NUCOR CORPORATION

Submitted to Dr. John T. Hogan by Ramakrishna.Gutta

In Partial fulfillment of course requirement for MBA700

THE UNIVERSITY OF FINDLAY 04/24/2009

1. EXECUTIVE BRIEF: The weak dollar is helping US steel manufacturers export their steel. However, demand in the US markets for steel is weakened from the recent decline in building and expansion because of the weak economy. Home building in general has also declined Significantly due to the sub-prime mortgage issues seen within this sector. The weak dollar has provided a great opportunity for steel companies to export. US steel products are being exported at the best rate seen in many years. 10.3 million tons of steel where exported in the first 11 months of 2007 only 9 million tons were exported the previous period.5 Over the last 20 years steel makers have suffered significantly when the dollar has had high value. This competitive dollar has also led towards more foreign investment across the US market from the Euro zone because of the cheaper energy prices and labor when compared to Europe. Nucor has seemed to benefit from the increases activities of the US steel companies. Its most recent acquisition of David J. Joseph Co. a scrap metal supplier for $1.44 billion dollars is a sign that Nucor has been doing well proceedings. 2. SUMMARY OF THE CASE: Nucor steel is an industrial steel company headquartered in Charlotte, North Carolina. They are an innovative and lean company operating with safety in mind and a goal of returning investments to stockholders. There management system is extremely lean and consist of 5 levels containing only 75 members for a corporation of over 18,000 employees. Nucor is a highly segmented and independent company. They benefit from each manager operating there segment as its own business entity. This prospective allows Nucor to maintain a high degree of entrepreneurship throughout its vast corporation. Nucor maintains a high level of respect between management and its employees. This relationship has allowed management to achieve success through financial goals and has given employees job security and a great working environment. Nucor has essentially eliminated the barrier between

management and employee. The employees have the exact same benefits as management. Management has also taken on not buy corporate jets, cars, and country club memberships like other big time companies do. In fact a top manager of Nucor, Ken Iverson is often seen in NYC Riding the subway. This is something unheard of for someone of his status. Iverson also very rarely makes more than 1 million a year while his similar industry positions rake in amounts of up to 50 million.10 Nucor has also pioneered the mini-mill steel factory allowing for them to cut operating costs compared to traditionally steel factories. This mill has also led to reduction in energy use and pollution. Environmentally speaking Nucor has continued to be an industry best. Nucor recycles 1 ton of steel for every two seconds making it the largest recycler of any material in America--more than the nation's entire aluminum 3.COMPANY POSITION: In comparison with other top competitors like United States Steel Corporation, and commercial co, Nucor Corporation is in higher position, and still its position in the competitive market growing by its strategies. Since 2007, Nucor has made the two biggest acquisitions in its history, one to help control its raw material supply and the other to expand its product line. In the year 2007 Nucor agreed to pay $1.07 billion dollars for Canadas Harris Steel Co. The deal allowed Nucor to expand its presence in the type of steel used to build bridges, highways and other infrastructure projects, according to media report. And in the year 2008, Nucor agreed to pay $1.4 billion for DJJ, one of the largest scrap brokerages. In August 2007, Nucor acquired the four brands of Magnatrax (American Buildings Company, Gulf States Manufacturers, Kirby Building Systems and CBC Steel Buildings) for $280 million to bolster it share in the pre-engineered metal building systems market. As a result Nucor Buildings Group was created. In May 2008, Nucor also announced two joint ventures

