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NUCOR CORPORATION CASE ANALYSIS 2
Table of Contents
Background ................................................................................................................................ 3
Financial Analysis ...................................................................................................................... 3
Financial Performance Analysis Table .................................................................................. 3
PESTEL Analysis ...................................................................................................................... 4
Political Factors ..................................................................................................................... 4
Economic Conditions ............................................................................................................. 5
Sociocultural Factors ............................................................................................................. 5
Technological Factors ............................................................................................................ 6
Environmental Factors ........................................................................................................... 6
Legal and Regulatory Factors ................................................................................................ 6
Five Forces Analysis .................................................................................................................. 7
Threat of New Entrants: Low ................................................................................................ 7
Threat of Substitute Products: Moderate ............................................................................... 7
Bargaining Power of Suppliers: Moderate ............................................................................. 8
Bargaining Power of Buyers: High ........................................................................................ 8
Intensity of Rivalry: High ...................................................................................................... 8
SWOT Analysis ......................................................................................................................... 9
Strengths ................................................................................................................................ 9
Weaknesses .......................................................................................................................... 10
Opportunities........................................................................................................................ 10
Threats.................................................................................................................................. 11
Value Chain Analysis: Primary ............................................................................................... 11
Inbound Logistics................................................................................................................. 11
Operations ............................................................................................................................ 12
Outbound Logistics .............................................................................................................. 12
Marketing and Sales ............................................................................................................. 12
Service.................................................................................................................................. 12
Value Chain Analysis: Secondary ........................................................................................... 13
Organizational Structure ...................................................................................................... 13
Technological Development ................................................................................................ 13
Procurement ......................................................................................................................... 14
Core Competences ................................................................................................................... 14
Core Competencies: VRIO analysis .................................................................................... 15
Core Strategies ..................................................................................................................... 16
References ................................................................................................................................ 18
NUCOR CORPORATION CASE ANALYSIS 3
Background
among the largest steel manufacturers with a current production capacity of 27 million tonnes
of steel per year. It was founded by Ken Iverson (CEO) in 1960 and currently operates in 9
states. The company was a pioneer in producing steel using mini-mills and electric furnaces.
The company has more than 20,500 employees. The company recorded a profit of 21.1
billion US dollars in 2014. Nucor Corporation’s mission is to “Take Care of Our Customers”.
Consequently, the company strives to achieve this by providing most profitable and
productive, high quality, lowest cost, and safest steel and steel products to its customers
Financial Analysis
Nucor has enjoyed attractive profits for decades. Since the company’s beginning it
has only experienced a loss in one year and that was in 2009 following the economic crisis,
from which it quickly bounced back. The following table shows the summary of key financial
ratios of the company that indicate its past progressive performance in 2012, 2013, and 2014.
Industry
Performance Measure 2012 2013 2014
Average
Liquidity
NUCOR CORPORATION CASE ANALYSIS 4
Asset Management
Profitability
PESTEL Analysis
Political Factors
NUCOR CORPORATION CASE ANALYSIS 5
Nucor Corporation has faced political factors during the time of the Clinton
administration. In 1999, steel companies in Canada, South Korea, Taiwan, Italy, Belgium,
and South Africa were illegally dumping stainless steel in the United States. Governments
of Belgium, Italy, and South Africa accelerated the dumping by giving their steel producers
unfair subsidies that partially made up for the revenue losses companies from these
countries were experiencing. Clinton and Congress did not impose tariffs or quotas on
imported steel, which precipitated the number of bankruptcy filings by U.S. steel companies
(Cash, 2011). Though, trade practices were regulated by the Bush Administration in the
early 2000’s Nucor still faces market share loss today to foreign competitors dumping steel
Economic Conditions
the industry they manage to cope with these times better than most. The 2001 financial crisis
led to diminished sales for the company that took several years following to creep back up
to healthy profits. Then again in the crisis of 2008 Nucor Corporation experienced lower
than average profits for years to come and are still recovering to this day. Foreign exchange
rates also affect Nucor sales in a negative manner. Manipulation of rates by governments in
foreign countries such as China allows their companies to sell steel in the United States at
rock bottom prices while remaining profitable (Cash, 2011). In response steel firms in the
U.S. are losing market share and are forced to lay off thousands of employees raising the
unemployment rate.
Sociocultural Factors
NUCOR CORPORATION CASE ANALYSIS 6
Population growth is a massive force that has an impact on Nucor Corporation and
the steel industry. The need for steel to erect buildings and houses, and build automobiles is
increasing with the growth of populations in all regions. This helps boost sales volumes for
Nucor and its competitors leading to more desirable profit margins. Consumers increased
interests in going green creates the need for steel companies to be more economically
friendly (Dlabay & Scott, 2010). Nucor strives to be a leader in this category as they update
their plants with the technology needed to perform jobs in the most environmentally friendly
Technological Factors
There are not any outside technological advances that directly affect companies in the
steel industry. However, technological advances within the steel industry have a significant
impact on the efficiency in which companies operate. Nucor Corporation has been an early
Hoskisson, 2007). This allows the company to disrupt efforts of competitors in matching
Nucor Corporation’s cost competitiveness and product quality, and overtake competitors in
Environmental Factors
The case does not describe any environmental factors that have an impact on the steel
industry. The only aspect that may be an issue would be severe weather that eliminates the
capability to ship products to different regions limiting the ability to fill orders on time.
