Intercultural challenges facing Hyundai's global operations

Intercultural Issues at Hyundai

Inter-Cultural Issues at Hyundai

Hyundai faces issues with intercultural concerns for two major reasons. First, they operate a carmaker that operates on a global scale and second because they actually have many of their cars manufactured in countries other than their country of origin including the United States. Indeed, Hyundai operates both Hyundai itself and Kia within the United States. This can be a challenge on a number of levels. Issues like nationalism, inter-cultural interactions, inter-cultural turf wars, prior wars between the home country of the company with that of one or more countries they operate in and other related concerns can all be issues for companies like Hyundai that originate from one country or part of the world and operate extensively, especially as a manufacturer, in another. Put another way, there are a lot of dependent and independent variables that Hyundai must address and deal with to operate efficiently and with the proper amount of public relations and other corporate skills. Indeed, the cultural norms of South Koreans and Americans, let alone those of any other countries that Hyundai operates and sells in, are quite different and the meshing and melding of those two cultures as they interact can be quite tepid and even uncomfortable at times.

Table of Contents

Terms & Acronyms 4

Introduction 6

Methodology 14

Hypothesis 18

Literature Review 19

Discussion & #8230;.22

Conclusion & #8230;24

References 26

Terms & Acronyms

Asian Auto Crisis -- the time period during which Kia acquired bankruptcy and thus allowed them to be acquired by Hyundai

HMA -- Hyundai Motor Company. Founded in 1967 and is traded publicly in South Korea.

HMMA -- Hyundai Motor Manufacturing Alabama

Hyundai America Technical Center -- the "proving ground" for Hyundai cars in the United States. The area is located in California City, California in the western United States.

Kia -- Another South Korean car company, in addition to Hyundai, that has operated corporately since 1944. Roughly one third of Kia's corporate assets are owned by Hyundai Corporation.

Kia Motors America -- the United States division of Kia Motors. Founded in 1992, they filed for bankruptcy just a few years later in 1997 and when was acquired via a majority stake buyout (51%) in 1998. They outbid Ford Motor Company, which had had a stake since 1986, predating their entry into the American market. They have since drawn back their stake to roughly a third.

Kia Motors Europe -- the European counterpart to Kia Motors America

Lean Production System -- a Japanese automaker creation, it is a stressing of flexible and easily-changeable production operations in auto plants

Montgomery Plant

NUMMI -- New United Motor Manufacturing Incorporated -- a joint venture of Toyota and General Motors that was shuttered in 2010

SIA -- the common acronym used to identify Subaru/Isuzu Automotive.

West Point Plant -- the American manufacturing point for Kia vehicles. The plant is located in the state of Georgia in the southeastern corner of the United States. The plan is fairly close to the Montgomery Hyundai plant

Inter-Cultural Issues & Hyundai

Chapter I - Introduction

Problem

In a nutshell, the major issue that Hyundai has and will face is the fact that they originate in one country and operate massively in another country and there are a number of major cultural and societal differences between the two areas. Examples these massive differences include societal norms, cultural norms, the array (or lack thereof) between the two countries, language barriers, different standards relating to courtesy and respect, perceptions and attitudes towards foreign car makers, human resource practices, management practices, attitudes towards unions from both corporate/employee/societal/political sources, and so forth.

Even if one temporary excludes the fact that importing corporate operations and culture from one region of the world to another, the cultural and societal variations and differences that exist just within the United States (or even within a single state) can vary quite a bit and this can affect any of the dynamics listed above. Some cities sin the United States in particular typify the term "melting pot" as applied to the United States and these cities include Los Angeles, New York, and San Francisco, just to name a few. This would perhaps explain why Hyundai chose Alabama as its United States plant side given that the area in question is a lot more culturally and societally homogenous than other areas in the United States. Its relative closeness to areas like the Northeast, Southeast and Midwestern United States is also probably a major plus for Hyundai as well.

Coming back to the United States culture (as varied as it tends to be) and its comparison and contrast to the South Korean culture, there are obviously a lot of differences and language is far from being the only dimensions that this can be applied to. Many of the common trends, behaviors and acceptable norms in South Korean culture may seem odd or even offensive to Americans and the same can certainly happen in reverse as well. The barriers in place are by no means limited to language or time zone differences between the two cultures. Normal and proper human resources and managerial practices can vary but even things like normal daily interactions can be tepid at best in certain situations, especially when speaking of interactions between people that were born or remain South Korean citizens and how/when they react with Americans and how that all plays out.

To put a fine point on the overall problem that has and must continue to be addressed by Hyundai, and as addressed in this report, is the fact that Hyundai must acclimate and customize its approach based on the fact that they are melding two entirely different cultures when they are corporately centered in the East and they operate extensively in a Western country like the United States. There are a lot of "sub-problems" that are part and parcel to this greater issue and those will be covered in the next section.

