sm nucor corporation

8/2/2019 SM Nucor Corporation

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CASE ANALYSIS

STRATEGIC MANAGEMENT

NUCOR CORPORATION: COMPETING AGAINSTLOW-COST STEEL IMPORTS

Alberto Torres Navarro

Kurnya Kusuma Dewy

Vitri Vidia Rizalanti

Batch 56/ International

Master of Management ProgramFaculty of Economics and Business

Gadjah Mada University

YOGYAKARTA

2011


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I. Company background

In the 50's and 60 Nuclear Corporation was involved in the nuclear instrument and electronics business.

Nuclear Corporation at that time had large losses and was on the verge of bankruptcy due to poor

financial situation. Because of this, the Board looks for new leader with different ideas, F. Kenneth

Iverson. Change the policy of the company or wanted Nucor take a totally different way with its

successful subsidiary Vulcraft in the steel business. It was from that time when the company name

change. Later, in 1968, Nucor's management decided on backward integration in the manufacture of

steel to apply the benefits of supplying steel products to their own needs. Long-term strategy Iverson

became the major player in the steel industry in the U.S

He designed and carried out a strategy of low cost, and carries out policies of austerity. Iverson had to

leave the company following disagreements with the Board in 1998 and was succeeded by DiMicco.Disagreements are blamed on managers who wanted more privileges and wanted to implement

austerity Iverson full.

Companies in process of development countries are dumping steel on U.S. companies because they are

subsidized in their countries. After many acquisitions and joint ventures worldwide, Nucor is in a

macroeconomic point of recession and global slowdown. Nuchal has the advantage that it was too big so

got new customers and has a comparative advantage because of the synergies.

II. Research QuestionsIs it a good idea to continue to make purchases to expand the company and gain new customers?

How to create new strategy in term of to win the market because there are so many dumping steel

products from foreign steel companies?

III. Analysis

1.Five forces

a. Industry rivalry among competitors

The steel industry is mature with intense competition. Nucor competes with Mittal Steel and U.S steel.

Apart from the local players global players are in the market to with imports from Russia, Brazil and

China. High rivalry in the industry makes the attractiveness low. However Nucors acquisition

Crawfordsville had a newer technological innovation called the Castrip technology which differentiated

their product. This differentiation is ideal to stand high against rivalry.


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b. Suppliers

If the numbers of suppliers are reduced the suppliers bargaining power is increased. Nucor acquired

many steel firms in the industry and holds a large portion of the industry. Nucor has increased their

bargaining power as a single firm. Yet they stand second largest to U.S steel. Global joint ventures Nucor

holds with firms still gives them additional influence. Nucor acquired other steel producing firms that

produce different steel products like girders roofs etc so the switching costs for Nucor is comparatively

less.

c. Potential New Entrants

Industry attractiveness is low with many players and the market being saturated. Entry into any industry

depends directly on the associated costs. With globalization being the current trend and the merging of

many competitors, the barriers to entry have increased. Economies

of scale and capital requirements are the greatest barriers in the steel industry. Larger quantity orders of

rawmaterial are usually discounted. The initial investment is low and economies of scale can be derived

which makes the barriers to entry lesser.

d. Buyer Power

Buyers pose arguably the greatest threat. Price competition develops from buyers having low switching

costs and low product differentiation. Steel industry is the buyers market and that is why Nucor produces

to customer specification the cold finished steel products with requested shapes. Numbers of suppliers are

high which means their influence is low. Nucors buyers are mainly automobile, farming, etc

d. Substitutes product

In this case there should be an alternative to steel that would be a threatening substitute. From auto

manufacturing, to structural supports, to fasteners, there are relatively few products available with the

strength, durability, and cost efficiencies of steel. Plastics are a newer product that substitutes to some

extent because it lacks characteristics that steel exhibits. 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.

2. Key success factors

- Strategic acquisitions. Nucor carried out an aggressive acquisition policy to grow and win customers


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-Commercialization of new technologies and new plant construction. To continue to be a technology

leader and to be aggressive in constructing new plant capacity

-The drive for plant efficiency and low-cost production. A jey part of Nucors strategy was to continue

making capital investment to improve plant efficiency and keep production cost low

-Global growth via Joint Ventures. Nucors strategy to participate in foreign steel markets was via joint

ventures involving pioneering use of new steelmaking technologies

3.SWOT analysis

Strengths

-Because the purchases, Nucor is a large group integrated backwards and they can enjoy multiple

economies of scale

-The industry is in a mature product life cycle stage but Nucor had remarkable profits by earning a profit

in every quarter.

-Nucors technological advantage by having efficient new state of the art equipment and facilities keeps

them higher than their rivals. Their low cost strategy where the labor cost is only 8% of revenue helps

them to maintain their long term growth.

Weaknesses

-Nucor dont diversify to other components.

Opportunities

-Nucor can become multinational instead of joint ventures .

Threats

-Dumping of steel to the U.S

IV. Conclusion and recomendationNucor has to be comprehensive and must continue to grow and has to continue to compete at

competitive prices because the new countries in process of development requires large investments in

infrastructure steel at competitive prices. Therefore, Nucol should continue its policy of low-cost

differentiation.

Nucor has to find and use new technological advances to reduce energy costs and which is its main

threat in the future

sm nucor corporation

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