Hyundai Heavy Industries Co., Ltd.
Introduction
HHI is among the largest shipbuilding company in the world. Its headquarters are in Ulsan, South Korea. Chung Ju-Yang founded the company in 1972 to serve as one of the divisions of the Hyundai Group. It managed to finish building its first ship in 1974 and in 2002 it spun off from Hyundai group. Currently HHI deals with; ships building, offshore and engineering, industrial plant & engineering and Engine & machinery. Ship building industry involves the operations carried out during construction of ships and any other vessel that floats on water, ship building operations take place in a specialized facility referred to as a shipyard. The roots of ship building history can be traced back to ancient times even before history begun to be recorded. Over time ship building is an industry that has suffered from the global rules absence and has also been used by countries such as Japan to rebuild their industrial structures. South Korea which is the mother country to HHI made the shipbuilding industry an important key player of the economy of the country. The strategies put in place by HHI has helped the company emerge and remain at the top of the industry for a long time.
In 2017 the shipbuilding industry GDP increased with a growth rate of 3.7% which was its highest increase since 2011. According to research conducted by OECD the GDP of the industry will continue to gain further strengths in 2018 & 2019 if the growth rate will be 3.9% annually. In 2017 it was predicted by UNCTAD that the worlds seaborne trade would rise by 2.8%. However, an upswing in shipping demand may not bring about a rise in the number of new ships constructed and vice versa (Steidl, Daniel, & Yildiran, 2018). The shipbuilding industry is an industry that has to undergo a process from growth to recession. The life cycle stages of the shipbuilding industry are divided into four stages. The first stage is the initial stage, the growth stage, mature stage and decline stage. These life cycles constitute of important external environment of enterprise, economics and management that has made scholars interested in studying the theory of life cycle of the shipbuilding industry (Xinhua, & Yujing, 2014).
Porters Five Forces model can be described as a simple but powerful tool to understanding the competitiveness environment. Scholars have presented many tools to analyze the competitive environment of an industry, these tools are game plan, Value Chain Model and PESTEL but in this case it is more preferable to use the Porters five force model, the competitive forces are the threat posed by new firms entering the industry, the power that has been allocated to the buyers, the power that suppliers hold, the market threat that is posed by substitutes. Lastly, the existing rivalry between the companies already existing in the market. These forces are responsible for determining the average level of expected profitability in the industry. The strengths if these forces are inversely proportional to the process and profits to the extent that a weak competitive force is taken as an opportunity and while a string one is interpreted as a threat (Sung, Samuel, Mahasuwan, Pupipat, & Shanna, 2009).
For many years Korean shipbuilders have been on the lead when it comes to shipbuilding. They have offered cost effective, high quality vessels and now China is advancing and closing the gap that exist between them and Korea, their business rival. Globally, the ship building industry is geographically divided. The industry is concentrated and the majority of the market shares are taken by China, Korea and Japan. Rivalry in the shipbuilding industry has existed for a long time in the industry, competition as a result of the rivalry has created an environment that is not disciplined. The firms in this industry are not similar in their dealings and their profits differ due to geographical locations that have different economic conditions. The product differentiation is low thus bringing about high competition. The high investments made while entering the industry make it hard for firms to leave the industry (Sung, Samuel, Mahasuwan, Pupipat, & Shanna, 2009).
HHI has 10 drydock, and a construction facility that are equipped with up to date technologies. With this infrastructure. Each of the drydock is designed to build certain ships The Gunsan drydock can managed to build about 20 ships per year and its equipped with the latest advanced technology. These resources are the core strengths of HHI. HHI has the largest number of drydocks compared to other shipbuilding companies, and its involved in building different ships (Hyun, 2015).
The human resource system of the company is well developed and designed. In order to develop their employees, they take them through certain programs. HHI has top strategic management course, business course that are undertaken in the top business schools (Hyun, 2015). The company also runs a learning institution, Hyundai Technical Education Institute (HTEI) that was established a few years after it finished building its first ship in order to educate and make their employees more knowledgeable in the various fields of shipbuilding but their competitors have also established their own schools that run different programs that suit the companies. Despite the many advantages the company’s distance from capital is a major problem for the company, in Korea the location of a firm is one of the strongest motivating factors. Closeness to the capital will help in recruiting and maintaining human resource since most of the productive population desire to work and live in the capital, their competitors such as SHI have managed to be located near the major capitals of the country (Hyundai Heavy Industries, 2015). HHI is also using high level technology in production in order to make their ships more environmentally friendly
Conclusion
HHI is among the largest companies in the ship building industry. The shipbuilding industry undergoes a process of growth and recession. The lifecycle of the shipbuilding industry is divided into four stages. The shipbuilding industry is analyzed according to geographical location instead of the number of firms. The Korean shipbuilding industry has managed to be on the lead for many years but their Chinese rival are closing in on that gap. The competition in the industry is high and it has created an environment that is not disciplined. The firms in the industry are diverse and thus different firms can accept low profits. Exiting the industry is had due to the barriers placed by the high investment made. HHI has the highest number of drydocks compared to their competitors. The human resource of the company is well developed, the company is also using advanced technology in order to enhance efficiency and environmental friendliness. The strategies being used by HHI have helped the company emerge at the top of the shipbuilding industry.
References
Hyun, L., (2015). Strategies for Improving the Competitive of the Korean Shipbuilding Industry: Case Study of Hyundai Heavy Industries. Retrieved from; https://commons.wmu.se/cgi/viewcontent.cgi?article=1491&context=all_dissertations
Hyundai Heavy Industries. (2015b, August 17). 2015 Half Term Report (Report). Retrieved from https://dart.fss.or.kr/dsab001/main.do?autoSearch=true
Steidl, C., Daniel, L., & Yildiran, C., (2018). Shipbuilding Market Development. Retrieved from; http://www.oecd.org/sti/ind/shipbuilding-market-developments-Q2-2018.pdf
Sung, N, A., Samuel, N, Mahasuwan, P, Pupipat, P., & Shanna, Z., (2009). Competition in the Shipbuilding Industry. Retrieved from; https://www.systemdynamics.org/assets/conferences/2010/proceed/papers/P1104.pdf
Xinhua, Q., & Yujing, H., (2014). Analysis of the Life Cycle of China Shipbuilding Industry.
