Post on 11-Jan-2016
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Presented by:
Erum SyedMirza Ehtesham
Napacha SuttitumSantid Panichapong
External Analysis• General Environment Analysis• Driving Forces• Porter’s Five Forces• Key Success FactorsInternal Analysis• Organization Analysis• Financial Analysis• Strategic Analysis• Core CompetenciesSWOT AnalysisRecommendations
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Overview
• General Environment Analysis
• Driving Forces
• Porter’s Five Forces
• Key Success Factors
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External Analysis
External Analysis
General Environment Analysis
General Environment TREND
Demographic POSITIVE
Political POSITIVE
Socio-Cultural POSITIVE
Technological POSITIVE
Economic POSITIVE
Global POSITIVE
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External Analysis
Global SegmentGlobal
Segment
Technological Segment
Technological Segment
Socio-Culture
Segment
Socio-Culture
Segment
Political/Legal
Segment
Political/Legal
Segment
Economic Segment
Economic Segment
Demographic Segment
Demographic Segment
G.E. Analysis
G.E. Analysis
Driving Forces
TechnologyCost reductionInnovative
processes
Economic Climatelow interest rates Increasing Steel demand
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External Analysis
Five Forces Competitive Analysis
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External Analysis
Power of Suppliers
Threat of Substitutes
Power of Buyers
Threat of New
Entrants
Rivalry Among Competitors
HIGH HIGH
LOW
LOW
HIGH
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External Analysis
Key Success Factors
Lowering Operation Cost
Innovative Technologies
Increase Market Share
Environmental Friendly
Internal Analysis
• Organizational Analysis
• Financial Analysis
• Strategic Analysis
• Core Competencies
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Internal Analysis
Organizational Analysis
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Internal Analysis
Organization NUCOR
Mission / Goal “Take Care of Our Customers.”
Leadership CEO: Daniel R. DiMicco (55)
Organization Culture Zero lay off / Innovative
Structure Decentralized
Daniel R. DiMicco since Sep 2000
Products
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Internal Analysis
Financial Analysis
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Internal Analysis
Nucor (NUE) Industry United States Steel (X)Financial Analysis 2003 2004 2005 2006 2006 2003 2004 2005 2006P/E Ratio (TTM) 70 7.5 8.1 12.4 12.33 -4.3 6.1 6.9 9.7Revenue Growth 30.50% 81.60% 11.60% 21.00% 18.99% 34.10% 49.20% -0.50% 14.70%Net Margin (TTM) 1.00% 9.86% 10.32% 10.78% 10.79% -5.06% 7.61% 6.35% 5.88%
21.0018.99
14.70
NUE
Indust
ry X
10.78 10.79
5.88
NUE
Indust
ry X
12.40 12.30
9.70
P / E Ratio Revenue Growth Net Margin
Financial Analysis
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Internal Analysis
Nucor (NUE) Industry United States Steel (X)Financial Analysis 2003 2004 2005 2006 2006 2003 2004 2005 2006Return On Assets (TTM) 1.42% 21.11% 19.75% 20.62% 17.14% -6.06% 11.42% 8.59% 7.87%Return On Equity (TTM) 2.69% 38.98% 33.99% 34.50% 34.54% -39.30% 68.28% 26.10% 20.16%
34.50 34.54
20.16
NUE
Indust
ry X
20.62
17.14
7.87
ROA ROE
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Internal Analysis
NYSEPrice : 58.64 (12/1/06)
52 Wk High 61.70
52 Wk Low 32.18 0.2
3.54.1
2003 2004 2005
Dividend Yield1.3
0.90.8
EPS
NUE
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Internal Analysis
Core Competencies and Sustainable
Advantages Valuable Capabilities ?
Yes
Costly-to-imitate ?
Yes
Rare Capabilities ?
Yes
Non-substitutable ?
