1 Nucor Corporation: Competing against low cost Steel imports I.

B ackground/ problem identification Nucor earlier started with the nuclear equipment and electronics business in the early 1950s and60s. The company was facing heavy losses and was on the verge of declaring bankruptcy, whenthe Board of Directors was seeking for new leadership. Iverson was appointed from within theBoard in 1964 with a completely new vision. He concluded that the best way was for Nucor totake a different path altogether with their successful Vulcraft subsidiary in the steel business. Itwas 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 profitmargins. Nucor was regarded as the low-cost and technologically innovative steel producer to theworld. 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 andlow-cost strategy was successful.Iverson was a leader who walked the talk. He proved himself as a ³Master in crafting andexecuting a low-cost leadership strategy, and he made a point of making sure he practiced whathe preached´. Nucor was not a company that had jet planes for their directors, nor companymembership 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 inthe city. Iverson had to leave the company following disagreements with the Board in 1998 andwas succeeded by DiMicco. Disagreements may have been due to the lack of extravagance thatwas not offered by the president.Other firms from China, Russia, Brazil and India are dumping steel in to the U.S which affectsthe 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 highlyvolatile 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

One of the strategies of Nucor is acquiring new companies that have an advantage. farming. However it is not clearly mentionedwhether Nucor takes into account the financial and non-financial factors of acquisition. Steel industry is the buyers¶ market and that iswhy Nucor produces to customer specification the cold finished steel products with requestedshapes.such as Birmingham steel would broaden customer base.Global joint ventures Nucor holds with firms still gives them additional influence. to fasteners. Fromauto manufacturing. High rivalry in the industry makes theattractiveness low. there are relatively few productsavailable with the strength.Currently scrap steel prices are on the increase and energy too. With globalization being the current trend andthe merging of many competitors. Price competition develops from buyers having lowswitching costs and low product differentiation. Other larger companies. Plastics are a newer productthat substitutes to some extent because it lacks .Bargaining power of BuyersBuyers pose arguably the greatest threat. However Nucor¶s acquisition Crawfordsville had a newer technologicalinnovation called the Castrip technology which differentiated their product. Brazil and China. Nucor hasincreased their bargaining power as a single firm. the barriers to entry have increased. Larger quantity orders of rawmaterial are usually discounted. to structural supports. Nucor is heavily dependent on scrap steel for production. II. Nucor acquired many steel firms in the industry and holds a large portion of the industry.Sometimes there is a question whether is it necessary that they need to acquire to broadencustomer base or locate closer to the customer to service their needs? Cannot they do it withVulcraft or Nucor itself? In addition.S steel. Yet they stand second largest to U. Nucor has economies of scale and differentiatedtechnology (regarding the Castrip) which can be a barrier to existing companies and new onesentering the industry. The initial investment is low and economies of scale can bederived which makes the barriers to entry lesser. Apart from the local players global players are in the marketto with imports from Russia. Entry into anyindustry depends directly on the associated costs. electric appliance industries etc. This differentiationis ideal to stand high against rivalry. Numbers of suppliers are high which means their influence is low. durability.Threat of product substitutesIn this case there should be an alternative to steel that would be a threatening substitute.Bargaining power of suppliersIf the numbers of suppliers are reduced the suppliers¶ bargaining power is increased. Nucor competeswith.Threat of new entrantsIndustry attractiveness is low with many players and the market being saturated. Analysis and evaluationPorter¶s five forces model Industry rivalry among competitorsThe steel industry is mature with intense competition.environment. is Mittal Steel and U. Nucor acquired other steel producing firms that produce different steel products like girders roofs etc sothe switching costs for Nucor is comparatively less. Economies of scale andcapital requirements are the greatest barriers in the steel industry. Nucor¶s buyers aremainly automobile.S steel. and cost efficiencies of steel.

They can go into the marketslike Russia. China because they dump into the U. Nucor can also open a dump yard where domestichousehold customers can dump the waste scrap steel. Nucor may even be able to collect freescrap from this. Brazil. Nucor¶s technological advantage by having efficient new state of the art equipment and facilitieskeeps them higher than their rivals. They are a large groupintegrated backwards and they can enjoy multiple economies of scale. And being highlydependent on scrap steel for raw material and energy for production. Nucor can find other alternative ways of collecting scrap steel for cheap. 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.Opportunities Nucor can become multinational instead of joint ventures and earn royalty instead of pay them.ThreatsDumping of steel to the U.Weaknesses Nucor seems to be more self consciences by growing larger but do not consider other factors likeindustry rivalry and product diversity like shifting from steel to other components. However Nucor shouldanalyze the five forces before entering those markets. They could be highly competitive. Nucor also carries out a environmental program by planting trees that absorb the carbon emission from their factories. Nucor¶s strategy of lowcost can be at stake. SWOT analysis Strengths Nucor acquires many companies and increase their capacity and size. This can help show their CSR values and reduce pressure group resistance. They can find newsuppliers who offer cheaper raw material. Their low cost strategy where the labor cost is only 8% of revenue helps them to maintain their long term growth.characteristics that steel exhibits.S market. The industry is in a mature product life cycle stage but Nucor had remarkable profits by earning a profit in every quarter. Solutions to the problems Nucor can indulge into new global markets and increase markets.S economy is a threat that Nucor is facing. Also their employment pay schemes arewidely accepted by their workforce which automatically improves their efficiency and no pressure is required by top management. May be the acquisitions would have covered the idea for self development 5 R ecommendations .They can venture themselves into new markets and increase market growth. However there may be pressure groups and environmental problems from theseyards. Nucor should consider developing the Vulcraft and Nucor brand further without moreacquisitions.

If Nucor is able to apply these techniques they can remain a successful organization in the years to comewith a very dynamic and volatile market . Nucor should continue on improving their low cost strategy because that is their differentiation. power plants and other infrastructure developments would require steel with competitive prices.They need to consider their size as companies that are too large do collapse. to improve on their energy efficiency. These countries have emerging market potentials withincreasing infrastructure. They could find countries with scope like India and Chinawho are referred to as the BRIC countries.Nucor should go global on their own. Nucor has the competitive advantage of low cost pricing. Nucor should also find newer technological means although they are differentiated with efficientones. Nucor should also find cheaper alternatives to get scrap steel to fight with their strategy. Countries building new ports. More steel would be required for development. Energy costs on the rise are a threat to their low coststrategy.

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