Source: Fortune, January 18, 2010, p. 40-42
Hyunday benchmarking Toyota
How do the Koreans do it? In addition to getting big, Hyundai has gotten good. Once known as a cheap and cheerful brand that offered a comprehensive warranty to make up for mechanical shortcomings, Hyundai has become a respected name and a smart buy. 'Hyundai is a brand that is on the verge of being aspirational,' says New York-based consultant and investor John Casesa. 'People are saying they are proud to own it, not just to settle for it.' The evidence can be seen in the strengthening demographics of Hyundai owners. Last year some 49% were college graduates, compared with just 36% in 1999. By comparison, Toyota has a higher percentage of college grads – 57% – but the number hasn't grown much, up only two percentage points in 10 years.
Hyundai's success reflects a shift in attitude that occurred nearly a decade ago. In the 1990s the company was more interested in how many cars it could build than in how good it could make them. That changed in 1999 when founder Ju-Yung Chung passed corporate leadership to his son, Mong-Koo Chung. According to company lore, the younger Chung decreed that Hyundai would henceforth concentrate on quality, not volume. With the chairman behind the push, and with its characteristic intensity, Hyundai went after quality improvements with a vengeance.
Hyundai benchmarked Toyota, then the industry's quality leader, to understand its processes. It installed Six Sigma at its engineering center to measure its improvement. It made quality a cross-functional responsibility, with involvement from procurement, finance, and sales and marketing. It enlisted outside suppliers and put them together with designers and engineers to work out problems before they occurred. Quality oversight meetings, which had been poorly attended, became must-go events after chairman Chung began to show up for twice-monthly gatherings.
Source: Fortune, January 18, 2010, p. 42-43
Hyundai's increasing quality scores
Chung, who rarely gives interviews to English-language publications, spoke with a journalist through an interpreter from his penthouse office in the Hyundai tower. Chung attributes his company's success to the investment it has made in improving its products. He believes that Hyundai's quality, as well as its technology, 'are head to head with Toyota at this moment,' a statement he makes with some confidence since 'we are monitoring what is going on with Toyota all the time.' Asked what scares Hyundai the most, he replied, 'The thing we fear is uncertainty. There are many announcements about demands shrinking and all the numbers are different.' Hyundai's quality success is a testament to the power of focused management and aggressive goals. In 2001 Hyundai ranked 32nd out of 37 brands in J.D. Power's study of new vehicle quality after 90 days of ownership – close to the bottom. As its quality efforts took hold, it began moving up the list, and it achieved a breakthrough in 2004 when it reached seventh place. Since then, Hyundai has placed third in 2006 and then fourth in 2009, displacing Toyota as the highest-ranked mass-market brand in the world. (Three luxury brands – Lexus, Porsche and Cadillac – finished ahead of it.)
Management: An Evidence-Based Approach - 3rd edition 2010
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