Hyundai

HYUNDAI

Hyundai Case Questions

Hazem Abdelrazek

900-100-871

Case Questions

1. What are the roles of comparative and competitive advantages in Hyundai’s success? Illustrate your answers by providing specific examples of natural and acquired advantages that Hyundai employs to succeed in the global car industry.

First of all the comparative advantage can be beneficial for two countries to trade without barriers as long as one is relatively more efficient at producing goods or services needed by the other. What matters is not the absolute cost of production but rather the relative efficiency with which a country can produce the product. Such as the example mentioned in the book where Germany is more efficient than France at producing cloth and wheat as Germany uses less labor hours to produce the two products. This therefore makes us look at the opportunity cost for the country to choose producing one good over the other where the opportunity cost of producing this product is less than producing the two products together. In this example Hyundai’s comparative advantage is that Korea holds numerous competitive advantages in the car industry. The country is a world center of new technology development. Korea has abundant, cost-effective knowledge workers who drive innovations in design, features, production, and product quality. The country also has a high savings rate, with massive inward FDI, which ensures a ready supply of capital for carmakers to fund R&D and other ventures. Collectively, Korea’s abundance of production factors in cost-effective labor, knowledge workers, high technology, and capital represent key location-specific advantages. The Korean economy is dominated by several businesses, called chaebols. They include Hyundai, Samsung, LG, and SK and account for about 40 percent of Korea’s GDP and exports. In recent years, the Korean government imposed stringent accounting controls on many of these firms including Hyundai which...