Hyundai Case Study
Hyundai Case Study
1. Time Context
Mr. Muhammad Soeparno was appointed by thegovernment of Indonesia to succeed Mr. Lumenta as President Director of GarudaIndonesia Airways on January 6, 1988. He had to announce his decision in frontof his head quarter’s employees during the monthly flag raising ceremony heldon the 17th of each month. Thus, the problem has to be solved on the 17thJanuary, 11 days after his inauguration.
From the first place, the problem was aroused fromthe new President Director of the company. And the person who has the abilityand authority to solve the problem was Mr. Muhammad Soeparno.
3. Major Policy Statement
Garuda Indonesia Airways was an airline company. Itwas the first airline company in Indonesia and was reported as the biggest inthe Southern Hemisphere. And since it was owned by the government of Indonesia,its basic goal is to support the success of the development of airtransportation and tourism of the country.
4. Background of the Case
Garuda Indonesia Airways was able to operate infull swing March 1, 1950 since the historical time an aircraft bearing theIndonesian flag crossed the skies carrying the name of Indonesian Airway. Itsflight network continued to expand encompassing all of Indonesia, Singapore,Bangkok, manila and was able to establish routes reaching Europe and Tokyo. Garuda continued to grow and gradually beganreplacing their propellered aircraft with full jets. In 1960’s, Garuda had beenthe only airline operating the domestic routes. However, such monopoly positionhad failed to help the company to grow because the Indonesian economy had beendeteriorating during that decade. In 1966, the New Order Government took over Garuda(Soekarno) as it was going
through difficult times and was unable to contributetowards national development. The result was a sustained period of high growthin the economy. The oil boom in the early 1970’s generated a highereconomic growth for Indonesia and for this in turn sustained passengers growthfor Garuda. In 1979, the improvement works are done on runways in majorairports (Supono). And by this time, Garuda experienced another breakdownbecause of its poor services and coincidence of almost simultaneous delivery ofairbuses and a decline to the number of passengers. And these problems wereresolved partly on 1984 (Lumenta).
5. Environment Analysis
A. SWOT Analysis
· Garuda Indonesiamonopolizes the use of jets
· It wasproclaimed as the biggest airline in the Southern Hemisphere · It has twosubsidiary companies, one providing airline catering in the three majorairports in Indonesia and the other running a chain of resort hotels. · Garuda wasconsidered that has much below rates that offered by Asia’s more popularairlines like Singapore, Thai International, Japan or Cathay Pacific. Weaknesses
· Systems in allaspects: sales, preparation, flight, supervisory · The risk ofhaving the magnitude of the debt servicing · Inefficiency ofits international operations
· The company’sorganization is still unsteady that makes the organizational behaviorincompetent in supporting the company Opportunities
· Political willof the government in tourism
· The still-abundant-availableseat capacity
· The economicgrowth of Indonesia
· The moreincreasing competition
· The uncertaineconomic situation
· The bureaucracywhich still caused problems in managing company professionalism
The directcompetitors of Garuda are Singapore, Thai International, Japan and CathayPacific Airlines. These airlines are more popular than Garuda and offer alittle higher cost than Garuda. They render services better.
6. Present Company Departmental Plans
A. Product Planningand Development- expansion of flight network and improvement works on airportsand runways B. Market Planning-it serves for all passengers
C. FinancialPlanning- no definite financial planning presented D. ProductionPlanning- it acquires new equipments and aircrafts by buying E. ManpowerPlanning- good performance of the staff
F. Organizationalplanning- good implementation of strategies
1. Background of the Problem
It was in 1981 that Garuda proclaimed as thebiggest airline in the Southern Hemisphere and has reported a net loss of U.S.$ 46 million for the year ended December 1983 leaving Mr. R.A.J. Lumenta, thenew President of Garuda, debts amounting to U.S. $ 1.3 billion at 12% interestper annum. Mr. Lumenta adopted a strategic thinking in making plans to turn thecompany’s situation around including Garuda’s lack of competitiveness inservice, visibility and distribution. And so, he almost did, and then he was replacedby Mr. Mohammad Soeparno.
2. Statement of the Problem
How would Mr. Mohammad Soeparno maintain Mr.Lumenta’s eager in resolving the company’s problem which would enhance thecompany’s ability to deal with the challenges it may face during his term andbeyond?
3. Statement of Objectives
The company, after addressing the root problemshould achieve and expect the following objectives: a. To improveGaruda Indonesia’s internal control especially in policy of setting a newmanagement team of the company. b. To develop thecompany’s plans in addressing the maintenance stability of the company. c. To be moreresponsive to the market demands and to be adept
to adapting those changes. d. To keep ahead ofthe competition intoday’s age of modern air travel. 4. Areas of Consideration
The areas of consideration in solving the probleminclude the history of the company’s management and their standing under eachmanagement, the outside environment of the company and their competitors.
5. Alternative Courses of Action
A. Mr. Mohammad Soeparnoshould continue the policies what Mr. R.A.J. Lumenta has contributed as aresponse to the increasing uncertainties of the company. B. Mr. MohammadSoeparno should formulate a new set of policies for the company to attest hisworth as the new president of the company. C. Mr. MohammadSoeparno should decline from the position.
