and through that, they have managed to produce vehicles that will meet the local needs of the people (Schwaiger et al, 2001). In the case of North America, the company has produced enough vehicles that will ensure that the local people have sufficient to buy. Moreover, these vehicles are localized, made according to the local terrain hence making them highly suitable (Kerin, 2006). Volkswagen Corporation and Hyundai motors have taken the same initiative whereby they have formed alliances with other countries. For instance, Volkswagen has formed alliances with China motor company, and the union has culminated in escalated number of vehicles in the market. For instance, in China, most of the vehicles used and imported are Volkswagen affiliates, and this has boosted its market. International dealers in different parts of the world are also evident, and they are part of the supply chain. Similarly, Hyundai has formed alliances with India and Pakistan, and they have managed to sell many cars. The union has facilitated creation of a market hence making it possible for supply to take place effectively (Chorafas, 2001). Conclusion It is evident that the automotive industry is growing day in day out. With increased technology, acquiring a vehicle has been made much easier the fact that translates higher market for the automotive corporations. Volkswagen, Toyota and Hyundai are the leading motor corporations, and they have successfully competed for the available market opportunities. The unique strategies, organization design and the supply chain have enabled the companies to emerge victoriously. 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