REVIEW THE NUCOR CASE STUDY Mariah Shojaei Strayer University Instructor: Dr. Chantel Upshur-Myles Course: Business 599 Assignment #4: HRM Issues/Diversification Strategies December 1, 2011
8unnlng Pead nucor case sLudy
INTRODUCTION: Nucor Corporation headquartered in Charlotte, North Carolina, and is one oI the largest steel producers in the United States, and the largest oI the "mini-mill" operators (those using electric arc Iurnaces to melt scrap steel, as opposed to companies operating integrated steel works with blast Iurnaces). (Wikipedia.org) Nucor's history consists oI three distinct eras: the Reo Motor Car era, the Nuclear Corporation oI America era, and the current Nucor era. (Steel on the net.com) Nucor's origins are with auto manuIacturer Ransom E. Olds, who Iounded Olds Motor Vehicle Company in 1897 (later, as Oldsmobile, to become a part oI General Motors). In 1905 Olds established REO Motor Car Company, the predecessor to Nucor. In 1938 the company Iield Ior bankruptcy. As part oI the bankruptcy reorganization, REO exited the car business to concentrate on trucks, and aIter World War II, attempted to diversiIy into lawn mowers. The reorganized company continued to underperIorm, and Iinally in December 1954, REO sold oII its entire manuIacturing operations to Bohn Aluminum and Brass Company. AIter the sale, REO initiated liquidation proceedings. However, a group oI shareholders challenged the liquidation and in September 1955 they Iorced REO to take over a tiny nuclear services company called Nuclear Consultants, Inc., later called Nuclear Corporation oI America Inc. In 1962 Nuclear purchased VulcraIt Corporation, a steel joist manuIacturer located in South Carolina. In 1965 Nuclear Iiled Ior bankruptcy. The Board oI Directors Iired Nuclear's President and hired Samuel Siegel, an accountant with Nuclear as chieI Iinancial oIIicer (CEO) and Iverson as President. Iverson and Siegel quickly reorganized Nuclear around its only proIitable business, VulcraIt. All other Nuclear businesses were either sold or liquidated. (All business.com) In 1972 the company (recognizing that there was nothing "nuclear" about making steel or steel products) adopted its current name. As oI 2008, Nucor operates 53 Iacilities throughout the United States and purchased DJJ (David J. Joseph Company), one oI the largest scrap brokerages.
PROBLEM IDENTIFICATION: Nucor`s major customer segments are the construction industry (60 percent), the automotive and appliance industries (15 percent), and the oil and gas industries (15 percent), with the remaining 10 percent divided among miscellaneous users.(Gordin, 2007)
8unnlng Pead nucor case sLudy
Because oI the weakness in the global economy, there is a shortage oI demand Ior steel. Recovery in the construction and automotive industry will positively aIIect the steel industry. Other problems can be summarized as inherent volat ilit y in the steel market, dependency to scrap steel, high energy prices and Iinally expensiveness oI expansion and technological modernization.
ANALYSIS AND EVALUATION: Steel Industry trends are very dynamic. From 1910 until 1960, United States was the Iirst country in term oI producing steel. AIter that countries like Japan and China took over. Now, India and Brazil are among the larger producers oI steel with China being the larger producer. In such a dynamic market, Nucor has created a very successIul strategy by creating eIIiciency, quality, innovation and responsiveness. It has done it by implementing a very well-matched human resource strategy. Nucor has high job satisIaction which in turn brings improved job perIormance. It hires goal- oriented, motivated people who striving Ior continuous improvement. Since the production oI quality steel depends on teamwork, workers within the plant are eligible Ior substantial incentives based on the output oI their group.For example, an employee usually makes about $9 an hour, but that employee probably is making about $13.50 an hour in bonus pay Ior a total oI $22.50 an hour. (allbusiness.com) Managers have the power oI decision making without the need to wait Ior decisions Irom headquarters. They have a scholarship program Ior children oI employees which promotes long-term employee retention. Nucor provided employees with a perIormance-related compensation system. Analyzing a corporation cannot be completed without analyzing its strategy based on Porters Five Forces Model. As Ior Nucor: Rivalry among competitors is high Ior steel industry. Mittal Steel and U.S steel are Nucor`s national competitors. Its international ones are mainly Irom Russia, Brazil and China. Bargaining power oI Buyers is the greatest threat. Because oI number oI the steel companies, the buyers have the power to barging. Bargaining power oI suppliers is low due to the large number oI suppliers.
8unnlng Pead nucor case sLudy
Threat oI new entrants is low because oI the saturated market and also high associated costs. Threat oI product substitutes is low because there are a very Iew alternatives that would have the same strength, durability, and cost eIIiciencies oI steel. Plastics are a one oI these substitutes that lacks characteristics oI steel exhibits. It is important to analyze Nucor Corporation based on its strengths, weaknesses, opportunities and threats (SWOT analysis). Strengths: Nucor is a large company because oI acquiring many companies. It has had a remarkable proIit. It has technological advantage over its rivals due to its eIIicient state oI the art equipment and Iacilities. It has a low cost strategy. Weaknesses: Nucor seems to be more selI consciences by growing larger but do not consider other Iactors like industry rivalry and product diversity like shiIting Irom steel to other components. Opportunities: Nucor can become multinational instead oI joint ventures and earn royalty instead oI pay them. They can venture themselves into new markets and increase market growth. Threats: Slow U.S economy is a threat that Nucor is Iacing. It is also highly dependent on scrap steel Ior raw material and energy Ior production.
RECOMMENDATIONS: Nucor should go global. There is a potential Ior acquiring companies in India and China. Nucor should consider exporting to other counties requiring steel with competitive prices because it has the advantage oI low cost pricing. Nucor should continue on improving their low cost strategy because it diIIerentiates Nucor Irom its competitors. It also needs to develop and Iind new technology to improve its energy eIIiciency. Nucor needs to Iind new suppliers who oIIer cheaper raw material. With energy costs on the rise, Nucor has to Iind a way to keep its low cost strategy. Nucor should also Iind cheaper alternatives to get scrap steel. One way being opening a dump yard where domestic household customers can dump their waste scrap steel. Nucor then can be able to collect Iree scrap steel Irom this. Being able to do these, Nucor will be able to remain a successIul organization in the years to come.
8unnlng Pead nucor case sLudy
CONCLUSION: In conclusion, Nucor has eIIect ively used Porter`s strategy oI the Five Forces to become the leading steel producer in the United States and continually have high proIit s while others go bankrupt. While Nucor`s innovat ive int ernal organizat ion cuts costs and encourages productivity, it main strategy is to stay on the cutting edge oI technology (at least Ior the American market).
8unnlng Pead nucor case sLudy
REFRENCES:
Richard Franklin, 'An Interview with John D. Correnti, President and CEO, Nucor Corporation, The Wall Street Corporate Reporter, September 9-15, 1996, pp. 19-20. www.tuck.dartmouth.edu/people/vg/site/.../20015NucorA.pdI
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2010). CraIting and executing strategy: The quest Ior competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin.
Steel on the net.com (2001-2011). Retrieved November 28, 2011 http://www.steelonthenet.com/kb/history-nucor
Wikipedia.org. Retrieved November 28, 2011 http://en.wikipedia.org/wiki/Nucor
Overman Stephenie (1994). Retrieved November 28, 2011 http://www.allbusiness.com/human-resources/compensation/