overseas to capitalize on thriving construction markets outside the U.S.Nucor Today Nucor had sales of $23. 66 billion in 2008and employed 21,700 workers 4. INDUSTRY ANALASIS: through modernization of plants/facilities, has improved the competitive position of the industry by reducing the exposure of the industry to volatile labor markets and labor costs. It has also increased the flexibility of producers to shift product output and lent to the incorporation of the continuous casting process. Closely related is the elimination of the old open hearth furnace in favor of the blast-oxygen furnace and electric arc furnaces. These technologies are better suited for more efficient and easily automated operation and require less manpower. These furnaces also reduce stack emissions, a critical environmental requirement. The impact of increasingly more stringent environmental requirements has directly attacked the bottom line of industry balance sheets as emission levels mandate significant redirection of retained earnings into recapitalization. That foreign producers do not face such drastic requirements is an industry force that requires acknowledgement and planning, especially with respect to government relations. While technology has been a driver of change, labor agreements and relations have not always made it possible to fully exploit the benefits of technological improvements. 5. COMPANY MAJOR PROBLEM: The first is industry competitors, which is the intensity of rivalry among firms in the industry. There are two basic types of competition; price and quality. Nucor focused on the manufacturing segment know as minimills and thus saved on costly labor, raw materials, and the capitalintensive machinery necessary to produce steel from iron ore. Nucor was able to expand sales from the minimills by keeping costs below its competitors. Also, another means of maintaining quality control and costs was a highly decentralized organizational structure. Corporate staff

was kept to a minimum and individual plant-level mangers were given authority on decisions. By using the minimills and keeping the corporate staff to a minimum, costs would be kept at a minimum and quality would still be maintained; thus keeping the industry competitors in a need to keep up. The second is new entrants which were threats of new competitors entering the market. As was said before; the minimills and minimum corporate staff helped keep prices below competitors. In addition, the risk of adapting an untested German process for manufacturing flat steel also paid off and helped get the company ahead of the competitors. This process was quite a risk for the Nucor Company .Again by keeping price down and quality up, new entrants were kept from coming in and if they did decide to enter it would take them a lot to get up to Nucors level. The third and fourth are the bargaining power of consumer and buyers and these two are controlled by also keeping the costs down and the quality up. As long as Nucor carefully monitored costs and paid attention to the needs of its markets, then it had the upper hand in the decisions of the company because as long as they keep the top standing as cheapest and best quality production, then the consumer and buyers have no where else to go and thus can only follow what Nucor decides and therefore gives it the upper-hand. The fifth force is substitutes which is the threats of substitute products or services. This also is answered with; as long as prices are kept at a low and quality kept at a high then Nucor has the upper hand and people would have no need to go and find other substitutes elsewhere. 6. COMPETETIVE BUSINESS ANALYSIS

7 STRATEGIES FOR IMPLIMENTAION: The Miles and Snow adaptive model of strategy formulation suggests that organizations should pursue product/market strategies congruent with the external environments. A well chosen strategy, in this sense, allows one organization to successfully adapt to environmental challenges. There are four strategies; the prospector strategy, the defender strategy, the analyzer strategy, and the reactor strategy. The prospector strategy involves pursuing innovations and new opportunities in the face of risk and with prospects for growth. The risk of adapting an untested German process for manufacturing flat steel paid off and helped get the company ahead of the competitors but was quite a risk for the Nucor Company but Ken Iverson, CEO, who made the decision. Nucor also took a chance on the manufacturing segment know as minimills and thus saved on costly labor, raw materials, and the capital-intensive machinery necessary to produce steel from iron ore. Nucor was able to expand sales from the minimills by keeping costs below its competitors. The defender strategy is where an organization avoids change by emphasizing existing products and current market share without seeking growth. This was done through their highly decentralized organizational structure. Corporate staff was kept to a minimum and individual plant-level mangers were given authority on decisions. This structure was not changed even through expansion and increase in products. The analyzer strategy seeks to maintain the stability of a core business while exploring selective opportunities for innovation and change. Their highly decentralized organizational structure was never changed throughout their growth but Nucor was always trying to expand and take chances with products in order to get ahead.

The reactor strategy is primarily responding to competitive pressures in order to survive. The strategy of providing customers with a competitive product at competitive prices has brought success and growth to Nucor, in sales, income, and stock price. This need to keep prices down and quality up, has always given Nucor an upper hand in competition.