Hyundai Elevator eyes global expansion

The government has attempted to implement an overhaul of the economy in the face of various structural problems and an ongoing decline in the export model, which has served the country well for more than half of a century. Indeed, Korean exports have declined for 18 straight months, although the rate of decline has slowed somewhat recently. How has Hyundai Elevator adapted its business plans and priorities in relation to this ‘new normal’ in the national and global economy?

The Korean government has been worried about the Japan experience. In order to boost the entire economy, the Central Bank in Korea has slashed its major interest rates about eight times between 2012 and June 2016.

With a sense of urgency, our company would like to turn the external and internal pressures into an opportunity to upgrade the business model and to pursue an innovation resulting in qualitative change.

Our primary goal is to grow from being the best and largest elevator company in Korea to become a global leader in the elevator industry.  As an analogy, I will say that we want to win a gold medal in the Olympic Games. Our second goal is to transform our business structure from equipment seller to service provider. To succeed in these two initiatives, world-class competitiveness in cost and quality is necessary and we keep innovating on those.

You mentioned that Hyundai Elevator is the market leader here in Korea. What are your expectations for growth and performance in your national business up until 2018, when Korea will host the Winter Olympics?

You mentioned the Winter Olympics but the impact of these games will be miniscule. However, as I told you before, the government now has a very aggressive and active fiscal policy. Also, followed by the previous year, the government compiled about a U$10 billion supplementary budget this year. With those efforts of the government, we are expecting a positive performance in our industry in the coming years.

I would like to emphasize the business data. Currently the balance of our orders, this year, is 23% higher than last year. If you look at our sales revenue for the past five years (2011 to 2015), it has grown by an average of 13.3% per year. I expect that our sales revenue will grow by an even greater percentage in the next two years.

Korea’s construction firms are ranked amongst the best in the world in terms of overseas contracts, but they have been impacted by a decline in the Middle East market in recent years due to low oil prices. To what extent has Hyundai Elevator’s overseas business also been impacted by the slowdown in Middle East construction, and which overseas markets have you identified as having the greatest potential for growth in the near future? 

Korean construction companies working overseas normally focus on infrastructure and power plant projects, which have little relation to the elevator industry.

However, what you pointed out is quite right. Our major clients, which are the local construction firms, have definitely seen their business decline in some of their major markets due to the low oil prices. Saudi Arabia, UAE and Iraq have all been badly affected.

Here at Hyundai Elevator, we see potential in emerging markets with stable internal demand. From that perspective, we have a long-term strategy to achieve market-leading positions in countries such as China, India and Turkey, and we have been investing in these countries accordingly.  China accounts for 60% of the global elevator market and we view it as our second home market. As such, we are planning to open a new factory in China.

India is the second largest elevator market in the world, so we want to set up an entity for production and sales in that country. We have dispatched a five-person task force to India and they are currently conducting a feasibility study.

As you know, Turkey, where we have a comparably better brand position, has suffered from political and social turbulences recently but it still offers lots of potential and advantages. We recently signed an agreement there for a joint venture and our aim is to establish a foothold in Turkey and use it as a hub for entering Eastern Europe. 

In addition, we believe Southeast, Southwest Asia and Africa also are very attractive markets which have potential.

Your company has set a target of becoming one of the world’s top 7 by 2030, with expansion into 62 countries. However, I have found very little mention of the USA in either your previous activities or your target countries, despite the fact that Korea has recorded exponential growth in exports to the USA since KORUS FTA was signed in 2012. Do you see potential in penetrating the US market as part of your 2030 vision?

Right now we have a presence in 62 countries all over the world, but we are strongest in Asia and emerging markets.

Our highest priority right now is to grow as a major player where we already have a presence and a positive brand image. Until we reach a level of global major players, we must focus on securing next home markets beyond the Korean market. In this point of view, penetrating developed markets like the USA and Western Europe will take time for us to consider.

Korea was ranked as the world’s top innovator by Bloomberg in 2015, based on its R&D spending per capita. Hyundai Elevator has its own R&D center, employing more than 100 people. How important are your R&D activities to the long-term sustainable growth of the company?

Our R&D activities will enable us to compete at the very top end of the market. Our company has already developed an ultra-high-speed elevator which can travel 1080 meters per minute. With the support of the Korean government, we are now developing the world’s fastest elevator which will travel at 1260 meters per minute.

Another example of our world-class technology we are very proud of is destination selection system using artificial intelligence.

In terms of service maintenance, we have also developed a remote monitoring and control system here in Korea.

Hyundai Elevator was recommended to us by the Ministry of Employment and Labor following our interview with Minister Ki Kwon Lee. The Ministry singled you out for “establishing labor relations based on trust and communication”. Can you expand on the structural difficulties in the labor market that Korean firms have to face compared with American firms, and how your company has successfully navigated these difficulties to retain healthy relations with its workforce over the past several decades?

Korea has much less flexibility in the labor market compared to the US. In addition, labor unions in Korea are much more militant in nature than unions in the USA, so unions and management are often in confrontation. We are really proud to say this is not the case at Hyundai Elevator. The relationship between labor and management here at Hyundai Elevator is based on trust and communication. Since our foundation in 1984, this company has never experienced redundancies or strikes.  We engage with our employees from a position of mutual respect and trust.

This year the management suggested that the workers themselves can decide upon their wage increase plan. Such a move has no precedent in the history of Korea.

People make things happen. I don’t think companies can save money by only hiring people they can afford, so we always try to hire the best people and motivate, train and reward them. In addition, we are trying to reach people through emotion. We overinvest with emotional currency, by offering independence, freedom and encouragement.

I personally operate with a quarterly review system whereby we ask key people and departments for their plans and priorities for the next 90 days. The biggest advantage of this system is that it induces employees and their managers naturally to having a constructive dialogue. Over time, their working relationship will certainly improve.

Korean young people are highly educated, but are currently having to contend with historically high youth unemployment rates. What factors make Hyundai Elevator an aspirational choice for young Koreans looking for meaningful employment in the current climate?

Hyundai Elevator has risen to become the ninth largest elevator company in the world in just 30 years. For the past 10 years, we have recorded exponential growth to become a solid market leader within the Korean market. As a result, many young people aspire to work with us because they want a career with a successful company and they want to learn the secret of our success.

The second reason is because of the challenge we offer.  Based on our success in the domestic market, we are now raising our capabilities to become a global powerhouse. Many young people aspire to be global businessmen and women and our company offers them the opportunity to fulfill their ambitions. 

The third reason is that many young people are looking for job security. Hyundai Elevator responded very sensibly to the global financial crisis earlier this century and we overcame difficulties in unity with our employees.  The positive relationship between the labor and management of Hyundai Elevator has been spreading through the media and by word of mouth in Korean society. This year we had 120 candidates competing for each new job position.

Looking forward, we want to be a magnet for competitive, passionate and talented young people looking for successful and rewarding careers.

You were appointed as CEO in March 2016. How would you sum up your ambitions and overarching vision for the company going forward?

The company’s pursuit of globalization will be reached through glocalization. To meet global standards, we want to be seen as a trustworthy local business in all the markets we operate, with flawless ethical behavior and excellent services. With ambition and persistence, we can make our major overseas markets our second home.

Also, I really want my company to be recognized as a good corporate citizen. Finally, I recognize that I won’t be here forever so I really want to lay solid foundations for the future.