| La Lettre du GERPISA | no 102 |
Nouvelles des firmes - Myeong-Kee Chung
To promote exports Korean automakers are improving quality and strengthening marketing in the US and West European countries in particular. US remained the largest overseas markets for Korean in 1995 though its share of Korean auto exports declined. Korean auto exports to North America decreased 14 percent from 234,904 vehicles in 1994 to 203,785 in 1995. Shipments to North America accounted 20.7 percent of total, down from 31.8 percent. Western Europe is expected to become one of Korea's fastest growing auto markets next year. Korean auto exports to Western Europe were 267,058 vehicles in 1995, up almost 100 percent from 138,560 in 1994. The 1990s will see the Korean increasingly set their high-quality inexpensive cars against the more expensive Western Europe competition. In the following I would like briefly to explain the internationalization strategies of Korean Big Three companies.
Along with the car production expansion projects, Daewoo has been bolstering its overseas sales promotion activities in Western European countries, including Germany and Britain. Daewoo aims at increasing the sale of its cars in West Europe to 103,000 units or 1 percent ot the total market share in 1995, 150,000 units in 1996 and further to 200,000 units 1997.
As an initial step to survive the fierce competition in the world's automobile market, Daewoo took over the research center of the International Automobile Design (IAD) in Worthing, Britain, a world-renowned auto design and engineering company in 1994. Daewoo also set up new technical center in Munich in 1995 where has been conducing development of new engine system.
The globalization strategy of Daewoo looked at simply, consists of two parts. One is to R&D in the advanced countries such as Britain or Germany. The other is to build up a CKD Plant in the inexpensive labor reservoir likely Eastern Europe for the export to Western Europe.
In particular, under a contract with Wilhelm Karmann GmbH, the firm embarked upon its production in Germany in early 1995 for 30,000 units of Sportage on an OEM (original equipment manufacturing) basis. It will be conducive to increasing Kia's exports to Europe. To this end, it established a subsidiary named Kia Motors Europe GmbH. In 1995, the export in Western Europe grew 32.8 percent from 24,615 units to 32,681. In addition, it is building a network of more than 1,200 dealers throughout a total of 22 countries with a view to exporting its own model car Sephia. Kia is also spending huge amount of funds on the creation of a global network in the field of R&D while trying to enhance the status of Korean carmakers in world market.
In addition to loss of market in the USA, the future growth of export markets will be determined by the evolution of non-price competitiveness. The first implication is that Hyundai needs to maintain its access to the US market in order to capitalize on recent investments in advanced consumer and intermediate products. In order to become more active in the US Market, Hyundai established Hyundai Motor Finance Company in 1990.
A second implication is that Hyundai will generally have to diversify and direct its marketing toward European countries and Asian and African markets. Hyundai decided to boost its presence in Malaysia. An assemby factory has been built there with a capacity of 12,000 vehicles per year. Also, Hyundai exported CKD as follows: Egypt (20,000 unit per year), Botswana (10,000 unit per year), Zimbabwe (10,000 unit per year), Thailand (10,000 unit per year), Philippines (12,000 unit per year). Hyundai will extend the network of overseas dealers from 2,968 to 3,200. They also will extend the 3,700 after-service chain in the world. Hyundai brought in from home base against the more expensive Europe competition, because they have any production site in Western Europe. Hyundai extablished their own distribution company in Germany in order to promotion of marketing activities in Western Europe. Export vehicles in Western European countries by Hyundai increased from 96,251 in 1994 to 130,576 in 1995.
However, it simply is not expected that European countries are no comparable upsurge in demand for cheap Korean cars, because several European companies already made similar car so that market too has been more difficult to penetrate. To expand Korean sales is correspondingly more difficult in Europe. To survive the fierce sales competitions in world car market, Korean automakers should exert their best efforts to improve technology and develop next-generation vehicles, including electric cars. Quality and high technology are necessary for survival. They also must improve their own image that is the reputation for poor quality and inexpensive in their export market. This conditions might stimulate to international network system of R&D that will permit increased internationalization of production in Korean automakers. Under the pressure's globalization, it is still unclear that Korean manufacturers are efective in responding to its challenges.