Nucor Corporation Case Analysis Competing Against Low-Cost Steel Imports
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Nucor Corporation: Competing Against Low-Cost Steel Imports
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Founded: In 1904– by Ransom Eli Olds (REO Motor Car Company)Incorporated: In 1955 as Nuclear Corporation of America.Expansion in steel joists, and the introduction of mini mills (1966 – 1970)Rapid growth in steel production and fabrication (1970 – 1986)Expansion of product line(1986-1996)Profile: 2nd largest steel manufacturer in USAHeadquartered: In Charlotte, North Carolina1st place in 2005 in the Business WeekTake Care of Our CustomersMission:Highest quality, lowest cost, most productive and most profitable steel. Being cultural and environmental stewards in communities where we live and work.Succeeding by working together.Vision:Ensuring price competitiveness through commodity nature of steel products. Productive workforce by ensuring production incentive planInnovative technology to reduce cost and also a safe working environment.Meeting customer requirements and delivery schedule.Challenging IssuesExcess capacity of global steel production and slow demand for steelKeeping low cost production capabilitiesMaintaining debt-asset and debt-equity ratiosDeclining market shareForeign competitionEnvironmental issues and regulationsRecommedndation:Lower the dependency on US marketResearch scrap alternatives To increase market share - more acquisition - building long-term relationship with customers - Pursue joint ventures in growing international market Decrease pollution to improve Nucor’s environmental image.
Transcript of Nucor Corporation Case Analysis Competing Against Low-Cost Steel Imports
Strategy
Nucor Corporation: Competing Against Low-Cost Steel ImportsMazed Hossain Mahin 13164080Sadman Shariar Biswas 12264004Md. Yasir Arafat 12264057 Nipupurni Biswas 12364006Sharmin Akter 13164074Shamima Nasrin 10364027Hasan Asif 12264069NUCOR CORPORATION AT A GLANCE
1950s and 1960s it was involved in the nuclear instrument and electronics businessIn 1464 F. Kenneth Iversion was appointed as president and CEOIn 1966 he moved head quarter from Phonix to CharlotteTotal revenue in 1985 was $758 million
NUCOR IN 2007Ken Iverson was regarded by many as a model company PresidentHe left company in 1998In 2000 Daniel R. Dimicco joined NucorRapid growth strategy- 11.2 million in 2000 to 22.1 million in 2006
Steel Products:Nucors First venture into steel in the late 1960sIn 1977, expanded into fabrication of steel deckingIn 1979, Nucor begun fabricating cold finished steel productsIn 2006, Nucor Cold Finish was largest producer of cold finished bars
STEEL MAKING
In 1968 built a mill in Darlington, South CarolinaIn 1981, they had four bar millsIn 2006 Nucor had 10 such plants with capacity of 7.7 million tons.
Strategy Four Part Growth Strategy
New AcquisitionsNew Plant ConstructionContinued Plant upgrades & Cost Reduction effortJoint VenturesSTRATEGIC ACQUISITIONSAcquired Auburn Steel company, ITEC ,Trico , Harris steel, Verco etc.Strengthen Customer Base.Geographic coverage and Lineup of product offering.To gain production capacity .Reduced price to better compete against foreign steel makers.
Commercialization of new technologies & New Plant Construction
Technology LeaderAggressive in constructing new plant capacityCastrip Technology Exclusive rights in United States & BrazilTechnological Breakthrough. Ability to use lower quality scrap steel90 % less energy requirement Environmental benefit Investing in the construction of new plant capacity.
The driver for Plant Efficiency and Low cost production
Continued Plant upgrade & Cost Reduction effort
Making capital investment to improve plant efficiency & keep production cost low.Use of State of the art technology .Investment to upgrade & fully modernize operation.ISO 14001 certified Environment management system in place by 2007 in all Plants.
GLOBAL GROWTH VIA JOINT VENTURE
Joint Venture with CVRD to construct & operate environment friendly pig iron project.Use of Eucalyptus trees as fuel.Partnered with RIO Trinto group, Mitsubishi Corporation & Shougang corporation to pioneer in Hismelt technology.Initiative to develop low cost substitute for scrap in TrinidadOPERATIONS At Nucors, sophisticated rolling mills converted Billets, booms, and slabs to-
RebarAnglesFlatSheetChannelsBeams
Rounds12Nucor Steel Mills Operations Are-Highly automatedFewer operating employeesLower labor costJust-in-time inventory mood
Operations Value ChainInvolves fewer production stepsFar less capital investmentConsiderably less labor
Organization & Management Philosophy Nucors decentralized management structure had three management layers.
15Managements Philosophy is Quite Friendly-
Operate with minimal restrictionsFriendly spirit of competitionShared same bonus systemsFunctioned as a teamReplace group or plant manager
HUMAN RESOURCE POLICYEmployee relations were based on the following Principles:
Employees would earn according to their productivityEmployees should feel confident that if they do their jobs properly, they would have a job tomorrowEmployees have the right to be treated fairlyPERFORMANCE BASED SALARY SYSTEM
They know clearly that effort can drive to high performancePerformance Based Salary SystemMakes them know the outcome of performance
EffortPerformanceOutcomeMotivationEveryone will get benefitsProduction incentive planDepartment manager incentive plan
Professional and clerical bonus plan
Seniors officers incentive plan
PRICING AND MARKETING STRATEGYPrice VariedSame Price and Sales TermsContractual StrategyDeveloping plant in suppliers areaVerco acquisitionVulcraft systemNucorS Average Sales Prices (per ton) for Steel Products, by Product Category 2006PeriodSheetBarsStructuralPlateSteel JoistsSteel DeckCold FinishedOverall Price Per Ton2006Qtr 1$594$543$649$698$1104$938$1010$631Qtr 262556766771210929301033654Qtr 367360170374611229461067702Qtr 462457672773211751031998683GLOBAL DEMAND FOR STEEL PRODUCTSRegion200020012002200320042005European Union177.6174.6173.2176.0185.2176.8Other European Countries60.864.163.071.875.680.1North American161.6145.6145.9143.5164.2149.7Central and South America31.031.830.430.436.035.8Africa17.018.420.321.022.624.7Middle East21.725.527.933.333.738.2Asia353.0382.7432.8496.2546.7602.8Australia, New Zealand7.46.97.98.38.88.7World Total830.2849.6901.5980.61072.91116.8GLOBAL DEMAND FOR STEEL PRODUCTSMittal SteelFew LocationGeographical CoverageQuantityHighLowMany LocationSTRATEGIC GROUP MAPArcelorNipponPoscoJFEBAONUCORUS SteelCorusTHE STRUCTURAL DETERMINANTS OF COMPETITION
SWOTStrengthUnique Management Philosophy.Cost control In a product market with little room for differentiationInnovation
WeaknessExposure to fluctuation in price of scrap steelLack of market diversificationOpportunitiesExpansion through acquisition of failing steel makersPolitical support in the enforcement of trade lawThreatsIncrease foreign competition in its local marketsTechnological advancementAging baby boomersFactors affecting the industryEmerging technologyRecirculation of scrap steelLimited resourcesGlobal forces inflation, govt. trade barriersRecommendationSaturation of local market The local market has become saturated and has become less attractive for Nucor to operate in. In a product market with little room for differentiation, excess capacity is likely to lead to further price. Spreading of risk through market diversification Going overseas will help to mitigate this risk and provide them with a more balanced market portfolio.Access to labor Expanding overseas is likely to give them better access to labor and thus reduce labor cost associated in the production of steel. Acquiring a steel maker- with significance presence in IndiaThank you!
