Entry #6 20300156 Kim Han-gil

Pricing the Genesis: How much is too much?
April 18, 2008

If Genesis is about creation, well, the new car is creating a headache for Hyundai Motor as the firm prepares for the U.S. launch of its new premium sedan, the Genesis, in June. The main problem is deciding on price. For the moment, the company’s closest estimate is 32 million won ($32,258) for the model fitted with a 3.8-liter engine. The price for the same model in Korea is 52.8 million won. Koreans may complain about the price difference. Some may say the car’s price doesn’t warrant it being marketed as a premium vehicle.So why the price gap? Since the Genesis was in development, Hyundai Motor has studied the prices of similar cars in the U.S. market, including the Chrysler 300C, Acura TL and Lexus GS. Those models were the anticipated competition for Hyundai’s first high-end release in the United States. The other models range in price from $30,000 to $40,000 in the United States. Other factors, including cost for parts, raw materials and currency fluctuations all contributed to the final price. One very important stage during the process was consumer research.“We found that although quality is important, the ultimate deciding factor for customers in buying a car was price,” said a Hyundai representative. Accordingly, because Hyundai Motor’s brand name is less recognized in the U.S. than Japanese or American automakers, the price for its cars had to be reduced.Another factor in the reduced price is the U.S. economic slowdown. Although a similar process takes place in Korea before the release of a new model, a Hyundai representative said that prices differ between the two countries “because the price levels and customer tastes differ between Korea and the United States.” The representative added that Japanese and German cars are also much cheaper in the United States than in their own countries. In short, in Korea, commodities cost more and Koreans accept the higher prices. The Genesis might cost more than 50 million won but demand is strong.With the price difference and demand in mind, some might consider reimporting Korean cars from the United States, meaning they would buy the car there and ship it back to Korea.But with import taxes amounting to around 34 percent of the original price, individual customers will not save much money by taking this extra step.

By Han Ae-ran JoongAng Ilbo [jainnie@joongang.co.kr]

This article make me to remember about our team's Markstrat strategy. At first period, We failed our strategy because of worng deciding product price. I thought that Hyundai knows what they will be faced at U.S before expands U.S market. They have to decide optimal price of Genesis and consider many factors in U.S- other high-end car's price, brand awareness etc. I agree this policy and expect to result of it. Also, I wish success of our strategy at Markstrat.