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Korean financial markets are being increasingly saturated, with deteriorating profitability. Against this backdrop, financial companies in Korea are actively setting out to enter overseas markets than ever before, in attempts to seize new engines of growth.
According to the data on ‘The trends and financial status of domestic financial companies with overseas presence in 2018’ released by the Financial Supervisory Board (FSS), the number of overseas branches of Korean financial companies as of the end of 2018 were 437 (in 43 countries), an increase of 6 branches compared to the previous year (431 branches in 43 countries), and 12% compared to 2014 figures (391 branches). In terms of region, Asia accounted for the majority of overseas presence with 69.8% (23 countries, 305 branches), followed by the Americas (16.7%, 5 countries, 73 branches) and Europe (9.8%, 9 countries, 43 branches).
The total assets owned by Korean financial companies’ overseas branches as of end of 2018 amounted to 178.9 billion dollars, increasing by 79.3% over the last four years (99.8 billion dollars back in 2014) while net earnings also grew by 37% year on year to 1.28 billion dollars.
Despite such growth in size, the proportion of major financial players’ profits generated abroad still remains at single digit numbers, unlike globally renowned financial companies from the U.S. or Europe who reap higher profits overseas than in their home countries. Industry experts explain that this is because most overseas expansion in the past relied on simple business models revolving around loans or products that often target Koreans or Korean companies that have business abroad, rather than seeking a new source of revenue or devising localization strategies. Furthermore, experts point to a concentration of businesses in so-called ‘promising’ regions embroiled in short term profits without a long term vision or thorough market research.Hyundai Capital, as the representative Korean financial firm to expand abroad, operates 11 overseas entities with 2,500 global employees
Meanwhile, Hyundai Capital’s dynamic and solid overseas expansion is garnering wide attention. As the representative financial company in Korea to make inroads into foreign markets, Hyundai Capital currently has presence in 11 overseas entities with 2,500 employees (5,300 employees including Korean HQ headcount) since it established its first overseas entity in the U.S. back in 1989. As of 2018, the company has total overseas assets worth 43 trillion won (based on five financial entities overseas excluding Korea.)
In April, Hyundai Capital officially launched its sixth overseas financial entity, Banco Hyundai Capital Brasil and began its full-fledged operations. As a captive of Hyundai Motors in Brazil, BHCB will provide auto financing products and services tailored to local needs, with additional synergy effect expected from Hyundai Capital’s know-hows in auto financing and solid local network and stable operating system by Banco Santander Brasil.
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Current status of Hyundai Capital’s global presence
Behind Hyundai Capital’s success in overseas markets for the past three decades is thorough localization supported by global partnerships as well as corporate culture that endeavors to become a Global One Company.
From top left, in clockwise direction, Hyundai Capital’s overseas entities - BHAF, HCA, HCUK, HCBE offices.Success factor #1 behind Hyundai Capital’s overseas expansion, ‘Localization’
Hyundai Capital has devised differentiated ways forward for its global business catered to each market and introduced unique and independent business models that fit optimally into each country, considering market size and the maturity of the auto financing market.
Before launching its global businesses in earnest, a sophisticated analysis of overseas markets is conducted where ‘strategic importance’ and ‘the ease of entry’ are the two main criteria of the research. Strategic importance is about taking into account the market size, geographic location, Hyundai and Kia motors’ local situations etc. whereas the ease of entry is related to a comprehensive analysis on government regulations, financial infrastructure, competitive environment in the target market. Other relevant factors, including ethnic, linguistic, economic factors, as well as competitiveness in local funding, specific market circumstances, ability to execute and relationship with local Hyundai and Kia motors etc. are all considered in a matrix format. Such efforts result in reduced initial risk for overseas offices, which results in optimized business models for each region.
