Custom «Hyundai» Essay Paper Sample

Hyundai group was a fast growing group economically, but due to various problems that it faced over time, they continuously pinned it down. The group was founded by Chung Ju Yung in 1949 and due to strong leadership skills of its founder, the group grew well over years, expanding its services globally. The company expanded rapidly in various sectors and it was the most successful state guided capitalism supported by the government of Korea. The company recovered very fast from the Korean War overtaking all other companies that were affected including the government projects that took long to heal from the effects of the war. The company became number one in the domestic construction industry and very fast expanded overseas by improving their services to the overseas construction market and an example is the Thailand Express way Construction Project of 1965 (Kalab, 2008).

The Hyundai group started experiencing problems in 1997 when the Korean economy was hit by bubble flu. During this period, the group was overtaken by other small groups that were coming behind it like; Lucky Gold Star which is currently known as LG, Daewoo and Samsung among others. Due to Asian financial crises that led to fundamental changes in most companies, the government intervened in and implemented the Chaebol reform policy that eliminated all debts guarantees between affiliates and ban of cross shareholding between the affiliates, while other companies downsized to raise their financial structures. Hyundai took the opportunity to expand its business and with time it went ahead of those other organizations like LG semiconductor and Kia motors.

In the late 1990s, Hyundai expanded its services widely including the opening of the door of Panmunjom that had been closed for a half a century with the UN imposed armistice. In 1999, Hyundai’s affiliates started detaching from the main group to establish their own small groups like the Hyundai motor group. Family feuds began during this period; for instance, Chung Mong-Koo and Chung Mong- Hun who are both the founder’s sons were competing for the chairmanship seat because their father resigned during this period as the honorary chairman of the group.

The founder of the group Chung passed on in 2001 and this was the climax of problems whereby Mong-Hun inherited the group through the prince’s war and Mong-Koo the second son of the deceased took over the chairmanship of the group. Mong-Jun the sixth son leads the Hyundai heavy industry, Mongkeon chairs the Hyundai marine and fire insurance and Mong-il chairs the Hyundai finance corporation. Due to the sibling rivalry that came out between Mong-Hun and his brother Mong-Koo before the death of their father, led to the breaking of the conglomerate structure.

The Hyundai group was reduced into a small conglomerate following these family feuds and the death of the founder. The strong leadership of the group that Chung Ju Yung possessed could not be emulated by any of these sons who took over; this created a leadership vacuum in the group. The group suffered so many losses that led to difficulties in even making decisions. The group established its headquarters by the name, secretarial office to aid in central control, co-ordination of decisions and allocation of financial and human resources. It was also relied upon as the think tank that was involved in long range planning of the group’s business and enhancing its growth. The office weakened following the founders death and it was eventually dismantled leaving a large vacuum leadership throughout the organization (Davidson, et al., 2009).

Chung Ju Yung managed his business initiatives with a lot of motivation and an example is, when the company was entering into partnership with ship building industry, the group argued that ship building was similar to its core business of construction referring to the building of items. Although the argument looked stupid and simple, the Korea government gave a hand of support to the company (Alan & Mike, 2009).

Chung Ju Yung’s role of entrepreneurship was very important and rare. The leadership skills and the organizational culture that he was applying are very unique. This is the reason why after his death out of the many employees that were left behind in the organization, none of them could lead the group as he did. In his absence, Hyundai group dropped drastically and it is very hard for it to go back to its past.

Case Analysis

The Hyundai organization group has actually gone through various problems like family feuds and economic fluctuations. The main problem that led Hyundai group to dismantle completely is the family feuds. From the time the sons started fighting for chairmanship, the group’s financial status started going down. Immediately after the death of the founder in 2001, his family members started grabbing various affiliates of the group. They did not come into consensus or make appropriate decisions on which path to follow after the death of their father so as to continue running the organization effectively. One son inherited the Hyundai motor group, another one the Hyundai heavy industry, the next inherited the Hyundai motor group, another one Hyundai department store chain and kumgang development industrial and the other one leads the Hyundai maintenance and fire insurance. This division of the group broke its conglomerate structure completely. The support the group was enjoying from the government was cut because the group did not have future plans that the government could put hope in. for instance, the Hyundai Engineering and Construction Group that was once the symbol of economic miracle in Korea is currently seen as one of the businesses experiencing financial troubles in the nation. The Hyundai group dropped from position one during the time of Chung Ju Yung’s leadership to position five in the largest conglomerate in Korea with only nineteen subsidiaries (Kalab, 2008).

