Porter's Five Forces Analysis of Hyundai

Hyundai is a South Korean automobile brand and a well known name in the global automobile market. Among other things, the company is known for its diverse lineup as well as its focus on innovation. It has continued to expand its line of electric vehicles. Hyundai also holds a significant stake in another South Korean automobile brand Kia Motors.

The company has maintained a strong global presence and exports its cars to more than 200 countries. It has established 10 manufacturing locations worldwide including three in South Korea. Its Ulsan manufacturing plant is known to be the single largest automobile manufacturing plant in the world. In 2023, the company sold 4.22 million units which was 6.9% higher compared to the prior year. Hyundai’s vast lineup includes cars, SUVs as well as electric vehicles. It caters to different customer segments through products in varying price ranges and styles. It has also launched the high end vehicle brand Genesis.

In this five forces analysis of Hyundai, we will take a look at how Porter’s five forces affect its competitive position and business success in the global market.

Bargaining power of suppliers

The suppliers in the automobile industry are not a significant force because of their smaller size compared to the automobile manufacturers. Apart from it, these supplier firms are not concentrated in one place but are geographically dispersed. The supplier firms do not pose any threat of forward integration either since these are smaller firms and parts manufacturers lacking the technology and financial strength required for forward integration. There are some additional factors too that moderate the bargaining power of suppliers.

Hyundai is a well known and global brand of automobiles that is financially in a very strong position. Its financial strength helps it reduce the bargaining power of suppliers that depend on larger firms like Hyundai for business. Moreover, it is easier for Hyundai to switch to a different supplier if it finds one lacking in terms of quality. Hyundai has also maintained strong relationships with its suppliers. Rather than depending on a few suppliers, it has established a large, and resilient supplier network. Overall, the bargaining power of Hyundai’s suppliers is low.

Bargaining Power of Buyers

The bargaining power of buyers in the case of Hyundai is also moderated by several factors. Hyundai is a global brand and highly popular in most corners of the world including its domestic market as well as leading international markets like the US and India. Its strong popularity in these markets is based on its strong commitment to quality and innovation as well as passenger safety. It also offers a vast lineup that caters to various customer segments based on their needs. From cars to SUVs and electric vehicles, Hyundai offers a lot of choices to customers.

Hyundai’s focus on quality and its strong brand image have also driven the demand for its cars higher in the global market. While buyers are a significant force in the automobile sector, their bargaining power is reduced to some extent by these various factors mentioned above. The overall level of competition in the global automobile industry has increased leading to an aggressive battle for market share and customer acquisition. Overall, the bargaining power of Hyundai’s buyers is moderate.

Threat of Substitutes

The threat of substitutes in the global automobile sector arises mainly from the rival brands making similar products. Hyundai sells its products globally across around 200 countries. The company faces stiff competition from other brands including Ford, GM, Toyota, Honda, Nissan and several others. All these brands offer similar products including electric vehicles. Tesla and BYD that manufacture electric vehicles offer substitutes for the electric models manufactured by Hyundai. In most markets, other means of transportation also act as substitutes for Hyundai products. This is why the threat of substitutes gets to be moderately high for Hyundai.

However, there are some critical factors that have helped the company moderate the threat of substitute products. Hyundai is a leading automobile brand known worldwide for its focus on innovation and product quality. The company enjoys strong popularity and customer loyalty which helps it reduce the threat from substitute brands and products. However, since there are several players in the market offering similar products and services, the overall threat of substitutes tends to remain moderately high.

Threat of New Entrants

The threat of new players entering the market and snatching market share from leading and well established players like Hyundai is very low. It is because of the significant barriers to entry in the global automobile market. A new player would need significant capital as well as technical knowhow and other resources even to start locally in a smaller market. Expanding globally requires a major investment in marketing as well as manufacturing, supply chain and human resources.

Legal and regulatory barriers also prevent new players from entering the market. The intense level of competition among the established players also prevents the entry of new players. Overall, the barriers to entry are quite high in the global automobile market and therefore the threat of new entrants is insignificant for players like Hyundai.

Hyundai is a well established and popular brand of automobiles selling its products across 200 countries. It also has strong resources and capabilities in terms of manufacturing, marketing, supply chain and sales and service. It would be quite difficult for a new player to match the capabilities of well established players such as Hyundai and grow into a significant player.

Intensity of Competitive Rivalry

The intensity of competitive rivalry in the automobile industry is very high. There are several well established players in the global market competing for market share. Some of the leading competitors of Hyundai include Ford, General Motors, Honda, Nissan, Toyota and so on. As Hyundai has grown its focus on electric vehicles, Tesla is also now a leading name among its competitors. All the rivals of Hyundai are aggressive about protecting their market share. They invest heavily in innovation, marketing and retaining their customer base. It is why the level of competition gets to be very high.

Some of the leading factors that help moderate the threat from the rivals include brand image, popularity, demand and innovation. Hyundai has maintained a strong brand image and enjoys strong demand in most corners of the world. Its vehicles are quite popular in most corners of the globe and considered safe, efficient and reliable. While these factors moderate the threat from rival brands to some extent, the overall intensity of competitive rivalry faced by Hyundai remains high.

Conclusion

According to the above analysis, Hyundai is in a strong competitive position and poised for faster growth in the future. While the bargaining power of suppliers is a weak force in the case of Hyundai, customers are a significant force. Hyundai’s focus on quality and innovation as well as customer experience have helped it moderate the bargaining power of buyers. The company has further improved its situation by investing in electric mobility and launching the Genesis brand for high end buyers.

The threat from new entrants is insignificant for an established brand such as Hyundai. However, the threat from substitute products and rival brands continues to remain intense. Since the company is heavily focused on innovation, quality and customer experience, it has been able to moderate the threat to some extent. Its vast lineup also helps moderate the threat. Hyundai is enjoying growing popularity and increase in demand in several corners of the globe which shows its competitive strength and strong position in the automobile sector.