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Qi Dang

Joseph Talarico
Meggie Toppin
Nathan
Wainwright
Maintian Yu
5071 Strategic
Management

April 1, 2015

Agenda

History of Nucor
Issue Identification
SWOT
Porters 5 Forces
Corporate Level Strategy
Business Level Strategy
Nucor Structure & Control Systems
Alternatives & Recommendations
Implementation

Nucor: Company History

Formed from two corporate failures:

Nuclear Consultants
Nuclear Corporation of America

Nucor: Company History

Ken Iverson brought Nucor to


prominence

Navy officer training


Masters degree in Mechanical
Eng./Metallurgy
1962: Ken joins Nuclear Corp. building up
Vulcraft divisionNuclear Corp. only
profitable division
1965: Ken heads Nucor and gets rid of high
tech division and focuses on steel
manufacturing

Nucor: Company History

Sanborn Chase
Original owner of
Vulcraft

Scientific Genius
Engineer by trade
Compassionate
Developed Mini-Mill
technology
Established incentive
programs that were later
adopted by Ken Iverson
and Nucor as a whole

Nucor: Company History

Dave Aycock

Met Iverson during


the purchase of
Vulcraft
Worked closely
with Iverson
Managed all joist
operations of
Nucor
Became President
and COO in 1984

Nucor: Company History

Dan DiMicco becomes President & CEO September


2000

Iverson ousted by Board of Directors in 1998 over


disagreements
Aycock retires after hiring DiMicco (Iversons
replacement)
Pushed for U.S.A. government protection from
international competition in 2001
Began aggressive expansion through mergers &
acquisitions and joint ventures
20003.15

Bn Market Cap
200610.52 Bn Market Cap
201313.72 Bn Market Cap

Issue Identification

Remaining competitive with emerging


markets

Emerging markets producing more of their


own steel
Much cheaper labour costs and steel

Growing domestically or globally

Slowing growth of North American markets


means less demand for steel
Exporting to emerging markets is a
challenge with shipping costs and possible
trade barriers

SWOT Analysis: Internal


STRENGTHS

Human Resources
practices
Management
Style/Leadership
Organizational Culture
Materials Management
Mini-Mills
Vertical Integration

WEAKNESSES

Safety
No foreign locations
Rising Manufacturing
Costs
No brand loyalty
competitive on price
only
Changing Leadership

Porters Five Forces: The Steel Industry


LO
W

LOW

Bargaini
ng
Power of
Supplier
s

Threat
of
Substitu
te
Products

HIG
Indust
ry H
ry
Rivalr
y

Threat
of New
Entrants

Bargaini
ng
Power of
Buyers

LOW

MEDIU
M

Industry RivalryHighest
Threat

Industry is fragmented (Top 10 steel makers


supply less than 30% of global production
Demand

Global: growing quickly due to emerging markets


Domestic: growing slowly

Rising fixed manufacturing costs domestically


High barriers to exitinvestment in mills,
production & materials
Established companies are merging with
others

SWOT Analysis: External


OPPORTUNITIES

Emerging market in
China and India rapid
market growth
New technology
electric arc furnaces
Mergers & Acquisitions
(horizontal integration)

THREATS

Vertical Integration
Increased competition
Fluctuating industry
demand
Increased consumption
overseas than in the US
(International
Competition)
High Cost
Mature industry

Business Level Strategy


Cost
Differentiat
Broad Leadershi
ion
p
Cost
Differentiat
Narro
w
Focus
ion Focus

S
c
o
p
e

Cost

Differentiatio
n

Competitive
Advantage

Corporate Level Strategy

Nucor is using all three corporate level


strategies:

Vertical integration (forward & backward)


Horizontal Integration (mergers & acquisitions)
Cooperative Relationships

Empire building vs. profitability:


What is the most effective strategy?
Continue building empire (using all 3
strategies) or focus on one strategy?