Other minor problems that faced the organization are; the 1997 Asian financial flu bubble that affected the Korea economy, affecting the Hyundai group as well. Although the government intervened through the reform policy that called for elimination of debt guarantees between affiliates ban on cross-shareholding between affiliates as well as reduction of debt to equity ratios to 200% and below.

 These experiences are better for countries like Korea because they will learn from them and avoid them in future. Next time a firm like Hyundai is being established in Korea with a person, who witnessed what happened to Hyundai, the same mistakes that Hyundai faced will be avoided.

Solution to the Main Problem

The solution to the main problem of family feuds could have been for the family members to sit down together and agree on appropriate precautions to take so as to take the Hyundai group to its past during the leadership of Chung. The group does not have to split into various parts for it to incorporate all the sons in its leadership. Instead one son can be the chair, the next can head the Human Resource Department, and the other can head the finance department and so on.

Another possible solution to this problem is to find out whether the founder Chang Ju Yung left behind a will that could clarify who was left for what in the organization. In most cases, if the will was left, it will clearly show what was left for who and this can help to reorganize the group so that it can pick up again.

The government can also intervene and ensure that the organization is under proper management. It should ensure that whoever given the responsibility of managing the organization follows the footsteps of Chung. These footsteps include the leadership that depends on the charisma of Chung that was cohesive, diverse business portfolio of sharing resources and good co-ordination, centralization planning structure with shared direction of goals and speedy communication through top-down command and homogeneous culture with shared direction and competitive pressure to achieve the goals set.

Solutions to the Minor Problem

The solution to the minor problem which was caused by financial flu bubble that affected the economy of the country would be the government to intervene through means like banning of cross shareholding between affiliates, elimination of debt guarantees between affiliates and reduction of debt to equity ratios at a certain percentage (Kalab, 2008).

Other Alternatives

The other alternatives that can be considered in picking up the previous standards of Hyundai group are; the government taking over the organization. The Korean government can decide to take over the organization from Chung’s sons at compensation of course and try to manage it the same way its founder was doing (Alan & Mike, 2009).

The government can manage it in a top-bottom fashion, under a centralized organization and employ a manager or director who will manage the organization under tight control of the founder’s principles that were applied in decision making processes of subsidiaries. All decisions like launch of new businesses and large scale investments should be done under the manager’s authority. Subsidiary managers should be given limited authority to make the decisions; otherwise it should be a top-bottom management action. All other aspects of homogeneous culture, centralized structure, and diverse business portfolio, charismatic leadership should be practised (Kalab, 2008).

Recommendations

The recommendations to this Hyundai organization are that; this was a very large group that the Korean government was proud of, as one of its own. The government should look for means of reviving the organization to pick up and prosper even more without considering the death of its founder. It is also wise for other organizations to be always prepared for uncertain occurrences like deaths of managers and directors. These organizations should always prepare other people as next of kins, so that just in case any thing like death or sickness begets the founders and other top leaders, they can take over their positions and run the organizations without difficulties. For instance, if Chung Ju Yung could have prepared someone like that, the organization could not have failed as is the case for Hyundai. In most cases, the best person to prepare is the deputy assistant or the vice as he or she is familiar with most of the organization’s programs and procedures of carrying out tasks (Kalab, 2008).

Another recommendation is for the Korea government to promote many organizations to develop to the level that Hyundai had reached before falling. If many organizations within a country have attained these standards, the falling of one will not affect the country’s economy so much. If Korea had several similar organizations to that of Chung, the failing of Hyundai could not have affected its economy so much, in fact if could have been even unnoticed. The befalling of Hyundai organization in Korea leaves the Korean managers and directors a challenge of competing globally to attain the standards of Hyundai, replace it or even pass it and get even better (Alan  & Mike, 2009).