Once Hyundai Capital enters a foreign market, it caters to the local market and customer needs through customized products and services, strengthening the competitiveness of the financial products for Hyundai and Kia vehicles. For instance, Hyundai Capital America (HCA) launched the ‘Hyundai PLUS’ in July of 2018, which is a subscription based product bundling lease, maintenance and insurance into a single product. Currently the pilot program is being conducted in New Mexico, Ohio, Texas and Wisconsin. As a subscription service where the customer pays a fixed monthly payment to use a car of their choice, the subscription fee starts at $279 a month and consumers can choose any car amongst Tucson, Santa Fe, Sonata and Elantra. The monthly fee includes usage of the car, insurance fee as well as service maintenance and repair, which allows for customers to drive a car at a lower cost. Moving away from car ownership to sharing, and now with growing needs for car subscription services in the U.S. market, ‘Hyundai PLUS’ is deemed as one of the core businesses of Hyundai Motors, which is evolving into a mobility solution company.
Last but not least, striking a joint venture (JV) with local financial companies to ensure stable management of risk and operation systems alongside securing funding capabilities is another important pillar of Hyundai Capital’s localization strategy.Success factor #2 behind Hyundai Capital’s overseas expansion, ‘Global partnerships’
Hyundai Capital’s solid localization strategy is possible thanks to its long standing global partnerships. Such partnerships with globally renowned financial companies established since the early days of Hyundai Capital’s global business contributed greatly to enhance understanding about local markets and to swiftly settle. Furthermore, it promotes the internalization of Hyundai Capital’s genuine global business capabilities.
Hyundai Capital currently operates JVs with Santander, the largest bank in Europe, in the UK, Germany and Brazil. The partnership between Santander and Hyundai Capital was possible thanks to Hyundai Capital’s successful partnership with GE in the past, its high global credit ratings and ever expanding business in the global financial markets, benefits of being a captive finance of Hyundai Motor Group and extensive expertise in auto financing, among others.
Hyundai Capital’s Chinese entity, Beijing Hyundai Auto Finance, is run in partnership with Beijing Automobile Investment, a financial investment subsidiary of the Chinese state-owned company BAIC. China is the largest market for automobile sales, yet one of the harder markets to enter. In spite of this, Hyundai Capital set up an office in Beijing back in 2005 to study the changing financial markets and regulations in China; and after 7 years of preparation earned trust from its local partner Beijing Automobile Investment to establish a JV in 2012, signaling a successful entry into the Chinese market.
In addition Hyundai Capital has other diverse global partners including BNP Paribas, Société Générale and UniCredit to further expand its global businesses through close collaboration.Success factor #3 behind Hyundai Capital’s overseas expansion, ‘Global One Company’
As its global business and the number of global employees grew in size, Hyundai Capital placed greater importance on a common corporate culture, alongside localization, so as to move forward the shared goal of becoming a Global One Company. The rationale behind this was that corporate culture is not only about the way employees think and work but also a strategic competitiveness that enables new attempts and innovation. In response, Hyundai Capital is formulating innovative and advanced HR policies fit for a global financial company while offering diverse programs to enable effective sharing among employees around the world.
As the organization became more globalized, Hyundai Capital introduced the ‘Global Band’ in 2016 which is a standardized job position system applicable to all entities. Since 2010, more than 260 employees participated in the Global Mobility Program which offers new career opportunities to employees worldwide. Other programs such as the GEP (Global Exchange Program) and TD (Talent Development) enable employees to gain experience overseas and cultivate global leadership through mid to long term projects that take place across different entities around the world.
For example, Alex Gurin who was dispatched to HCA from Hyundai Capital Russia back in 2017 through the TD program, made great contributions in the successful launch of ‘Hyundai PLUS’, a car subscription service customized for the U.S. market thanks to his experiences of testing related products in Russia.
Programs such as the Global Internship Program which began in 2013 and the GCCA (Global Corporate Culture Ambassador) initiative which aims to exchange corporate culture among different entities encourage global employees who differ in nationality, language and culture to better understand each other.
As its global business expansion accelerates and collaboration with global partners increase, Hyundai Capital plans to create synergistic effects by harmonizing the way of working and the corporate culture at the partner company as well as at Hyundai Capital.
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