Leadership

Strategic leadership is provided by


an organizations founder and top
managers
Founder imprints values and
management style on organization
Established leadership style is
transmitted to the companys
mangers; as the company grows,
typically attracts new managers
and employees who share the
same values

Leadership: Ken Iverson (CEO 1984-1998)


Entrepreneurial spirit
Risk taker
Focused on building up Nucor to one of
the top competitors in the industry
through innovation, collaborative culture
and strong alliances with outside parties
Informal communication
Gave autonomy to division managers
Allowing people to function on their own
and by judging them on their results

Leadership: Dan DiMicco (CEO 20002013)

Informal communication
Focused on empire building
Horizontal and vertical
integration
Levels added to Nucors
structure: Executive Vice
President

Restructuring

2 Steps:
1.

2.

Streamline hierarchy of authority & reduce


number of levels
Reduce number of employees to lower
operating costs

Necessary because of changes


in the business environment,
shifts in technology,
competition
Sometimes restructure when in
a strong position

Organizational Structure

Becoming taller because company is growing, but


still try to maintain a decentralized structure
Principle of the Minimum Chain of Command
Decentralize Authority

Reduces bureaucratic costs


Reduce information overload; top management can
spend time on competitively positioning company
Increases lower-level management motivation and
accountability
Lower level employees given right to make important
decisions

Organizational Structure:
1991

Organizational Structure:
2000

Organizational Structure:
2009

Organizational Structure:
2013

Control Systems

Personal Control
Output Control
Behaviour Control
Strategic Reward Systems

Safety, quality, productivity


-Nucor Philosophy

Personal Control

Face-to-face interaction

Direct Supervision
Vacation policy

Empowered, self-policing teams


Is team-based work the best option?

Behaviour/Output Control

For Workers: 90% history output in


allotted time
For Managers: Division contribution (net
revenue)
For Administrative Staff: Division or
corporate ROA
Is paying employees
For Sr. Management: 9%/5% rule

75% market value +


bonuses ideal?

Strategic Reward Systems (Workers)

Unique & objective


salary + bonus system
Output vs. Time
Calculation
One weak member ruins the bonus of
the entire team and foremen. Can
this lead to bullying and other
undesirable results?

Alternatives

Alternative 1: Nucor manufactures


overseas to meet emerging markets
Alternative 2: Mergers & acquisitions
with foreign-owned companies
Alternative 3: Stay in the US and
continue to grow operations

Which alternative is the best option?

Implementing Strategy
Four strategies that companies use as they
begin to market their products and
establish production facilities abroad
1. Localization
2. International
3. Global Standardization
4. Transnational

1. Nucor Manufactures
Overseas

Localization strategy
Implemented through Internal New
venture to create own business overseas
Brings Nucor culture, structure,
leadership style overseas difficult but
necessary
In line with mini-mill philosophy
currently implemented by Nucor in the
US

2. Mergers & Acquisitions


Overseas

Transnational strategy

Implemented through mergers & acquisitions

Achieves local responsiveness and cost


reduction
Decentralized at global locations
Difficulties with integrating new companies into
original operations

Appoint specific division to do acquisitions


Select companies in steel industry
Transfer culture to new facilities

3. Continue to Grow in US

Implemented through cost leadership


Possibly Diversify business due to
slowing demand in local market
Keep acquiring, trying to consolidate the
industry, become monopoly (BHAG)
Develop new potential technology to
compete with foreign companies

Which alternative is the best decision


for Nucor?

Recommendation

Mergers & Acquisitions overseas in


emerging markets

Acquire established companies


(political/legal issues)
Workforce lower labour cost

Implementation

Select appropriate overseas firms to


horizontally integrate with
Establish structure with overseas firms
create international division structure while
maintaining decentralization, establish lines
of authority

Worldwide Product Division Structure: Focus on


local responsiveness, scale of economies and
transfer competencies and skills across
national boundaries (worldwide learning)

Implementation

Select capable leader for Nucors


overseas division
Continue to maintain Nucors
collaborative culture at new plants
overseas

New firms may have unique norms, values


and culture

Adapt control systems (personal,


behaviour, output)