PESTEL Analysis of Hyundai

Hyundai Pestel/Pestle Analysis

Hyundai is one of the leading automotive brands of the world which makes cars and SUVs that cater to the needs of various customer segments. From small family cars to luxury vehicles and SUVs, Hyundai has a quite large product portfolio. Its cars are popular in nearly every corner of the world from US to Asia Pacific. Apart from that, the brand is also known for its advanced manufacturing and distribution capabilities. Hyundai has a strong brand image which has been created through years of trust. Now, the brand is focusing on environment friendly vehicles. Asia is its stronghold where the brand has grown its presence over years. Some of its models like i10, i20 and Creta have been highly popular in the Indian market.

Its Sonata, Elantra and Santa Fe models have been highly popular in the American markets. Apart from that its high focus on technological innovation is also helping it grow its brand and revenue faster. In 2016, Hyundai saw strong sales worldwide with highest sales in Asia.  However, since Hyundai is a global brand that subjects it to various kinds of pressures. This PESTEL analysis discusses how these various forces impact Hyundai and its business all around the world. PESTEL is an acronym for Political, Economic, Social, technological and legal. These are important forces that can affect the growth of large and global businesses.

Political:

The political factors have kept growing in importance in 21st century. Increased governmental oversight of businesses and higher controls have kept making the business environment complex. Apart from various forms of taxes, heavier oversight has resulted in higher pressure on businesses operating internationally. Political stability is essential for a stable business and economic environment. Otherwise politically unstable environments can lead to business disruption as well as financial loss. Chaotic or unstable environments can lead to supply chain disruption and problems with manufacturing and sales.

In most cases, friendly trade relationships with other nations leads to better business in those markets/regions. Unfriendly relationships can lead to higher taxes and greater oversight. So, overall political forces can have a direct impact on automotive businesses.  The political environment in the Asia pacific has remained generally stable leading  to rising sales and revenue for Hyundai from these markets.

Economic:

Economic factors too an have a direct impact on automotive businesses including Hyundai. Economic forces are some of the most important and powerful forces affecting businesses worldwide. The world has been through a period of bitter recession just some years ago. During this period, not just economic activity but buying power of the customers had also grown low leading to lower demand for automotives and lower sales. Several of the automotive brand required being bailed out with government help. Now, that the recession has passed, economic activity is back on track globally and this has eld to higher sales of vehicles and higher revenue. As economic activity surged, it also led to higher level of employment and higher dispensable income in the hands of the consumers. This led to increased demand for SUVs and luxury vehicles worldwide. Asian markets have seen very high level of economic activity since after the recession and that has led to higher sales of Hyundai vehicles in these markets. In this way, economic forces have a major and direct effect on businesses all around the world.

Social:

Social factors too have acquired a central role in the context of business and it is because of changing social trends that affect demand for certain products globally. If demand for the same product varies across different regions then it is normally because of the social or economic factors. Moreover, globally the demand for SUVs has grown including in the Asia Pacific markets. This is also a result of changing social trends. Social factors affect businesses in other ways too. They affect businesses’ marketing strategy.  Automotive brands are designing their marketing strategy to suit the local societies and cultures of their markets. Moreover, changing demographic composition of the world population is also affecting how people shop and the kind of products they buy. The millennial are more interested in stylish and technologically advanced models of cars and SUVs. They do not just want cars that fulfil their transportation needs but which also cater to their lifestyle needs. Changing lifestyles have affected how brands design their vehicles and their marketing strategies. Small family cars and SUVs have grown in popularity in the Asian markets including India.   

Technological:

Technological factors are a major force affecting the growth of businesses in 21st century. The new generation of customers is highly tech savvy and can judge a product before buying it.  They want cars that  are not just affordable but also environment friendly. However, a large number of them with enough financial strength are also interested in style apart from advanced technological features. It is why automotive businesses including Hyundai are investing a lot in research and development. Hyundai too makes a very large investment in R&D in several areas including AI, sustainable vehicles and automated driving. In 2016, it invested around 2,352 Billion Korean WON on research and development. Over the years, its spending on research and development has kept increasing. There is immense competition in the automotive industry which has led to brands investing more in technology and innovation. The race has kept intensifying and is expected to grow even intense in the future.

Environmental:

Environmental factors too have grown important in the 21st century. Nearly every country in the world has created laws to check the growing air pollution caused by fuel guzzling vehicles. This has led to higher pressure on the automotive businesses regarding vehicle safety and environment friendliness.  Environment related laws have grown so stringent that recently Volkswagen had to pay a really hefty price in Billions of dollars for trying to escape emission related laws in US. This is why every brand including Hyundai is focusing on developing hybrids and electrical vehicles, apart from  environment friendly vehicles that are low on carbon emission.

Legal:

The importance of legal factors can be understood from the fact that non-compliance can result in hefty fines worth billions of dollars. It is why the brands are careful about legal compliance and have large compliance teams that are dedicated to ensuring compliance in the local markets and regions. The example of Volkswagen proves that noncompliance can be costly for business brands. Moreover, the legal net has kept growing tight during the recent years and from environment to labor laws and several other areas laws have grown stiffer leading to higher oversight. It is why brands have to focus more on product quality, passenger safety as well as environment friendliness to remain competitive and be successful.

Conclusion:

In the 21st century, technological and economic factors have become highly important. Recession and economic fluctuations or fluctuation in currency exchange rates have a direct effect on the sales of automotive brands like Hyundai and reduce their revenue. Apart from these political and legal factors have also grown more important than ever in terms of international business. Global businesses also need a friendly political environment to do business profitably. A friendly political environment is more supportive and sees less disruption which is good for the financial health of international businesses. Moreover, global automotive brands like Hyundai must not underestimate the importance of legal factors in 21st century.

Sources:

Hyundai SWOT Analysis