6. Analysis of the Alternatives
A. Continuation ofthe Policies
· There is a less possibilityof risk because the policies are proven to be effective. · Mr. Soeparnowould be tested to flexibility since the policies were not his own. · The policieswere already given the company a good response on the uncertainties in and outof the company. Disadvantages
· The existingpolicies might not be successful to be carried out by Mr. Soeparno. · There might be agap between his understanding about the policies and the understanding of theperson who originally formulated them.
B. Formulation ofNew Policies
· Mr. Soeparnowould prove that he was worth of the position he was given. · Formulation ofnew set of policies means that there is a chance of gaining more respect fromthe company organization. Disadvantages
· The new set ofpolicies might not be effective as the old policies
the company currently has. · The company wasnot ready to for new set of policies. C. Declining fromthe Position
· Mr. Soeparnowould feel less responsibility in the company’s fate. · Mr. Soeparnowould feel not pressured.
· Mr. Soeparnoshows that he is not competitive and not worthy of the position. · Mr. Soeparnowould feel disappointment from the organization.
7. Decision Statement
After analyzing the alternative courses of actionpresented above, it showed that the best was the first alternative. It isbecause aside from it generates more advantages than the others, it also showsthat the company has already been attached to it and the result was not onlygood but better. The existing policies managed the company to stand again fromits depression. The other two alternatives were also be solutions but they areonly getting the company into risk again.
1. Action Plans
A. Long-term ActionPlans
a. Garuda’simprovement in implementing its strategy regarding its structure, system, style (leadership), staff andskill. b. Garudahas to keep up with the changes in the internel and external environment. B. Short-termAction Plans
a. Sustenance of the policies to maintain theproductivity of the company. b. Improvement ofsome of the policies for more enhancement of the company’s productivity as awhole.
2. Proposed CompanyOperational Plans
A. Product Planningand Development- periodically infrastructure improvements for better services B. Market Planning-it serves for all passengers and reach for them perfectly with high hospitality C.
FinancialPlanning- sells theunproductive assets
D. ProductionPlanning- it acquires new equipments and aircrafts by buying E. ManpowerPlanning- good training system will be conducted regularly for better outcomesfrom customers and organization F. Organizationalplanning- better implementation of the policies and strategies of the company
3. Other Problems and Proposed Solutions
Garuda should have a good training system and have some strength in increasing customer satisfaction. Domestic Airline Competition
Indonesia people still look at “price” as a determinant variable. So the lower price strategy that has been implemented by its competitor, the new comer firm could disturb Garuda market. Garuda could loose its loyal customer. So strategy that must be done by Garuda is by improving its quality service. Securiry Issue
Garuda have to respond to the terrorist attacks by improving procedures and aircraft security to help restore travelers’ confidence. Even, it means price, but it is very useful for Garuda’s future. Safety and security is the most important thing that are needed by the passenger.
1. Time Context
The problem has to besolved in the year 1989.
Mr. Chung Ju Yung theowner of the Hyundai group has the ability and authority to solve the companyproblem. 3. Major PolicyStatement
The Hyundai group featuredas one of the principal engines of the Korean economic miracle in the past twodecades. The Hyundai group makes a
wide range of products- ships, bridges,cars, cement, steel and etc. They do not only prosper there in Korea but alsoin Middle East. They even gained praises from New York Times correspondent. 4. Background ofthe Case
Hyundai Company wasfounded by Chung Ju Yung in 1967 and immediately partnered with the ford motorcompany to produce the Cortina compact car in 1968. Hyundai focused onmanufacturing quality economy cars and began exporting excel to the Unitedstates in 1986. Today Hyundai consistently ranks among the top quality importcars in the U.S. Hyundai group manufacture products such as ships,bridges, buildings, cars, cement, steel, chemicals, oil drilling platforms,microchips, sneakers, pipes, furniture and locomotives. In early 1980’s hedecided to make Hyundai a factor in the electronics industry, focusing at firston production of semiconductors. Later Hyundai become the largest automobilemanufacturer in Korea. For Hyundai to grow as an extension of its founder’spersonality it is not surprising that the management style in the organizationhad always been authoritarian.
Hyundai group covered all kinds of industry. Itis involved in ship building, construction of bridges, cars, otherinfrastructure, steel, cements, oil drilling platforms and even manufacturingof microchips and became the largest enterprise in South Korea. Management
Theprojects and activities of Hyundai is headed by its owner Mr. Chung Ju Yung andmanaged by his surviving son Mr. Chung Mong Ku. It is also said that part ofthe private enterprises in Korea are open to the government, thus the presidentis also responsible for the management of Korea.
5. Environmental Analysis
a. SWOT analysis
1. Strong Domestic Market
2. Good Quality of products
3. Cheap labor cost
1. Poor management style
2. Making poor investment decision
Middle East warm welcome to Hyundai gives them a good start in international business. The Government sees Hyundai with a good impression.