Sub-Problems

As noted in the introduction and the problem sections of this report, there are a number of sub-problems that are part of the cultural dynamic in play between Hyundai and the United States and those sub-problems will be covered in this section. The first major issue is the union concern that they must deal with. This is not something to uniue to the United States and, as noted before, is a concern that they had in their home country of South Korea as well. However, while the union activities in the United States are rarely violent, they can get rather dicey and can actually present great fiscal danger to union firms. A sterling example of this in motion was exemplified by the recent travails of Hostess, which many say was taken down as a corporation, at least in part, by unions refusing to give concessions that would allow Hostess to retain its solvency, at least for a time. In the end, one of the major unions refused to budge and the company was liquidated with the brand names being sold to other corporate entities with a lot of them vowing not to allow for union operations with the reopened factories and/or brands.

Another sub-problem, also as mentioned before, is the concept of "buy American" proponents and nationalism in general. Obviously, the amount of time that has passed since the Korean War has allowed the anti-Korean animosity to subside, even it was silly to begin with given that the United States was never at war with South Korea. After hitting a peak in the 1960's, American car companies have had a litany of issues including the near-collapse of Chrysler in the 1970's and the subsequent near-collapse of all three major United States automakers during the recent "Great Recession" of 2007-2009. General Motors (GM) and Chrysler had to be bailed out by the United States federal government. GM has often been referred to as "Government Motors" and Chrysler is now majority-owned by Italian automaker Fiat. Ford was the only major United States automaker that did not take a government bailout and/or allowed for a government-organized bankruptcy but they struggled mightily as well. These struggles, coupled with shoddy workmanship and/or styling, on part of all three automakers at one time or another has allowed foreign automakers manufacturing cars in the United States to make major inroads and Hyundai is far from being the only beneficiary of that with Japanese automakers like Toyota and Honda doing quite well in addition to Hyundai.

Another sub-problem is the language and time zone differences, both of which present logistical issues with a firm that operates both in the East and the West at the same time. However, this is far from being a problem unique to Hyundai or even the automotive industry, but it must be dealt with nonetheless. A related concern is the different societal and cultural norms that are entirely different between the two regions and countries and how those two different cultures can interact and meld together to form a corporate culture of mutual respect and form a single profitable corporate entity.

Chapter II - Methodology

Data & Sources Used

The research for this report is a good blend between qualitative and quantitative data. The quantitative data is useful to ascertain how Hyundai has fared with each of ventures. For example, Hyundai's automotive sales performance can be compared between how they did when they made their cars in Korea, how they did when they were made in Canada, and how they have done since the Montgomery plant was opened. It can also be compared how Hyundai did before the Great Recession and how they have done since then or any other number of time horizons and windows.

The qualitative data is useful because cultural and social struggles including battles with unions, culture clashes, different corporate/HR practices and so forth cannot really be defined or explained using statistics alone and even those statistical trends have to be explained in qualitative terms because the numbers alone do not come close to telling the story as to what is going on and why. For example, those looking at car buying trends from 2005 to the present would almost see a sharp uptick in purchases of Hyundai and Kia cars, especially since 2007, and wonder why that might be. Some might point to the recession and suggest that it was because of people wanting to spend less on cars but that is not something that statistics alone would reveal or confirm. It could also be that anti-foreign car people were relaxing their viewpoints or it could be that people liked the design of newer Kia or Hyundai cars as compared to before or it could because of gas prices spiking so sharply from 2008 to the present and so on and so forth. The point is that there are entirely too many dimensions to just look at a sales repot and just easily identify what is going on because that is simply not rational, let alone true.

Even so, using qualitative data can be a bit dangerous and chaotic as it is much harder to make qualitative presumptions and theories that are based on reality and that can be definitively proven. However, it is not impossible and it is often entirely possible to show a correlation between a quantitative outcome and a qualitative theory through the use of surveys, interviews and so forth that can confirm the hypothesis at hand or disprove it. The key is to not make any brash or unfounded/unsupported assumptions and to make sure that the qualitative and quantitative results are both effectively and properly garnered and that they truly do point to the same single (or series) conclusions and outcomes.

Assumptions

This study and literature review was conducted using a number of broad or specific assumptions. The first of those assumptions is that scholarly community, those articles and research stemming from academic and scholarly/peer-reviewed journals are a good source of data for analyzing the questions within this study. This may seem like a non-starter but a lot of doubt is sometimes cast on the academic community due to their alleged disconnection and/or aloofness as to what is really going on in certain situations and dynamics and/or how reasonable it is to undertake certain efforts and tasks when running a business that is both global, national and local all at the same time depending on the situation. However, the author was care to select proper articles with proper viewpoints relative to this study and what was being researched.