There are no specific legal, and regulatory factors stated within the case. However,
constantly focusing on new ways to reduce or recycle their use of energy. They also make
improvements to their plants to lower their emissions. Therefore, any regulations imposed
Nucor Corporation and would have minimal impact on the company’s productivity and
Industries typically have to worry about the threat of new suppliers to the market;
however, in the steel industry the threat is quite low. The steel industry is comprised of few
well-planted companies who have been in the industry for decades. A new corporation
would not have the managerial experience, distribution channels, name recognition, capital,
or production capabilities to get even their foot in the door in this industry.
Though there is not a direct substitute for steel, as it has to be used in many
applications there are varying qualities of steel that customers can choose from. Nucor was
aware that there was a need for high-quality products by customers leading to a shift in
production in 2010 to start including value-added products (Witcher & Chau, 2010). With
the implication of mass-producing galvanized steel in the new heat treated facilities, Nucor
essentially eliminated the risk of substitute products of other companies by offering higher
quality products that had a high demand. By offering these different degrees of product
Supplier’s prices for a long time have had a substantial effect on Nucor’s operating
and production costs. They were required to purchase large quantities of scrap metal and
scrap substitutes for production. Scrap prices driven by market demand fluctuated
tremendously making it at times very expensive for Nucor to produce steel. Nucor has
reduced these costs by integrating backward to produce internally almost 5 million tons of
substitute scrap metal annually to be used in production. Though they are now producing a
lot of their raw material used in production they still have to purchase from outside suppliers
Buyer bargaining power has a substantial impact on the success of Nucor as they
compete to obtain repeat customers from competitors. Purchasers of steel have a multitude
of domestic and international producers to choose to do business with. Nucor strives to keep
prices and distribution costs low as well as produce quality material to appear a favourable
choice for customers. The greatest power a buyer has been the choice to invest in an
alternate supplier where they feel their dollar is better utilized. To eliminate buyer
bargaining power, Nucor must continue to improve technology to create top notch products
at a low cost, and convince customers that their product is perceived as having the best
value.
Nucor faces rivalry from domestic as well as foreign steel producers. It is entrenched
in an industry where competition is fierce due to limited differentiation and high switching
costs. Being a low price leader and having the ability to meet customer demands is of utmost
NUCOR CORPORATION CASE ANALYSIS 9
importance for gaining large portions of market share. Technological advancements are
prices. Though there is an annual growth rate of 5.5% for the demand of steel, companies
SWOT Analysis
Strengths
efficient and promotes high productivity while minimizing waste rates. The company
focuses on the use of incentive programs that play a central role in motivating the
employees to work hard, develop high quality, reduce costs, enhance delivery
services, as well as offer competitive prices. The company has sustained good
Strong brand name: Nucor Corporation has built a robust brand name both locally
Economies of scale: Nucor Corporation has vast economies of scale as it buys scrap
metal in bulk so as to produce large quantities of steel products at cheaper costs per
tonne. The company’s operations are set up to produce millions of tonnes of steel
economies of scale.
production and produce more product quantities with less effort therefore driving
their costs down. The company has also trained its workforce to enforce strategies to
NUCOR CORPORATION CASE ANALYSIS 10
enhance product quality and maintain cost per tonne low compared to the
competitors.
Weaknesses
High shipping costs: the company incurs enormous expenses in shipping material to
Limited range of products: the company relies heavily on steel and steel products
High dependence on local market: the company’s largest portion of sales is made
in the United States, which would present severe risks if the steel industry in the
Opportunities
Expansion to European and Asian markets: Nucor Corporation can expand to the
European and Asian markets to improve its global market share and competitiveness.
scale would help lower costs of production and increase sales through competitive
pricing.
Technological and product innovation: new technology has played a central role in
developing multiple sizes and shapes of steel sheets, beams, rods, and pilings among
Acquisition of scrap metal producing companies: this move would lower costs by
eliminating the need to buy scrap metals for production from outside suppliers
NUCOR CORPORATION CASE ANALYSIS 11
Threats
manufacturers in China and India pose a significant threat to the market share of
Nucor Corporation and long term profitability and expansion strategies. These
foreign players have a cost advantage, and Nucor Corporation have to strategize to
Raw material costs may continue increasing: rising cost of raw materials would
slow down the growth rate of the company in the long term and harm its competitive
capacity.
continued to provide goods and services that match or surpass those of Nucor
Labour costs may increase: continued lobbying of increased wages and salaries in
the country and expansion of operations in the company could result in increased
Inbound Logistics
NUCOR CORPORATION CASE ANALYSIS 12
The company focuses on developing processes to create own raw materials to avoid
an increase in base price and transportation prices. Besides, superior computerized inventory
management helps the beat out competitors, making them superior to competitors.
