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CASE ANALYSIS

Nucor at a Crossroads

(GROUP – 03)

Bharanidharan G, A-08

Harinder Singh, A-12

Praveen Arora, A-28

Randolph Vaz, A-31

Vinod Mathews, A-50

Instructor: Professor Srinivas Gunta


CASE FACTS

1. Background. Nucor Corporation is a United States based steel manufacturing company one of the
largest mini mill steel manufacturers . They were doing exceeding well since the days of the
companies transformation from Reo a manufacturer of motorcars to its present state under its CEO
Ken Iverson, however Nucor has in 1982 experienced its first slump or sales decline . They have
started to scan the environment for thin slab casting technology a year later .

2.Decision. The decision to be taken by the management of Nucor is should they commit to SMS
technology which they have shortlisted as High cost producers face a dim future of weak demand
and price concessions while Low cost producers are poised to succeed, but they must fight foreign
firms seeking to dump excess capacity and gain market share. Technological leapfrogging is
another major worry. Will this technology still remain viable and cost effective or will it get
obsolete?

3. There was no commercially viable process for obtaining thin sheets as of that time .Thus it is
clear that the process itself is not proven for commercial exploitation but it holds promise for the
Nucor to capture the largest component of US steel segments and gain early mover advantage. This
will result in capturing market for automobile and appliances sector which are the largest
consumers of flat sheet materials. The future of US industry lies in the flat products and it will
provide Nucor a competitive advantage in flat rolled products as more than 50 % of market
is from flat products. The other factors to consider are that by employing thin slab casting
technology vis a vis the technology being used currently by integrated steel mills, smaller
size of plants will be sufficient for achieving economics of scale .Most steel companies in
the US are in major cities and have much higher operating costs. Import share is low in flat
sheet segment. 52% of total steel consumption is in the flat sheet segment .Demand for
steel has presently stagnated in the US market but, Experienced players can enter and sustain in
the market. There is also a threat of substitutes ,Plastic, aluminium, advanced composites industry
are taking over market share of steel in future.

4. Recommendations. Though Investing in uncertain technology it is a strategic commitment


which has to be taken and the purchase of the new steel mill and commercialisation of thin slab
technology using SMS is recommended however they need to do the following:-
(a) More evaluation of performance data on prototypes of thin slab casting machinery, so that
problems if any can be rectified before commercialisation.

(b) Even if the technology was proven , it will become obsolete in 10-12 years so there has to be
some flexibility in the plant design, then even if the technology becomes obsolete, Nucor will
have first mover advantage and will reap in benefits by that time. There is uncertainty on returns,
low cost imports but ,Thin slab casting will provide a window of opportunity for future
technology and 50 % of total steel market of US as the cost of production will be cheaper by this
process. Resource allocation for two technologies Wide Flange beams and thin slab casting
required. One holds promise for the future and the other will help in focusing on Niche market .
The way ahead seems to be firstly focus has to on low end market then on high end markets of
Automobile and appliances.

(c) With large scale adoption of Thin slab casting technologies, scrap prices will be likely to go
up , thus the flexibility of using direct reduced iron as raw material at the design stage has to be
explored.