Another assumption is that the broader performance and management structure as portrayed to the public is at least somewhat complete and accurate and not mishmash of random events and goings-on and/or an outright lie as compared to what is trying going on behind boardroom doors. Since major moves and changes with a public company are typically revealed to the public in some manner or form, this is assumed not to be an issue.

Limitations

There are a couple of limitations that presented themselves. While they could have probably been overtaken if the study was given more time and/or more latitude, the author decide against going too deep down the proverbial rabbit hole. One such limitation was to conduct interviews with employees from both the United States and South Korea so as to ascertain just how well the strikingly different cultures meld together and how that manifests itself from a management and human resources perspective.

Another limitation, as partially noted in the assumptions, is that scholarly research about firms or practices is not always in line with reality in a lot of cases and some research and studies assign motives and patterns that are either not there or that paint an incomplete story of what is actually going on. This report will avoid that being an issue by keeping things at least fairly broad rather than drilling down too far and thus mucking up the conclusions that can be drawn.

Lastly, a limitation that exists is the potential (even if unproven) if biases about car manufacturers perhaps pervading into the research done relating to intercultural issues with firms that are foreign to the United States but yet operate prolifically in the United States rather than the other way around which is usually looked upon much more favorably. This was not assumed to be the truth and the true state of affairs, but it had to be kept in mind as a possibility no matter what since the chances of such a bias is obviously there. Politics and nationalism can stain anything and that includes scholarly research.

Chapter III -- Hypothesis & Research Questions

Hypothesis

The hypothesis that shall be offered for this report is as follows:

Hyundai, despite some definite and voluminous challenges relating to language, culture and distance, is able to effectively run a car company and build its brand within the United States

Research Questions

As for the research questions that are to be offered for this assignment, there are a couple.

1. Is Hyundai using the best strategies it can to avoid nationalistic marketing and PR campaigns that can be used to help Hyundai and Kia cars lose their luster?

2. How can Hyundai effectively manage and control the clear and present differences and variations between cultures in the United States vs. that of South Korea and vice versa?

3. How can Hyundai best manage potential or actual intercultural issues that it encounters during the daily course of its daily business?

Chapter IV - Literature Review

One interesting nugget that was find fairly early on in the research done for this study is that not all foreign-origin car companies that operate within the United States operate in the same general fashion. Indeed, a study done that was reviewed by the author of this report did a comparison of Hyundai and Toyota and made remarks and observations about symmetric and asymmetric leadership cultures within car companies. The leadership styles of the two firms were found to be very different when compared side by side but yet both companies take these distinctly different leadership styles and still mostly succeed. It speaks to the fact that even if a firm is foreign in origin to a market it operates in, there is no single leadership structure or style that is the end-all, be-all of operating a firm with a profit and in an effective way. To discover that this all holds true even when talking about a multi-national companies is an interesting observation for the study's author to confirm (Shim & Steers, 2012).

Another study looked at Hyundai's entry in the market of the Czech Republic. One of the main observations that the author of this report found fascinating was the statement that "the global is produced local." This may not really hold true for Chinese goods being produced in China and imported around the world but it certainly holds true for Hyundai's operations in areas like the Czech Republic and the United States (Macha & Drobik, 2010). Another treatise covered both Hyundai and Kia and it was noted that in 2008 there was a bit of a turf war between Kia and Hyundai in the aftermath of Hyundai getting a controlling stake in the company, which included the firing of Len Hunt, the CEO of Kia Motors up until that point, as well as Ian beavis, the marketing Vice President. It was the third major shakeup at Kia in as many years, but the executive musical chairs pretty much ended after that ("Culture Clash," 2008). A similar happenstance occurred in the pre-Kia days as well (Greenberg, 2002). However, the culture fracas that occurred in 2008 was muted by future initiatives such as the one undergone even before the Kia/Hyundai spat in 2005 when Hyundai made it a point to tell employees that they should learn about other cultures. For example, employees in Seoul, South Korea were urged to learn about the culture and people of countries like India. Some employees were lucky enough to take field trips to learn about other cultures. As such, it's clear that Hyundai was well-invested in multi-cultural ideals before their acquisition of Kia (Thorpe, 2005).

That all being said, it is fairly clear from the literature that leadership styles and culture in general is a lot different from South Korea to the United States. For example, it was observed in a 2008 article that leadership styles in South Korea are often much more authoritarian than in the United States. This can obviously present a potential issue as Hyundai operates extensively in both countries. At least in 2008, Hyundai's leaders were apparently very much "do what I say or else" type of leaders (Welch, Kiley & Ihlwan, 2008). Hyundai's succession planning, even as recently as 2010, has been subject to chaos (Pesek, 2010).