Operations
Nucor Corporation has controlled process in the production of steel before being
passed to inspection for quality assurance. The workers have control and responsibility for
quality of each product. Approaches to increasing flexibility have helped cut costs and
increase opportunities.
Outbound Logistics
Nucor Corporation distributes its steel products all over the world with attractive
exchange rates for foreign buyers. Projects in Australia, Trinidad, and Brazil have also
played a critical role in improving its brand awareness efforts. The company also
coordinates well with its suppliers and those in its supply chain, making operations more
In the business, individual plants control marketing and sales through a decentralized
system. Strong alliances, acquisitions, and joint ventures have contributed significantly to
the company’s marketing strategies. The company uses national advertising campaigns to
market products. It has initiated strong selling forces because of adoption of computer
Service
NUCOR CORPORATION CASE ANALYSIS 13
Nucor has a strong brand name associated with innovation, quality, and cost-
effectiveness. As an innovative company that puts their employees and stockholders first the
company offers efficient customer service and prioritizes customer satisfaction. The firm
also continually tries to obtain and supply the lowest prices possible.
Organizational Structure
are highly decentralized and thus allows for more freedom and flexibility for each division
manager. The managers often collaborate and share efforts to improve each other’s
division. All the vice presidents and general managers share the same bonus rates, so there is
a real effort for everyone to succeed at Nucor Corporation. The distinctive organizational
style sets Nucor Corporation apart from its competitors, keeping them superior in this
aspect.
The company has a history of treating their employees very well. Nucor Corporation
believes that satisfied employees and autonomy is secret to production efficiency. The
company ensures the flow of information and practice equality among employees. It uses a
lean, bottom-line approach aimed at empowering workers. This approach helps keep Nucor
Technological Development
NUCOR CORPORATION CASE ANALYSIS 14
helps to avoid research and development costs while ensuring constant adaptation of
technology since technology is always changing. Nucor enjoys more efficient rates, high
Procurement
Merger and Acquisition strategy for scrap metal companies increased flexibility for
Nucor Corporation and reduced the dependence on external suppliers of materials, thus
improving the bottom line. It enables the firm to have the capacity to produce and have
Core Competences
Strategic Acquisitions and Joint Ventures: This is the primary success factor that
helped the company increase capacity and capability against rivals. The major
Corus Steel, Fort Howard, Marion, Connecticut, Verco, Harris Steel, Fisher, and
competition in the steel business (Nucor Corporation, 2014). To make an entry into
the international market, Nucor entered joint ventures with foreign companies that
helped them to enter foreign markets. These joint ventures were established not only
to enter the international market but also to attain the technological advancement and
low-cost raw materials thereby making them an active player in the steel industry.
Low Priced Products: Nucor is a leader in the low cost of production of steel,
offering prices than their local competitors. With the low cost of production strategy,
NUCOR CORPORATION CASE ANALYSIS 15
the company was able to sell their products at a low price that helped them to acquire
techniques to decrease costs for both in production and for the pricing.
Lean Management Structure: the use of an efficient lean management team lowers
costs significantly, enhances the decision making process, and improves efficiency.
The decentralized system with autonomous power to get activities done quickly
Human Resource Management: Employees enjoy their job, and they are treated
well. The company also has trademark employee incentives and benefits that allow
their employees to be one of the highest paid groups in Steel Industry. High
efficiency is always rewarded, and Labourers paid bonuses of 60% of their base
salary for quick production times. Employees also get opportunities for investment
VRIO Analysis
to organization? implications
imitate?
Ability
Acquisitions Parity
Management Parity
Customer Parity
Experience
Core Strategies
over their competitors. The company differentiated its products and services by offering steel
users with a broad range of steel products. The following are the three critical approaches the
company employs to distinguish its goods and services to sustain its competitive position.
improving the productivity of labour and reducing the cost of production significantly.
Besides, the management system of the company was planned in a way that
processes. All these practices helped Nucor to have a competitive advantage over the
competitors.
existing steel manufacturers who had significant potential growth in the industry. The
acquisitions assisted the firm to improve its portfolio of products, new domestic
use of innovation and technology. The company develops the cost advantage by
manufacture steel. The firm also invests significantly in research and development,
and has a lean management structure, giving them even more efficiency.
NUCOR CORPORATION CASE ANALYSIS 18
References
Cash, R. M. (2011). Advancing differentiation: Thinking and learning for the 21st century.
Dlabay, L. R., & Scott, J. C. (2010). International business. Mason, Ohio: South-Western.
file:///C:/Users/User/Downloads/80768%20NUC%202014%20Annual%20Report_R
1_Final_LR.PDF
Witcher, B. J., & Chau, V. S. (2010). Strategic management: Principles and practice. S.l.:
Cengage Learning.