1.What is the nature of the competitive environments in which Nucor operates? What are the competitive implications?

focusing products.      Sales started declining due to the economic downturn(mainly due to decline in auto sales) Decline was due to high labour and energy costs in mining and processing iron ore. Cutting capacity. a lack of profits and capital to modernize plants and conservative management that has hesitated to take risks Companies sought protection from import quotas Imported steel accounted for 20% of US steel consumption Mid 1980’s the integrated mills were moving on a fast track They were restructuring. and trying to become responsive to the marker . dropping unprofitable lines.

       The US steel industry slowly stabilized post economic slowdown Nucor pioneered the low-cost German technology There was increase in competition globally There was pressure on the US steel mills to defend their home market In 1994. U. Steel. North America's largest integrated steel producer. began a major business process reengineering project Cut labor cost and increase reliability and productivity Company had to implement new technologies and business process to survive .S.

   the decline in demand prompted Nucor and other U. Nucor was the second largest steel producer in the United States Company's market capitalization was about two times that of the next smaller competitor .S. companies to slash prices in order to compete with the unprecedented surge of imports. As the 1990s ended.

 What factors have helped Nucor achieve a lowcost position? .

Under Iverson and Correnti. Finally. the company was able to move beyond the scope of their production and move into other areas. . such as the development of steel manufacturing technology. and their production of mini-mills has become a large source of customer sales.    Nucor keeps costs below those of their competitors while broadening their markets both in the US and abroad. Nucor’s decentralized organizational structure allowed each plant manager to make the decisions they saw fit for the company as a whole Nucor has been able to expand itself by becoming suppliers of low cost steel to other firms.

Efficiency of business units which ultimately results in low cost since the organizational structure is decentralized. Economies of scale. . Fast delivery and increased customer integrated technologies.       Established raw materials strategy through joint ventures with suppliers. Strong technological orientation enables the company to reduce its operating costs. Increased output per man hours. Forward integration through introduction of new fleet of trucks which resulted in profitable shipping of joists.

 How did Nucor’s organizational structure help the company achieve a low-cost position? .

Chairman/Vice Chairman/President Vice President/Plant General Manager Department Manager Supervisor .

This decentralized organizational structure allowed the firm to “take advantage of growth opportunities available in the environment.” which is a necessary step to stay ahead of competition.   Maintain low costs by keeping the employee force at the level it should be decentralized organizational structure allowed each plant manager to make the decisions they saw fit for the company as a whole. .

 How did Nucor’s incentive systems help the company achieve a low-cost position? .

they will have a job tomorrow – job security.    Employees will have the opportunity to earn according to their productivity Employees should feel confident that if they do their jobs properly. reduce work week instead of fire or lay off employees Employees have the right to be treated fairly Employees must have an avenue of appeal when they believe they are being treated unfairly – grievance process .

you lose your bonus for the week     4 forgiveness days Maintenance personnel were assigned to each team  No bonus paid if equipment is not operating Supervisors were apart of bonus teams  Received same bonus as employees Output and bonus info for each team was posted at the entrance . then no one received a bonus in the group   If you are 5 minutes late.Production Incentive Plan  Paid weekly bonuses based on production Based on actual output in relation compared to expected tonnages produced  Based on group not individual performance  Expected output did not change unless there was a change the production process  If tardiness or attendance kept team from meeting goals. you lose your bonus for the day  If you are 30 minutes late or absent.

Department Manager Incentive Plan  Annual bonus received based on performance of the entire plant Non-production and Non-department Manager Incentive Plan  Bonus based on each plant’s return on assets  Based on return on assets  A return of 25% or better was expected by the plant  Includes everyone not in previous 2 plans  Every month each plant received a chart showing its return on assets on year-to-date basis  Posted in employee cafeteria Senior Officers Incentive Plan  Based on return on stockholder’s equity above certain minimum earnings   Senior Officers earned less than other industry executives If Nucor did poorly. then Senior Officers would only receive their base pay .

In fact. this program prompts such high performance that employees were refusing to take time off.   This unique way of rewarding productivity keeps Nucor’s productivity high and its absenteeism at a low 1 to 1.5 percent a year. . Employees see a direct correlation between what they do and their paychecks.

 How did Nucor’s management style help the company achieve a low-cost position? .

       Safety Committee and reduced accidents Vulcraft Credit Association led to job security and improved morale among employees.(15% cost advantage when compared to integrated steel manufacturers) Egalitarian and incentive based worker relation philosophy. Worker Productivity(four labor hours per ton compared to eight labour hours per ton) . Unionization was not encouraged since he realized that it’s the biggest threat to profitability. Strong employee relationships. Mini mill production facility which was more economical.

 Why was Nucor’s organizational structure changed in 1999? .

Japan. and chairman David Aycock assumed his duties.     Iverson stepped down as the CEO of the company leaving the company to Cornetti. Di Micco. Brazil Sales and earnings declined and to regain price integrity the company raised its prices in 1999. . Foreign imports put a downward pressure on prices. became CEO of Nucor. Nucor slashed prices twice to compete against imports from Russia. Correnti resigned amidst disagreement with the board. In September of 2000 Aycock resigned from the company and Daniel R. a company veteran.

 In the period since 2001. what challenges does Nucor face? What approach has it taken to these challenges? Were its responses effective? .

.bought the assets of Trico Steel .acquired Birmingham steel. In 2001. Since 2002 they strategies was to go global.    Since 2001 demand was not stable. They tried to fluctuate their price based on demand. In 2002.

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