NUCOR

Overview of Analysis
Snapshot
of Nucor

Porter 5
forces

PESTEL
Analysis

SWOT
Analysis

Problem &
Recommend
ation

Value
Chain
Analysis

NUCOR IN 2010
American steel company
Only continuous profitable firm for decades in America

NUCOR IN 2010

So what's their secret of

success ?

About NUCOR
Incorporated: In 1955 as Nuclear Corporation of

America
Profile: 2nd largest steel manufacturer in USA
Headquartered: In Charlotte, North Carolina

1st place in 2005 in the Business Week

Difficult Times

Foreign Competition

Slow Demand for Steel

Insolvency

KEN IVERSON

Line of Business
Iverson restructured the company

Focus on 2 main lines of business:

Production of Steel from recycled scrapped metals.

Joist Production

Mission Statement

TAKE CARE OF OUR CUSTOMERS

n
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t
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a ctu
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r
O tru
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Organization Structure
Corporate
Centered

Decentralized

Chairman
Plant
Manager
Department
Manager

Supervisor

Integrated Strategy

RBV + IO Model

Strategy
Capabilities

RBV

Productive workforce

Innovative technology
Reduced throughput time

Efficient Inventory Management System

Resources

Strategy
IO Model ( Differentiation )

Mini Mill technologies and ElectricFurnace, compare to old blast-furnace

methods

IO Model ( Cost Leadership )

Own fleet of trucks
Close proximity to customers

Competencies

Innovation

Competencies and
Innovation
Building steel manufacturing facilities economically

and operating

them productively.
Benchmarked organizational style and empowering division managers.
1st company to introduce computer inventory management systems and

engineering process.
Sophisticated in purchasing, sales and management and beat competition

by its design effort.

New technologies to lower operating cost.

Environment Friendly Technology

It used Hismelt process to produce iron from iron ore with less energy

and pollution, actually reducing the greenhouse emissions and costs.

It took care of environmental friendliness, worker safety, and its

contribution to the community.

World Ranking top steel producers - 2009

Rank

Company

mmt

Rank

Company

mmt

ArcelorMittal

77.5

26

Hyundai

8.4

Baosteel

31.3

27

CELSA

7.8

POSCO

31.1

28

Metinvest

7.4

Nippon Steel (1)

26.5

29

Techint

6.9

JFE

25.8

30

Erdemir

6.5

Jiangsu Shagang (2)

20.5

31

Metalloinvest

6.5

Tata Steel (3)

20.5

32

Kobe

5.9

Ansteel

20.1

33

Usiminas

5.6

9
10

Severstal
Evraz

16.7
15.3

34
35

JSW
Essar

5.5
5.5

11

U.S. Steel

15.2

36

voestalpine (7)

5.5

12

Shougang (4)

15.1

37

Salzgitter (5)

4.9

13

Gerdau

14.2

38

Hadeed

4.8

14

Nucor

14.0

39

BlueScope

4.6

15
16
17
18

Wuhan
SAIL
Handan
Riva

13.7
13.5
12.0
11.3

40
41
42
43

CSN
Ezz
SSAB
Sidor

4.4
3.9
3.6
3.1

19

Sumitomo

11.0

44

Duferco

3.1

20

tdyssenKrupp (5)

11.0

45

Nisshin

3.1

21

Novolipetsk (6)

10.9

46

Vizag

3.0

22

IMIDRO

10.6

47

CMC

3.0

23

Magnitogorsk

9.6

48

AHMSA

3.0

24

China Steel

8.9

49

Dongkuk

3.0

25

Laiwu

8.9

Source: www.worldsteel.org

Perceptual Map

Main Problems
On a global scale there is an excess capacity of steel production and

dumping of steel in the USA, which diminishes profit.

Industry environment was volatile, due to economic recession and the

weakening dollar, Nucor Steel faced uncertain environment.

Another problem they face is lack of innovation of technology in the fast

paced markets.

Financial Growth

Source: www.worldsteel.org

Stock Price: $38.09 as per July 16, 2010

Mission Statement

TAKE CARE OF OUR CUSTOMERS

Porters Five Forces Analysis of Steel

Industry in the United States of America
Threat of new
entrants

Bargaining
Power of
Suppliers

Internal rivalry
within Industry

Threat of
Substitutes

Bargaining
Power of
Buyers

Bargaining Power of Buyers

With

an

increase

in

domestic

competition in steel sector in the USA,

the options for buyers are on a rise.
Low Product Differentiation.
Switching costs is low.
Buyers buying in large scale posses

Buyers Market !!!

strong negotiating power.

Bargaining Power of Suppliers

Scarcity of raw-materials

like steel shreds, iron ore,

coke, recycled steel.
Few Suppliers.
Most of the raw-

materials are imported.

Cost strategy drives Joint ventures, Mergers and Acquisitions

between suppliers and manufactures !!!

Major players in the United States of

America
Major M&A involving foreign partner

Internal Rivalry
Domestic market more than

20 players.
Intense rivalry Price wars.
No differentiated product.
Joint ventures helps in driving

economies of scale.
Low fixed manufacturing cost is the key !!!

Threat of Substitutes
No primary substitutes.
Secondary substitutes:

aluminium, plastic and

wood.

Continuous high demand for Steel !!!

Threat of New Entrants

Barriers to entry for Domestic entrants:

Low access to raw-materials.

Difficult to achieve economies

of scale.

Lack of product

differentiation.
Huge capital requirements.

Opportunity for big international Steel Companies

to enter the USA market !!!

