Hyundai Card's marketing strategy case analysis

Hyundaicard's Marketing Strategy: Case Study

Write a full case analysis: HyundaiCard's Marketing Strategy

Hyundaicard's marketing strategy

General overview of Hyundaicard

Current marketing strategy assessment

Financial analysis

Strategic alternatives

Assessment of the strategic alternatives

Implementation plan

Exhibits

Segmentation criteria

Qualitative ranking of alternatives

Market share of credit card companies

Preference of payment

Hyundaicard financial statements

This essay is a case study for Hyundaicard marketing strategy. Hyundaicard is a company situated in Korea's credit card industry. It forms the basis of the case study because of its' unique experience with marketing, since it was a late comer in the very competitive market it had to employ various marketing strategies in order to shift from being a market follower to being a market leader.

This study will first of all identify some key issues or aspects of the company after which it will conduct an evaluation and assessment of the company's internal and external situations. Thirdly the paper will look at some of the possible alternative strategies of which the company can employ and at the end one alternative will be chosen. Lastly the paper will give some few recommendations before it ends with an action plan that includes a projected financial performance after the recommendations have been implemented by the company.

General overview

Hyundaicard Company was established in 1999 after the Hyundai KIA Automotive group acquired Diners card, which was the first company to release into the market a general purpose credit card. Thou initially it didn't trade in the name of 'Hyundaicard', the current card name was only implemented in 2001 when the company resorted to re-energies itself and take a leading position in the market place.

The Korean credit card industry first developed in 1969 when Shinsaegae; a Korean department store which introduced the first credit card into the market that was to be used by its' customers, this development was later to be followed in 1978 when another credit card was launched by the Korean exchange bank for its' customers who travelled frequently. By the 1980's many players had already entered into the Korean credit card industry and it is reported that by the year 2000 the industry had recorded a tremendous growth with over a hundred million credit card issued countrywide.

The Hyundaicard which is the case study of this paper is perceived by marketing consultants to focus more on customer needs, this was after it shifted to a new online marketing campaign strategy and also new credit card products. In a bid to address customers' needs the Hyundaicard launched a strategy that involved dividing it clients' base into segments with regards to their respective lifestyle activities, in addition it has also diversified its' product line by introducing new products such as the purple and black credit card.

Goals and objective

Hyundaicard company's goal was to make its' retail businesses, financial services and internet fields, leaders in the market in terms of innovation and quality of their products and services. And by forming a strategic alliance with another company called the GE consumer finance (GECF), Hyundaicard Company aimed at increasing its revenue, market share, sales level, reputation and image and product development, since the new strategic partner was expected to provide extra funds, risk management system and financial product planning for Hyundaicard to initiate marketing campaigns for alphabet cards that were designed for their new unique and customized services.

The company had a long-term objective of transforming itself from what many used to know as an automobile manufacture into a global leader in the provision of additional services that are related to the automobile industry.

Problem statement

At its inception in 1999, the creative business model of Hyundaicard which was based on innovative products, integration of offline and online customers and the general consumer needs, forecasted that their clients would be given a discount of up to two million won as a promotion for using the Hyundaicard when purchasing Hyundai automobiles. This discount awarded could be paid back using points accrued from the use of the credit card in a five-year period. Thou there was commendable success of the creative business model in the Korean market, the performance of the company had not shown the much anticipated improvement, seven years down the line.

This prompted the company to evaluate its' marketing strategies, after which it was evident that the company experienced difficulties in relating its' creative business model to the loyal clients of other leading companies in the Korean credit card industry. This resulted to a minimal client base i.e. The number of Hyundaicard holders was very minimal representing a very small share of the market, as a result the company was regarded as a market follower not a market leader.

At this point the company's management was faced with the problem of how to successfully re-strategies the company to become a market leader in the Korean credit card industry up from being a market follower. The other challenge was whether the current Hyundaicard's marketing strategy could give it a competitive advantage in the market place and what future marketing strategy could best suit Hyundaicard.

Evaluation and assessment

Internal analysis

Customer value proposition

Through the creative business model the Hyundaicard offered customers who used the card when purchasing automobiles manufactured by the Hyundai automobile company, a pre-discount of up to two million won, of which they would repay it back in span of five years using the points accrued while using the card. The other value addition to Hyundaicard customers was the diversification of financial services it offered to them.

