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I. Background/ problem identification
Nucor earlier started with the nuclear equipment and electronics business in the early 1950s and 60s. The company was facing heavy losses and was on the verge of declaring bankruptcy, when the Board of Directors was seeking for new leadership. Iverson was appointed from within the Board in 1964 with a completely new vision. He concluded that the best way was for Nucor to take a different path altogether with their successful Vulcraft subsidiary in the steel business. It was then the company earned its current name and divulged in to the industry. Later on, in 1968, management of Nucor decided for backward integration which is into steel making to apply benefits of supplying their own steel to their requirements. Iverson¶s long term strategy was to become the major player in the U.S steel industry. By 1985, Nucor was the seventh largest in America with high held revenue figures and net profit margins. Nucor was regarded as the low-cost and technologically innovative steel producer to the world. During the recession in 2000/01 25% of U.S companies declared bankrupt and some of them suffered heavily whilst Nucor withstood the depression healthily since their efficient and low-cost strategy was successful. Iverson was a leader who walked the talk. He proved himself as a ³Master in crafting and executing a low-cost leadership strategy, and he made a point of making sure he practiced what he preached´. Nucor was not a company that had jet planes for their directors, nor company membership schemes with outside clubs, or executive dining facilities. Iverson thought of this to be a factor of rising costs. In fact he being the President and CEO of Nucor, took the subway in the city. Iverson had to leave the company following disagreements with the Board in 1998 and was succeeded by DiMicco. Disagreements may have been due to the lack of extravagance that was not offered by the president. Other firms from China, Russia, Brazil and India are dumping steel in to the U.S which affects the demands for Nucor. Those companies are being subsidized by their governments for support. After many acquisitions and joint ventures globally, Nucor is in the environment that is highly volatile and economy at a slow down. The 2008 recession affected Nucor¶s profits. Although Nucor has a competitive advantage of being large they still have to face impact from the outside
Apart from the local players global players are in the market to with imports from Russia. Other larger companies. However Nucor¶s acquisition Crawfordsville had a newer technological innovation called the Castrip technology which differentiated their product. is Mittal Steel and U. farming. However it is not clearly mentioned whether Nucor takes into account the financial and non-financial factors of acquisition. II. Currently scrap steel prices are on the increase and energy too. Bargaining power of suppliers If the numbers of suppliers are reduced the suppliers¶ bargaining power is increased.S steel. electric appliance industries etc. Sometimes there is a question whether is it necessary that they need to acquire to broaden customer base or locate closer to the customer to service their needs? Cannot they do it with Vulcraft or Nucor itself? In addition. One of the strategies of Nucor is acquiring new companies that have an advantage. Nucor acquired many steel firms in the industry and holds a large portion of the industry. such as Birmingham steel would broaden customer base. Analysis and evaluation Porter¶s five forces model Industry rivalry among competitors The steel industry is mature with intense competition.environment. Bargaining power of Buyers Buyers pose arguably the greatest threat. Price competition develops from buyers having low switching costs and low product differentiation.S steel. Nucor competes with. Numbers of suppliers are high which means their influence is low. Steel industry is the buyers¶ market and that is why Nucor produces to customer specification the cold finished steel products with requested shapes. High rivalry in the industry makes the attractiveness low. Nucor has increased their bargaining power as a single firm. Nucor¶s buyers are mainly automobile. Yet they stand second largest to U. Global joint ventures Nucor holds with firms still gives them additional influence. Nucor is heavily dependent on scrap steel for production. This differentiation is ideal to stand high against rivalry. Brazil and China. Nucor 2 .
Economies of scale and capital requirements are the greatest barriers in the steel industry. They are a large group integrated backwards and they can enjoy multiple economies of scale. to fasteners. to structural supports. and cost efficiencies of steel. The initial investment is low and economies of scale can be derived which makes the barriers to entry lesser. The industry is in a mature product life cycle stage but Nucor had remarkable profits by earning a profit in every quarter. Entry into any industry depends directly on the associated costs.acquired other steel producing firms that produce different steel products like girders roofs etc so the switching costs for Nucor is comparatively less. Nucor has economies of scale and differentiated technology (regarding the Castrip) which can be a barrier to existing companies and new ones entering the industry. Alternatives like plastic and other products increase market presence during the times of economic down turns or when there is a price increase in steel. From auto manufacturing. Plastics are a newer product that substitutes to some extent because it lacks characteristics that steel exhibits. Threat of product substitutes In this case there should be an alternative to steel that would be a threatening substitute. Threat of new entrants Industry attractiveness is low with many players and the market being saturated. Nucor¶s technological advantage by having efficient new state of the art equipment and facilities keeps them higher than their rivals. SWOT analysis Strengths Nucor acquires many companies and increase their capacity and size. the barriers to entry have increased. With globalization being the current trend and the merging of many competitors. Nucor also carries out a environmental program by 3 . durability. Their low cost strategy where the labor cost is only 8% of revenue helps them to maintain their long term growth. Larger quantity orders of raw material are usually discounted. there are relatively few products available with the strength. Also their employment pay schemes are widely accepted by their workforce which automatically improves their efficiency and no pressure is required by top management.
Opportunities Nucor can become multinational instead of joint ventures and earn royalty instead of pay them.S economy is a threat that Nucor is facing. Brazil. They could be highly competitive. Threats Dumping of steel to the U. Nucor¶s strategy of lowcost can be at stake. And being highly dependent on scrap steel for raw material and energy for production. Weaknesses Nucor seems to be more self consciences by growing larger but do not consider other factors like industry rivalry and product diversity like shifting from steel to other components. Nucor should consider developing the Vulcraft and Nucor brand further without more acquisitions. They can go into the markets like Russia. Nucor may even be able to collect free scrap from this. Nucor can find other alternative ways of collecting scrap steel for cheap. They can find new suppliers who offer cheaper raw material. Solutions to the problems Nucor can indulge into new global markets and increase markets. China because they dump into the U.S market. 4 . May be the acquisitions would have covered the idea for self development. However there may be pressure groups and environmental problems from these yards. Nucor can also open a dump yard where domestic household customers can dump the waste scrap steel. They can venture themselves into new markets and increase market growth. This can help show their CSR values and reduce pressure group resistance.planting trees that absorb the carbon emission from their factories. However Nucor should analyze the five forces before entering those markets.
Energy costs on the rise are a threat to their low cost strategy. They need to consider their size as companies that are too large do collapse. Nucor should also find cheaper alternatives to get scrap steel to fight with their strategy. These countries have emerging market potentials with increasing infrastructure. Countries building new ports. Nucor should continue on improving their low cost strategy because that is their differentiation. to improve on their energy efficiency. Nucor has the competitive advantage of low cost pricing. If Nucor is able to apply these techniques they can remain a successful organization in the years to come with a very dynamic and volatile market. They could find countries with scope like India and China who are referred to as the BRIC countries. More steel would be required for development. power plants and other infrastructure developments would require steel with competitive prices. Nucor should also find newer technological means although they are differentiated with efficient ones. 5 .Recommendations Nucor should go global on their own.
page c-129.nucor.com/ Case nine.References y y y y Crafting and executing strategy. Nucor Corporation: competing against low-cost steel imports. Crafting and executing strategy 16th edition http://www.com/stainless_steel_news/BRIC_countries_powered_the_van adium_production/163768. Arthur Thompson.html (Sourced from Roskill Information Services) 6 .steelguru. Arthur A. Junior. 16th edition http://www.. Thompson.
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