The aforementioned clash between Canadian and Korean culture that occurred when Korea tried its experiment in Canada prior to moving to Montgomery, Alabama is also confirmed via the literature (Sang & Young, 2005). A related article noted that the setback in Canada led to Hyundai starting with a fresh approach in India and, later on, the United States with much success (Lansbury, Seung-Ho & Chung-Sok, 2006). Hyundai has also acclimated and customized its cultural and leadership approach based on the subsidiary that is in question. For example, an article noted that Hyundai Motor Company and Hyundai Heavy Industries Company Limited are ran rather differently even though they have the same corporate parent (Sang-Hun, 2006). As far back as 1996, Hyundai and other foreign car companies operating in the United States were lauded for their effective mobilizing of resources and effective cultural interactions with their American components (Lee, Lee, Kim & Lim, 1996).

Another study made it a point to observe that Hyundai has been able to operate under two entirely different cultural and societal environments but yet get strong results from all relative environments despite these differences rather than only succeeding in one or the other and/or trying the same approach at all locations. It is clear from these observations that Hyundai has been customizing its cultural and leadership approach, at least in part, based on cultural and societal differences rather than trying to fit a proverbial square peg in a round hole (Hyung & Jong-Sung, 2011). The United States strategy seems to be working so well that Hyundai is churning out cars at maximum capacity and there is now talk of building another United States factory, although nothing is confirmed thus far ("No New Plant," 2012)

Chapter V -- Discussion & Recommendations to Management

It is clear based on the results of the literature that Hyundai is doing a fairly good job of aligning themselves with the commonly held facets and parts of making a global business venture work for the betterment of all of its workers, both in the United States and in South Korea. Hyundai's habit of not emphasizing its ties to South Korea within the United States is a good idea, both in theory and in real-world practice, because it emphasizes the fact that their focus is on building quality care and on building their brand. This is what investors are seeking and this is what Hyundai and its subsidiary Kia tend to deliver.

Even so, nationalism and pandering is prevalent in the United States marketplace and the pressure of things like unionization and "Buy American" are always on the horizon but Hyundai (at least thus far) has been able to avoid unionization of its plants and they are able to fall back on the fact that a lot of the people, tax revenues and what not that are involved with Hyundai's and Kia's United States operations stay within the United States due to reinvestments in the United States infrastructure as well as via the salaries and benefits paid to the employees that work for Hyundai and Kia within the United States in three states alone from their corporate operations not to mention all the Kia and Hyundai dealers that are able to make a living. Even if those dealers and parts sellers are not directly affiliated with Kia (and they are usually not), much of the same conditions and rules apply.

If there are some recommendations that the author of this report would offer to Hyundai, at least as it pertains to intercultural issues, there would be a total of three. First, the intentional avoidance of playing international politics with marketing and daily operations is a wise idea and it should continue. If another car company or organization (or even a politician) plays that card, they should respond by noting the facts above about Hyundai, albeit a non-U.S. firm, operating and paying a ton of people and manufacturing all of their cars within the United States rather than having the cars made elsewhere which they could probably do at much less expense.

Another recommendation is to open another plant using the patterns and practices used and currently being used at the Montgomery plant. Hyundai's ability to grow will be stifled if this is not done. Either that or the Montgomery plant needs to be expanded to allow for more production output. Lastly, management needs to continue to market to the social and car-buying trends of the American public because that is who they are selling to. American-sold cars needs to be designed specifically catering to the American consumer. Both Hyundai and Kia are certainly doing that now through its design and marketing strategies, such as the hamster ads for Kia, and they need to continue.

Chapter VI - Conclusion

In closing, it is clear that Hyundai faces a litany of challenges and potentially damaging cultural and societal situations but they are currently weathering that storm quite well. Even so, the literature (both scholarly and non-scholarly) that exists out there confirms that they must remain on top of things and remain ever-vigilant about the cultural and societal traps that Hyundai can fall into if they are not careful.

As long as they continue to be careful and are cautious to not violate any social or cultural norms, either in their home country of South Korea or in the United States itself, they should do fine. When watching any Kia or Hyundai commercial, it is not readily apparent that they are a foreign-based car manufacturer. This is not to say that they are hiding this fact but they have no basic need to advertise what they are given that the majority of the car companies that sell cars in the United States are owned, in whole or in part, by foreign corporate entities and that actually includes American car company stalwart Chrysler at this time.

Even with that question does come up, Hyundai can point to the fact that their main source of completed cars come from a source that is domestic to the United States and that is something that lot of other foreign-source car companies cannot say. However, other foreign car companies like Toyota and Honda do much the same thing, or at least manufacturing in Western plants in countries like Canada or Mexico if they do not manufacture their cars in the United States.

All in all, it is clear that Hyundai is here to stay, at least for now, in the American automotive marketplace and much can be said about Kia as well. A lot can change from year to year and decade to decade but both Kia and Hyundai are most definitely on the upswing in terms of quality and sales and they should obviously do well for themselves if that trend continues in the future.