Sustainable competitive advantage

Through the diversification and expansion of the company's product into the premium market by launching the purple card and the black card, it gained a competitive edge over other companies in the Korean credit card industry for its' distinguished services. These new products targeted only 0.05% of credit card holders in the market of whom the company considered to be extremely important customers or rather VIP customers. Important to note is that the company had to form strategic alliances with other financial partners in order to penetrate deeper into this new market niche.

Another sustainable competitive advantage of the company was through the electronic customer relationship management (eCRM) which was meant to address customer expectation and also satisfy the increasing consumer needs. The intentions of the eCRM was to further increase the quality of e-mail solutions and offer to Hyundaicard customers who use its' websites, a more customized service. The electronic customer relationship management was consistent with the integration of customer information that was to be used to create new credit card products that are suitable for customer needs.

The finance shop also accorded the Hyundaicard Company a distinction from the rest of other credit card companies as it offered the company's esteemed customers a place where they can get financial consultation services, enjoy all-in-one services and also enjoy the refreshing atmosphere designed by leading world designers. The new culture marketing strategy that also used concert series to promote the company products also enabled Hyundaicard it to have a sustainable competitive advantage.

Strength

According to Johansson (2002, 98-108) strengths are the most important aspect in which variables or aspects of Hyundaicard in this case, that are considered of very great importance and usage to make the company achieve the competitive advantage over the others in the Korean credit card industry.

Using the tools and techniques presented by Yip (2004, 17-24) in his studies; the strengths of Hyundaicard include Hyundaicard M, which is the leading credit card with most subscribers in Korea, Hyundaicard also took the top spot in terms of national customer satisfaction index in years 2005, 2006 and 2007 and again it came top on the credit card category of net promoter score further more it was recognized as the most admired company in Korea for two consecutive years (2007 and 2008). The other strength of Hyundaicard is based on its website whose traffic nearly caught up with the other top three credit card company's websites.

Weakness

According to Ehrbar, (1998, 5-7) weaknesses are aspects of the Hyundaicard that may hinder in its realization of the set goals and objectives. In the line of the research, they can be the factors that may hinder the Hyundaicard in trying to achieve the competitive advantage over other industry players.

Hyundaicard recorded a major weakness when reports noted that it had a very small customer base and that its' website traffic was low despite of the aggressive marketing campaign that was conducted in 2003 and 2004. Neuner (2000, 153-174) pointed out that Hyundaicard showed signs of weakness in terms of weak marketing communication, low brand awareness, weak card services and delays in venturing into the international market.

External analysis

Market trends and market potential

Compared to other industry players, Hyundaicard is considered to be a latecomer in the industry and hence the reason for its low client base. Due to this fact the Hyundaicard had to adopt the differentiated market strategy in order to increase its customer base and credit card usage.

The credit card market in Korea generally witnessed an overheating period which saw the number of cards issued increase drastically and subsequently the standards for issuing cards also declined. This had a negative repercussion as there were increased cases of late payments and holders with bad credit history. The situation got worse to the point where financial analyst were predicting a credit card crisis in the country. What followed were adjustments in all the credit card companies in the country that forced them to restructure their organizations and moreover they also had to downsize their operations.

According to Shaw and Shiu (2003, 1485) the Korean market potential is backed by the economically productive population which in 2007 was approximately 24.2 million.

Market share

According to industry statistics, by the year 2007 Hyundaicard enjoyed only a 9.96% share of the market, the statistics further note that the company has a market potential of 26.45% since the average South Korean cardholder held 3.78 credit cards. The table in the exhibits will show the market share in respect to other industry players in the Korean market.

Consumer analysis

According to research done by Pujari, Peattie and Wright, G. (2004, 381-391) they show that Koreans preferred to make their purchases using credit cards, even when making small payments. The amount of private consumption that was paid for using credit cards amounted to nearly two hundred and ten billion dollars in 2006. More than 45% of this figure was attributed to goods and services that were paid for using credit cards.

The consumer profile showed that both female and male clients were most likely to use their credit card for almost everything, such as shopping, dining out, flying or driving. The consumers ranged from VIP consumers, premium-level to university students.

Consumer segmentation

Consumer segmentation involves dividing the consumer base into distinctive categories. Hyundaicard categorized its' client base into four distinct groups according to their credit card payment, this groups are namely the high, middle, low and general. Consumer segmentation categorized each group of customers according to purchase method and usage status, this method also helped in collection of data such as location of purchase, gender and age of each respective credit card holder.