Yes
Result: Nucor has sustainable competitive advantage and its performance implications rated in above
average returns
Strategic Analysis• Corporate Level
– Optimize existing operations– Use Greenfield technology– Acquisitions– Go Global
• Business-Level– Low-end products– Highest quality mini milled steel– Offer low and competitive prices– Lean management style
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Internal Analysis
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SWOT Analysis
SWOT Analysis
SWOT Analysis
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SWOT Analysis
Strengths Financial Strength Technology innovator Decentralized business units,
high employee empowerment
Opportunities Acquisition strategiesLeverage, extend technology
advantageHigh Demand
Weaknesses High cost of Mini mill operation Exposure to economic,
business cycles of customers Lack of international presence
Threats High price of raw material Increasing consolidation
/Oversea competitors Changes in the cost of
electricity and natural gas
Alternatives
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SWOT Analysis
CURRENT PRODUCTS/SERVICES NEW PRODUCTS/SERVICES
CURRENT MARKET MARKET PENETRATION New processes to reduce
energy costs Acquire existing steel firms in
US Low-cost productivity
PRODUCT DEVELOPMENT Technology initiatives in
Hismelt, Strip casting Modification in steel
making process
NEW MARKET MARKET DEVELOPMENT Acquisition in India
investment in China Joint venture with foreign
companies Acquisition of a current
supplier
DIVERSIFICATION R & D initiatives
RecommendationsInternal Strategy Recommendation
• Reduce energy cost by Wind Turbine
External Strategy Recommendation
Acquisition in India
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Recommendations
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Recommendations
Recommendation 1
Internal Strategy Recommendation
• Reduce energy cost by Wind Turbine
Objectives
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Internal Strategy Recommendation
• Implementation of wind turbines at five of its existing plants
• Locations: Auburn, Chemung, Denton, Norfolk, Seattle
• 12 month project
• $2.5 million per turbine
• Total budget of $13.5 million
• Auburn, NY
• Chemung, NY
• Denton, TX
• Norfolk, NE
• Seattle, WA
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Internal Strategy Recommendation
Locations
Justification
• Reduce energy costs• Reduce production
costs• Environmentally
friendly• Payback period of 6.2
years• $4.48 million NPV
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Internal Strategy Recommendation
Regular Electricity Consumption
Average cost of electricity per Kilowatt (cents) 9.015
Average production of steel at five plants (tons)
2,000,000
Average electricity consumed by five plants (KW) 1,133,000,000
Total Electricity Cost $1,018,751,831
Electricity Consumption with Wind Turbines
Electricity Production with five wind turbines (KW) 23,470,000
Cost of purchasing 23,470,000 KW from Electric company $ 2,115,821
Deliverables• Five wind turbines will be purchased
from G.E Co.
• Five plants with one 1.5 Megawatt/hr. wind turbine each
• The total capacity will be 13,140 Megawatts
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Internal Strategy Recommendation
Implementation and Milestones
• Initiate immediately for all five locations– 12 month of installation and conversion
• Wind turbines will generate portion of mini mills electrical demand
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Internal Strategy Recommendation
Risk Analysis
• Purchasing/Installation costs may rise• Actual savings less than expected
savings
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Internal Strategy Recommendation
Long Term Effects
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Internal Strategy Recommendation
• Financial Implications (12 month project)– Saving of $2 million in electrical expense per
year– Recovery of initial investments in 6.2 years
• Promote “going green” image
• Base for future expansion of this project
External Strategy Recommendation Acquisition in India
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Recommendations
Recommendations 2
ObjectiveAcquisition in India
• Global presence of Nucor outside of the United States
• Acquire small companies in India such as MSP Steel and Power Ltd.
• 12 Month Period• Budget of $20 million • Lower production costs
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External Strategy Recommendation
Justification• Steel consumption is on the rise globally • Explore international markets• Shift production to low-cost countries
MSP Steel (MSPL)In thousands U.S. dollars 2002 2003 2004 2005 2006Total Income 318.56 888.39 1,085.81 8,477.85 19,304.54Operating Profit 4.49 -8.97 65.06 1,590.58 2,090.86Net Profit 2.24 2.24 60.57 549.64 246.78
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External Strategy Recommendation
MSPL : National Stock Exchange of India
318.56888.391,085.81
8477.9
19305
INCOME
Deliverables• Acquisition of MSP Steel in India within
12 month period
• Nucor will invest $15.33 Million
• Incorporate new and advanced technologies
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External Strategy Recommendation
Implementation and Milestones
• Acquisition in India should be initiated immediately
• Follow the acquisition steps
• Implement modifications to the existing steel company
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External Strategy Recommendation
Risk Analysis
• Not enough return back on investments
• Sudden decrease in the demand for steel
• Uncertainty of raw material supply
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External Strategy Recommendation
Long Term Effects
• Gain competitiveness
• Cut production costs
• Strong domestic growth in India
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External Strategy Recommendation
• Driving Forces• Key Success Factors• SWOT• Action Plans• Success
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Conclusion
Conclusion