Academic journal article Journal of the International Academy for Case Studies

Hyundai Card Company: Strategic Challenges in Changing Environment

Academic journal article Journal of the International Academy for Case Studies

Hyundai Card Company: Strategic Challenges in Changing Environment

Article excerpt


In 1995, Diners Club Korea Co., Ltd, the predecessor of the Hyundai Card Company, was started its business. In 2001, the Diners Club Korea was sold to Hyundai Capital, a business group member of Hyundai Motors Company, which is one of the largest Korean Chaebols. It changed its name to Hyundai Card in 2001. In 2011, Hyundai Motor Group and its affiliates owned 53.98% of the Hyundai Card's outstanding shares while GE Capital owned 43% of its shares. In the 2000s, Hyundai Card achieved significant success by introducing innovative card services such as Hyundai Card M, the Black, the Purple, and the Red. Hyundai Card consecutively received the prestigious "Korea's Most Respected Company" honor from the Korea Association of Management Consultants and ranked number one in the credit card category in the National Customer Satisfaction Index (Doosanpedia, 2014).

When Hyundai Card entered the credit card market in 2002, Hyundai Card recorded huge deficits of KRW 145 billion (USD 140 million). In 2002, the credit card crisis in Korea occurred and LG Card, which was the largest credit card company in Korea, went bankruptcy. Under these difficult external environments, Tae-young Chung took in charge of Hyundai Card. He brought new strategic actions to transform Hyundai Card. Hyundai Card's strategic turnaround is based on reshaping its brand image and targeting high income earners (Newsis, 2004).

Before joining to Hyundai Card, Chung was the executive director of Hyundai Motor Company. He was sent to Hyundai Card for its restructuring. He was a passionate and innovative leader to challenge all existing paradigms of the card industry and he built the organizational culture of Hyundai Card that emphasizes innovation and creativity. Hyundai Card offers a wide range of credit services including Premium, Platinum, Alphabet, My Business Card, and Diners/check debit cards (Hyundai Card Corporation, 2014). Table 1 gives the feature of the Hyundai Card products and brief descriptions. Before Hyundai Card 's customized services, existing credit card services used to provide services for customers without considering what benefits customer really want. They consider other service benefits from credit card usage as its supplementary function. As a result, customers never use many of the benefits. In contrast, Hyundai Card put the benefits from its card usage as the core services of credit card. They considered which benefits might be the most useful to customers and designed card services based on the needs of the customers. For instance, its flagship credit card is Hyundai Card M, which provides $ 2,000 discount for cardholders who purchase Hyundai or KIA cars (Financial News, 2013). In 2005, Hyundai Card also launched 'The Black Card' that was the first premium credit card service in Korea that targets people in the top 0.05% of personal income. As a result, Hyundai Card became the second-largest credit-card service company in Korea (Woo, 2013). Hyundai Card expanded its market share from 1% to more than 16% in ten years, and increased its brand recognition from 69% in 2007 to 88.1% in 2011.

However, recently its return on assets has been decreased from 3% in 2010 to 1.7% in 2012 compared to the industry average of 2.6%. Furthermore, recent regulatory changes have put challenges for Hyundai Card. At the New Year celebration in 2013 Tae-young Chung, CEO of Hyundai Card expressed his concerns for the entire card Industry. Chung also emphasized Hyundai Card's innovative DNA and he asked all employees that Hyundai Card should stay away from complacency and should react to the challenges instantly:

2013's given business condition would be the worst case for the card industry. This year could not be easy for Hyundai Card. Because of increasing rate of interest, increasing purchasing cost and family debt, it is hard for us to increase revenues. In this harsh situation, government reinforced regulation on card companies and competitors straightened up their line of battle. …

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