Hyundaicard formulated a marketing strategy called Hyundaicard M, S, W, U, K and A, that addressed the different consumer segment. The campaign dubbed "alphabet marketing" classified the market using alphabetical words based on the each consumer lifestyle, for example Hyundaicard M. was meant for male consumers while Hyundaicard S. targeted women in their thirties.

Pestel analysis

Political and legal analysis

Hyundaicard has a vision of being the leading credit card company in Korea and in the future it plans to venture into the international market where it also aims at being the global leader, this therefore means that the company's financial performance will be subject or under the influence of the legislative and political conditions of Korea and in the future, it will be the entire international market.

Banking, credit and employment legislations are the main political factors that majorly affect Hyundaicard and with a vision of providing high quality products and service to its' customers and employing over 5,000 staff the company is keen to observe this legislations hence can't be negatively affected by political factors Carrigan and Attalla (2001, 560-577).

Economic analysis

Since Hyundaicard operates in the credit card industry the external economic factor are likely to influence its' performance in regards to profits, demand, cost and prices. In the market which the company operates in, the main economical factor likely to affect its' operation is the high unemployment in the region, which has a negative impact on the demand for credit cards. The economic factors can't be controlled by the company hence its' performance is largely dependent on the economic condition of Korea.

Social-cultural analysis

Korea itself is a very religious state and a demographic change is also a factor in this region, whereby people mostly prefer to use their credit card for every single purchase they make. Therefore for the company to succeed in its' endeavors it should produce products that are religious inclined or considerate to the socio/culture of the consumers, this would ensure their survival in market.

Environmental analysis

Over the recent past there has been increased pressure in all the business organizations to act responsibly towards their surrounding community and environment. More in particular in Korea, there has been increased pressure on the credit card companies to engage in eco-friendly practices. Through Hyundaicard business model, corporate social responsibility is listed as a major objective for the company in which it aims at providing sustainable plastic cards that can be recycled once they expire in a bid to minimize any negative impact on the environment that could be caused by the plastic credit cards.

Technological analysis

With a vision of providing consumers with high customer satisfaction; technology can be best applied to attain this. The credit card industry is increasingly integrating technological innovations into their business model and Hyundaicard can offer high customer satisfaction because technology allows their services to be more customized.

Neuner (2000, 153-175), indicates that technology will also benefit Hyundaicard in terms of efficiency and reduced operational costs.

Competitive analysis

The Korean credit card industry is characterized by intensified competition among the industry players. According to the industry report the three top credit card issuers in Korea include Samsung card, LG (Shinhan) card and Hyundaicard. The major competitors of Hyundaicard are Samsung card and LG (Shinhan card).

The competition in the industry placed Hyundaicard in the fourth spot as the largest credit card company in Korea and after Shinhan card and LG card merged, LG (Shinhan) card became South Korea's largest credit card company with a market share of 24% by the year 2008. Samsung card is the second largest credit card company in Korea.

Porter's five forces analysis

Threat of new entrants

The market in which Hyundaicard operates is considered a market for big players who also include Hyundaicard competitors like Samsung card and LG (Shinhan) card. Hyundaicard, which is a latecomer in the industry, operates in different regions in Korea which in way hinders the entrants of new competitors more so the small credit card companies. The Threat of new entrants is mitigated as they would be required to have huge sums of capital that's hard to acquire, Hyundaicard also offers specific barriers to new entrants that include economies of scale and differentiation (Porter, 1980).

Bargaining power of customers

Referring to Porter's writings; the more the company products become undifferentiated or standardized, the lower the cost of switching and hence the more power consumers attain. With Hyundaicard increasing attention towards meeting consumer demands, offering competitive prices for its' financial services, customizing services and providing wide variety of financial services has been able to maintain and control its consumer base (Porter, 1980).

Bargaining power of suppliers

This force according to Porter shows that supplier's power can be influenced by big players in credit card industry and they are in a bad position in terms of losing their business to them. This force offers to Hyundaicard the advantageous spot in bargaining for fairer prices from its suppliers who are afraid of the company's potential to source their raw materials from other suppliers at better prices.

Threat of substitutes

According to Porter the substitution of products can reduce its demand, as customers can easily switch to alternative products. In the credit card industry this is practiced in the form of substitute for need and it's further weakened by new emerging trends, and as such is the reason why small traditional markets are emerging mostly in the Korean market. To counter this Hyundaicard has created products for each specific small group of consumers i.e. Hyundaicard M, S, W, U, K and A (Porter, 1980).

