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From Cheap to Chic

Do you know what a Hyundai is? How about a Kia? Of course you do. They are South Korean automakers. Though they are not top of the consumer mind in the U.S., they are a rising pair. They both belong to the Hyundai-Kia Automotive Group. Globally, this automotive group is the fourth largest automaker. Toyota, General Motors and Volkswagen rank ahead of them. And the South Korean Group is gaining share at a rapid rate. Ten years ago it was the eleventh largest global automaker.

In the United States, Hyundai and Kia began life as Price Leaders. They produced small, cheap cars with relatively low quality. Twenty years ago, these manufacturers’ cars might have been a close substitute with a used car. Not so any more.

Hyundai has become better known with its 100,000 mile warranty, the best in the auto business. The company realized its poor quality reputation was holding it back and invested to improve quality. To convince the U.S. consumer that it was serious, it offered the best warranty in the business.

Hyundai is no longer simply a Price Leader. It has become a true Standard Leader. It has migrated up through the Standard Leader product class, with the Sonata, and has even entered the lower end of the Performance Leader class with the new Genesis. All of the company’s offerings, though, carry lower prices than those of competition.

The combination of low prices and good quality has propelled Hyundai, even in the hostile auto industry. Hyundai sales in the last year grew by 47%, while industry sales were up only 1%.

Hyundai is a good example of a Price Leader who morphs into a Standard Leader over time by offering good performance for a low price. (For more information on the four price points, visit the Diagnose/Products and Services section of StrategyStreet.) Most Price Leaders don’t try to do this, but a few carry it off with aplomb. Hyundai is one of them.

Posted 9/28/09

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