Globalization of the Korean Auto Industry Research Paper

Globalization of the Korean Auto Industry - Research Paper Example State also opted for industry restructuring/ regulating, and concentrated on export led strategy. Rise in domestic demand due to the betterment of economic condition of the country, further enhanced the auto industry of Korea. It took Korea barely three decades to move along the learning curve and secure the place of fifth largest automobile manufacturer in the world. It is notable that exports and foreign auto manufacturers have played a key role in supporting and pulling through the industry in the worst times. This paper throws light on the road taken and success achieved by the Korean automobile industry along with its impact on the economy of Korea. It also aims to explain the reasons for its global competitiveness and what distinguishes it from American automobile industry. The next section of the paper would compare the Korean and American automobile industries which would then be elaborated by an example. It would be followed by the challenges faced currently by the Korean au tomobile industry. Lastly, the paper would conclude with some recommendations to tackle the challenges. Korean Auto Industry Development The history of Korean Automobile Industry can be traced back to 1960s when the Government of Korea took a policy decision to develop auto industry in the country. In the first five year plan of the country, initiated in 1962, emphasis was laid on the creation of indigenous automotive industry. In its initial phase, i.e. in 1960s, the automobile majors were largely involved in assembling of semi knocked down and fully knocked down kits which were nothing but imported components of automobiles. To ease out the conditions for the development of the industry, the state banned import of fully assembled cars although it encouraged foreign partnerships for transfer of technology to the domestic players. With the support of the state, the industry progressed to give rise to four major players which were Hyundai, Kia, Daewoo and Samsung Motors. Hyundai was formed in 1967 with the aim of manufacturing a wholly indigenous car. It started on the learning curve by creating an assembly line to assemble fully knocked down kits. It tied up with Ford, Mitsubishi and Honda for technology transfers in order to initiate local manufacturing of automobiles. It was not until 1976, that Korea achieved the feat of manufacturing automobiles domestically. After eighteen technology transfers, from its foreign partners, Hyundai launched ‘Pony’, in 1976. Pony was the first Korean developed automobile (Korean Development Bank 175). It also holds the distinction of being the first Korean car to be exported. In 1985, Hyundai achieved the landmark quality certifications to meet the quality requirements of EEC, Canada and America which enabled it to export to these geographies also apart from Middle East and Africa. Kia, another automobile firm owned by a chaebol (large Korean business house) was established in 1971. Kia started its product line w ith three wheeled trucks and in a span of three years graduated to manufacture four wheel vehicles. Kia produced its first passenger car ‘Brisa’, in 1974 in technological partnership with Japan’s Honda. Similarly Shinjin Motors (now Daewoo) tied up with Japan’s Toyota to acquire capital and technical knowhow in automobile production. In 1972, Toyota’s share was taken over by General Motors which steered the firm to become the largest automobile