Bargaining power of competitors

The high level of competition between Hyundaicard and its' competitors, has made consumers in the Korean market to become more sophisticated and demanding, thus the reason why Hyundaicard has focused more on acquiring consumer information so as to relate well with them. The competition has also forced industry players to offer more innovative services so as to build and maintain their market share.

Opportunities

Hyundaicard has an opportunity, as noted by Lord and Putruve (1998, 581-591) since the Korean government launched initiative programs to promote use of credit cards among the nationals so as to stimulate private spending and secure more revenue for the government that can be channeled towards national development.

By the Korean government making it mandatory for credit card acceptance and penalizing stores that don't accept credit card it has created a whole new opportunity for Hyundaicard of which they can exploit it to their own advantage.

Threats

The legislations in place in Korea have made it difficult for Hyundaicard to add new customers and to even redistribute credit cards to those whose cards have expired. The other threats to Hyundaicard is the increasing number of late payments and cardholders with bad credit history, also the rapid expansion of the credit card industry in Korea resulted to a decline in standards for issuing cards.

Current market strategy assessment

The current marketing strategy for Hyundaicard is the differentiated marketing which the company term as alphabet marketing. The marketing strategy is based on consumer lifestyle and each distinct consumer group has been divided using alphabetical letters i.e. M, S, W, U, K and A. This customized marketing approach has paid off since reports indicate that the Hyundaicard M. has the largest consumer base among all the credit cards in the Korean market. (Carrigan and Attalla (2001, 560-565) noted that Hyundaicard is in the defensive stage at the product life cycle.

4P's assessment

The Hyundaicard products have undergone transformation in terms of diversification and creative marketing strategies and according to marketing consultants the consumer segmentation has being fruitful more so with the premium card that has a high prospectus to improve customer relationship.

Through consumer segmentation the pricing of Hyundaicard's products and services has been done on a fairly manner since each distinct group has its' own price. For example university student who are cardholders are charged cheaply than VIP cardholders.

Hyundaicard promotion has been conducted through radio and television media this has created increased consumer awareness since most consumers are most likely to either watch the television or listen to a radio station. This promotion strategy has reached out to many potential clients.

With only a market share of 9.96% this indicates that the distribution of Hyundaicard's product and services is still minimal in the Korean market. This statistics also indicate that the company has few retailer stores that are widespread across the country.

Financial analysis

The company's financial statements show that the sales figure in 2008 was 42.7 trillion won and this impressive growth in sales revenue has been recorded ever since 2004 to 2008. The operating revenue on the other hand had also gone up in the period of 2003 to 2007, with 2007 operating revenue being 1121.3 million won. The company's net income had experienced an increase since 2003 to 2006; however between the periods of 2006 to 2007 the company's net income witnessed a reduction from 281 million won to 234.4 million won. These figures indicate the effectiveness of the Hyundaicard's marketing strategy ever since 2003 that has yielded increased sales and revenue for the company.

Appropriate strategy (alternatives)

Product development

In product development, Hyundaicard is set to enhance its' product to meet consumer needs and expectations. Using the information gathered from the electronic customer relationship management and the integration of consumer information into Hyundaicard database. The data is supposed to inform the company what the consumer expects and needs.

So far the consumer segmentation has lead to the development of products that are customized to specific consumer group, for example the purple card and black card is the recent product to be developed by Hyundaicard.

Product development will definitely lead to customers' satisfaction and competitive advantage, but uncertainties looms on the number of customers that will appreciate the new product that has been developed. The other disadvantage with product development is that the amount involved in gathering consumers information and eventually developing the right product is too high.

Market penetration

This as a strategy will involve penetrating deep into the market where Hyundaicard had not previously exploited. Hyundaicard as previously mentioned doesn't have a widespread network across the Korean market; this puts it in a disadvantageous position as compared to other competitors who have a wide network across the market thereby enjoying the economies of scale.

To venture deep into the market it will involve opening new offices in other parts of Korea, more the finance shops and in addition Hyundaicard will have to form strategic alliances with other likeminded business in order to reach deep into the market.

Market penetration will definitely lead to economics of scale and it will be a sure way to guarantee the company a leading position in the credit card industry in Korea, while venturing into the international market will make the Hyundaicard a global leader. Market penetration is a costly business strategy whose returns are realized in the long-term.

Differentiation

Hyundaicard has been able to differentiate its' products and services over the recent past. With its' unique alphabetical credit cards and the finance shops the company has being able to completely differentiate its' products from those of competitors.