Nucor Case Study

Business Summary and Strategy

Nucor is the largest steel manufacturer in the United States. It remains a profitable company despite being in one of the most cyclical industries in the economy. Nucor enjoys this success for several reasons, employee relations, quality, productivity, and aggressive pursuit of innovation and technical excellence. NucorÐŽ¦s strategy is that of a low cost provider, they know they are selling a commodity and understand their competitive edge in the industry is lowering prices through innovation and productivity. The company operates primarily in two business areas, steel mills and steel products.

Steel Industry Outlook

Driving Forces:

„« Globalization ÐŽV Low cost foreign manufacturers ÐŽ§dumpingЎЁ steel in the U.S. and other markets.

„« Changes in the economy

„« Changes in currency valuations

„« Input/raw material prices

Key Success Factors:

„« Technological innovation ÐŽV such as the strip casting technology, investing in technology such as this allows Nucor to take calculated risks to ultimately lower their cost to produce steel subsequently raising margins. They now own the U.S. and Brazil rights to this technology.

„« Employee relations ÐŽV Nucor employees are more productive, loyal and Nucor has lower employee cost than competitors.

„« Global Economic growth ÐŽV if global and U.S. growth continue, Nucor will continue growth.

„« Product Quality ÐŽV Nucor has a reputation for quality products.

„« Market Share ÐŽV gain market share, squeeze out competition by being low cost provider. Once competitors are limited, then margins can be increased.

PorterÐŽ¦s Five Forces:

„« Competition ÐŽV as stated earlier, competition is fierce and foreign competitors are dumping steel.

„« Barriers to entry ÐŽV are typically high, it requires a very large amount of money and expertise to enter the industry. The industry is consolidating not growing.

„« Substitute products ÐŽV plastics and other components have taken market share from steel and will continue to do so.

„« Seller-Buyer ÐŽV since there is such heavy competition in the industry and there is excess capacity it is a buyers market.

„« Supplier Seller ÐŽV Nucor is heavily reliant on the producers of iron ore and scrap.

Company Resources

Strengths ÐŽV Most profitable steel company in the U.S., highly productive, non-union workforce, technological/innovation leader in the industry, decentralized management structure, financial strength

Weaknesses ÐŽV heavy reliance on the U.S. market, highly cyclical industry, decentralized