External Analysis Traditionally, Western Europe, the United States, and Japan dominated the auto industry.

However, by the early 2010s, the China, India, and South Korea joined these regions as top auto markets. Eastern Europe and Latin America also represented emerging markets (Pearce, 2013).

General Assessment of Environment Economic. The U.S. consumer confidence index is an indicator to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending (Wikipedia. n.d.). People will generally postpone buying expensive products like new vehicles when the consumer confidence index is low. Consumer sentiment is expected to increase during the next few years (see table 1), so it will create a potential opportunity for the Hyundai Motor to increase sales. Sociocultural. The growing worldwide environmental movement prompted automakers to do more research and development to focus on developing electric-gas hybrid vehicles to cut exhaust emissions and increase fuel efficiency (Industry report: Car & automobile manufacturing in the US, 2014). These eco-friendly vehicles will create opportunities for the matured industry to become revitalized and increase sales and profit to Hyundai Motor Company. Global. The automotive industry in South Korea, China, and India is currently going through impressive growth. In 2010, emerging growth marketsSouth Korea, China, India, and Eastern Europeaccounted for slightly more than one-half of the 73.2 million light vehicles sold worldwide compared to the worlds mature markets, led by the U.S., Western Europe, and Japan (see table 2). Since then, emerging markets have extended their lead in the global sales with 52% in 2011, and 54% in 2012. This trend is expected to continue (The global auto industry shifts its

focus to overseas and emerging markets, 2013). Although Hyundai Motor Company is part of an emerging market, which is growing well, Hyundai Motor has to compete against companies in growing emerging markets as well as in the worlds mature markets. Therefore the general environment of globalization will be a threat to the firm.

Porters 5 Forces Analysis Threat of new entrants. Due to high barriers of entry, the threat of new entrants is low for the automobile industry. The industry utilizes a large economy of scale due to maturity, which makes it difficult for newcomers. Product differentiation is high due to the competition within the industry. Large capital investments are required to enter this industry. Switching costs are high because switching from one project to another needs investment. Moreover, there are many government policies regarding the industry, such as pollution and emission guidelines on each automobile. Threat of substitute products or services. The threat of substitutes for the automobile industry is moderately high. Customers will switch to substitutes in response to price increases and their usage needs for the product. The substitutes for cars are public transportation, motorcycles, bicycles, airplanes, and walking. Public transportation, bus or train, has limited usage opportunities due to fixed routes. Motorcycles are just as expensive as cars, but they are limited to carry only one or two passengers. Bicycles are inexpensive compared to autos; however, they do not provide speed like autos. It will take more than double the time compared to cars to get to the destination. Airplanes are capable of traveling overseas; however, they are more expensive and their routes are limited. Also, one needs a means to get to and from the airport. Walking is great for short distances, but it is hard for long ones. Although there are many

pros and cons for each substitute, there are many different transportation methods to choose from, which makes the threat of substitutes high for the automobile industry. These substitutes have been options for many decades, but the automobile industry has not suffered because of them. Therefore, the threat of substitutes is moderately high. Bargaining power of suppliers. Suppliers of the automobile industry maintain a relatively low bargaining power. Generally, relations between manufacturers and suppliers are strong, and this causes a high switching cost. Hyundai Motor Group has many subsidiaries such as Hyundai steel, parts-maker Mobis, and there are also many different suppliers. This lowers suppliers bargaining power and gives manufacturers many different options to obtain their parts. Bargaining power of buyers. The buyers maintain a very high power in the industry. Because this industry is highly saturated with manufacturers, consumers have many options when purchasing a car. With so many different manufacturers offering similar products, consumers force the manufacturers to fight over their business. Dealerships also have a minor pull; they just want to sell the brands that will earn them the most profit, and they want to sell multiple brands, not just one. Rivalry among existing firms. The intensity of rivalry among existing firms is high. There are several companies and brands to choose from, as well as various styles and lines of cars. For example, the 2013 U.S. market share of the worlds big 8 automakers is as follows: General Motors (18%), Ford (16.1%), Toyota (14.2%), Honda (9.7%), Nissan (6.9%), and Hyundai (5.7%) (Young, 2013). The automobile industry is in the mature stage of life cycle (see table 3). There is good evidence for this: the market for midsize and big cars has been contracting, and industry operators have improved production efficiency (Industry report: Car & automobile manufacturing in the US, 2014). In a mature industry, differentiation between

competitors has a small impact on sales. Although there is high differentiation, there is only so much that companies can do to distinguish themselves from one another. Therefore, the competition to be different and stand out is fierce.

Appendix A

Table 1.

Source: IBISWorld. Car & Automobile Manufacturing in the US. 2014. PDF file.

Table 2.

Source: Standard and Poor s NetAdvantage. The Global Auto Industry Shifts Its Focus To Overseas And Emerging Markets. 2013. PDF file.

References Pearce, L. (2013). Motor vehicles. Retrieved March 6, 2014, from Gale Business Insights: Essentials website: http://bi.galegroup.com.libproxy.utdallas.edu/essentials/ Standard and Poor s NetAdvantage. (2013, September 25). Special report: The global auto industry shifts its focus to overseas and emerging markets. Retrieved from http://www.standardandpoors.com/ Consumer Confidence Index. (n.d.). In Wikipedia. Retrieved March 7, 2014 from http://en.wikipedia.org/wiki/Consumer_confidence_index Young, A. (2013, December 24). [December US Auto Sales preview]. International Business Times. Retrieved from http://www.ibtimes.com