The US-China Trade War on Multinational Business

Abstract

The US-China Trade War, that officially began from March 22nd of 2018, raised serious tensions between the two-digit economies , triggering a knock-on effect across the world. Moreover, the THAAD dispute, between Korea and China, which officially began in July of 2016, raised greater concerns for Korean companies that operate in China. One of the Korean multinational businesses that received the greatest damage is Hyundai Motor Company. These political disputes triggered nationalistic spending behavior among the Chinese consumers, which induced consumers to divert their consumption away from politically disputing nations brands, such as Hyundai or Ford, to non-politically disputing nations brands, such as Toyota or Mercedes Benz. This thesis aims to find, that during the direct and indirect political crisis, whether the nationalistic spending behavior had a greater impact on Hyundais production flexibility in China, rather than the effects coming from Hyundais faulty management.

The results have found that, despite the political disputes, automobile market demand was increasing with greater market optimism by consumers. However, Hyundai along with American brands have suffered serious damage in sales, market share, and average monthly production in China, which increased Hyundais production flexibility to react to the decreasing demand. Hyundai and American brands market shares were absorbed by non-politically disputing nations brands such as Japanese and German brands. Moreover, Hyundais global factories, located outside of China, faced increased average monthly production with stable production flexibility, contrary to those of Chinese factories. Hyundai even started to export its products from China to global markets, as their demand sharply decreased in China.

In order to prove that Hyundais sharp changes in production flexibility and decreased market share is due to nationalistic spending behavior, which was triggered by political disputes, this thesis tests three most compelling faulty managements suggested by the experts, such as lack of NEV investment, failing to fulfill SUV demand, and fall in brand value. Upon the test, all three faulty management arguments were effectively refuted, making a strong argument that the chief cause behind Hyundais significant changes in production flexibility is due to the nationalistic spending behavior caused by indirect and direct political disputes, the US-China Trade War and THAAD dispute, respectively.