1. The competitors of Hyundai have grown rapidly forthe past year.
b. Competitor analysis
The competitors ofHyundai Group are Samsung electronics and Lucky Gold star which had made asuccessful transition to large scale chip production. Hyundai Electronicsperformance had been a disappointment, losing $11.9 million. Rivals have largeelectronics subsidiaries. Another competitor of Hyundai is the Daewoo. Daewoois the supplier of the successful leading edge computer. 6. Present CompanyDepartmental Plans
a. ProductPlanning and Development
The Hyundai groupplanning to put their products to the construction of buildings. To Korea or toother countries. b. MarketPlanning
The plan is designatedto domestic and foreign country.
The financial is comefrom in the land of Chung Ju Yung. And from the help of the other business manwho helped him.
Hyundai company doesnot only focus on production of cars but also other projects such as governmentconstruction of bridges, cars, ship building, other infrastructure, steel,cement, oil drilling platforms and even manufacturing of microchips. e. ManpowerPlanning
Hyundai company hasseparate workers for car manufacturing for road construction. f. Organizational Planning
Hyundai company isowned by Mr. Chung Ju Yung and managed by his surviving son
Mr. Chung Mong Ku.
1. Background of the problem
The problem of HyundaiGroup was deemed to start in 1987 when it has experienced a loss of 11.9million dollars. They have invested in Silicon Valley project which was seen tobe a loss even at its proposition. Hyundai tried to jump to the productionsophisticated one-megabit dynamic random access memory chips instead ofpursuing the market for 256K. They are said to be not fully committed to hightechnology. They only see semiconductors just as an accessory but not assomething to be done because competitors are doing it. 2. Statement of the Problem
Whatchanges in management style should the top management adopt to satisfy theneeds of the workers on strike and so as to break the series of uprising?3. Statement of Objectives
Hyundai Group of companies would like to:
Ø Ceasethe uprising of the employees of Hyundai Group.
Ø Toregain the trust of the public to the firm especially to its chairman Mr.Chung. Ø Toget back the shattered hope of peace and unity among all nations that wascaused by Hyundai’s unpeaceful solution to the conflict. 4. Areas of Consideration
· In Korea, the private sector played animportant role in Korea’s economic development. They are interdependent with anumber of other forces such as government, economic and non economic factors. -Fulleighty percent of Korea’s economy is open and heavily dependent on theinternational economy.
5. Alternative Courses of Action
Ø TheHyundai top management should amend their present “authoritarian” style of leadershipto another style which is more employee-friendly. Ø Hyundaishould just give the employees the increase in wage that they are demanding. Ø Fullydetach Hyundai from the government influences.
6. Analysis of Alternatives
1. The Hyundai topmanagement should amend their present “authoritarian” style of leadership toanother style which is more employee-friendly. Advantages:
· This would improve the relationship ofthe employee and the management subsequently. The daunting ways of the chairmanto the people will be eliminated. · The trust and the confidence of theemployee of Hyundai would be recaptured by the management. Disadvantages:
· This would require great adjustment tothe part of employees also because almost all of the companies in Korea followauthoritarian type of management.
2. Hyundai should justgive the employees the increase in wage that they are demanding. Advantages:
· This alternative would terminate theuprising of the employees abruptly. · This would create a better image for thecompany immediately. Disadvantages:
· The company is not sure if they cansuffice the financial needs if they would provide the increase in wages. · This act will only tolerate theemployees. They will think that with a strike, they can easily get what theywant from the management. 3. Fully detach Hyundaifrom the government influences.
· Hyundai will be free in deciding fortheir own.
· No one will hinder decision of themanagement
· Hyundai will lose financial support
· Hyundai will lose much of its projects
Thebest alternative is alternative # 1.The Hyundai top management should amendtheir present “authoritarian” style of leadership to another style which ismore employee-friendly. In this way, the company
would not require to spendmuch money but it would change its imageto the employees. Most of the time, the management forgot the needs andcapacity of the people. Now if they will try another style of leadership whichunderstands their employees. The employees would feel that they are loved andrespected by their management so theywill love and appreciate the work that they are doing.
1. Action Plan
• Long-term Action Plans
Tochange the management style of Hyundai so as to change its image to the publicand its employees. This way Hyundai will be able to regain its reputation tothe market. • Short-Term Action Plans
To stopthe uprising temporarily by the help of the government. The deployment of powerby the government will create an effect that would stop the uprising.
2.Proposed Company Operation Plans
Product Planning and Development-
Studies show that it’s muchbetter if Hyundai would focus on a certain venture and develop it.
They established good name in theMiddle East so it is better if they expand to another foreign country andestablish a new market there.
Since they experience loss frompast, it is advisable for Hyundai to loan in banks. Production Planning
Proper training should be givento the people in production department to come up with good quality products. · Manpower Planning
The management should know how toreinforce their employees. One of which is giving incentives and benefits. · Organizational Planning
Previousmanagement would still be the future component of organization.
Other Problems and Proposed Solution
· The diversified needs and wants of employees
Conduct survey or questionnaires regarding the employees wants and complaints about the management.