Porters Five Forces Analysis of Steel

Industry in the United States of America
Product differentiation, access to rawmaterials, economies of scale and
capital requirements are biggest
barriers to entry for Domestic market.

Threat of
new
entrants
Few suppliers.
Mostly raw
materials are
imported.

Bargaining
Power of
Suppliers

Internal rivalry
within Industry

Bargaining
Power of
Buyers

Low switching
costs for Buyer
. Low product
differentiation.

Intense Rivalry between Domestic

Companies leading to Price Wars.

Few substitutes like

Plastic, woods and
other metals like
Aluminium, but can
not be compared
with Steels durability
and robustness.

Threat of
Substitutes

Other Determinants:
Low Government s regulations in domestic
market, high barrier for international entrants.
Economy Slowdown

Porters Five Forces Analysis of Steel

Industry in the United States of America
Domestic market:
Buyer

power (High)

Supplier
Internal

power (High)

rivalry (High)

Threat

from Substitutes (Low)

Threat

of new entrants (Low)

Unattractive Industry

Porters Five Forces Analysis of Steel

Industry in the United States of America
With

and

advance of Globalization,
economy

regaining

momentum, steel industry is

once again looking attractive.
There

is huge demand for Steel.

Attractive Industry for Foreign Players

PESTEL Analysis
Environment

Legal

Organization

Technological

Political
Economical

Socio-cultural

Political and Legislative Analysis

Anti Dumping Law :

U.S imposed countervailing duties and anti-dumping duties.

Laws were opposed by many European countries and WTO.

SOX Act :
To increase the transparency of the USA accounting standards.
To increase the responsibility of corporate office and board members.
The costs of compliance is quite high approx $3.4 million per company.
Long-term benefits of compliance: creating high barrier to entry, jeopardizes
bought up / take over and will also increase investor confidence in U.S financial
markets.

Economical Analysis

The steel industry is cyclical.

Heavy reliance upon economic growth in construction and infrastructure.

Prolonged slowdowns and economic recession have a direct impact on Nucor.

The weak dollar has provided a great opportunity for steel companies to
export. But Nucor does not have a global market to exploit.

This competitive dollar has also led towards more foreign investment across
the US steel market. This has become a threat to the US steel industry.

Social Analysis
Nucors employment policy and community positioning is

one that is very key to its success.

Nucor targets small rural towns in order to have a very

loyal community base.

The increasing age of baby-boomers has led to a

nationwide decrease in blue collar workers.

Students feel lack of social status while taking blue collar

workers.

Technical Analysis
The U.S. steel industry is heavily influenced by global development

Nucor was the first mover in adopting the new technologies in the U.S market.

Nucor used the mini-mill method to create steel, which has led towards an

industry revolution.

Nucor implemented a new information technology infrastructure that would

integrate all the planning, production, and order fulfillment aspects of the
business process. New computer systems have also been developed and
implemented to precisely control the quality of the steel produced.

Environmental Analysis
Nucor is ahead of the pack when it comes to being environmentally friendly

in the steel industry.

Nucor complied with the EPA adding 85 million pollution controls to its 14

plants.

Environmental Protection Agency found Nucor guilty of failing to curb

pollution and improperly disposing of hazardous waste. They also paid a 9

million dollar fine

The issues was handled with the EPA effectively and both Nucor and the

EPA showed excitement for the new technology.

SWOT Analysis
STRENGTHS:
Industry leader in innovation and

minimization of pollution and

production cost.
Strong financial position.
Calculated risk taking culture.
Customers sharing their product

or business roadmap with Nucor.

SWOT Analysis
WEAKNESS:
Nucor highly depends on the

United States domestic markets.

No diversification.
Lack of R&D.
Declining market share.
Environmental issues.

SWOT Analysis
OPORTUNITIES:
Expansion in the USA market

through M&A.
Entry in Asia & Europe markets

through joint-ventures.
Innovate and reduce costs with

improvements in R&D.

SWOT Analysis
THREATS:

Rising raw material and labor costs.

Rising debt to equity ratios.
Weak Government regulations

allowing dumping of steel by China.

Invasion of the USA domestic

market by foreign players.

Internal Analysis Value Chain

Internal Analysis Value Chain

Inbound Logistics
Primary logistics - Scrap Metal and Electricity.
Backward integration with David J. Joseph

Company.
2000+ rail cars for transportation of raw

materials.
Increasing energy prices by 105% in 2001.
Decreased energy consumption by 91%

through innovation - Mini-mill and Castrip .

Inbound Logistics
Lean management process and highly

motivated, productive and innovative

workforce.

Excellent inventory management processes

along with reduction of cist, waste and

pollution.

Lack of utilization of by-products

Production
Lean management process and highly

motivated, productive and innovative

workforce.

Excellent inventory management processes

along with reduction of cist, waste and

pollution.

Lack of utilization of by-products

Outbound Logistics
150-truck fleet for distribution of products
Production plants near customer locations but

restricted only to US
Shipment within 1.5 days anywhere in US
Market coverage with 14 steel plants in US
In-house shipping enables quick and on-time

delivery
But questionable when Nucor expands its

global presence.

Sales and Marketing

Sales to proximity customers and focus on long-term

relationships.

Market itself as environmental friendly and worker safety

product

Service to the community and compliant to environment

regulations

Insufficient research on predicting demand

Frequent and extensive market research to be done due to

cyclical demand conditions

VRIO Analysis

Issues & Problems

ISSUES
Nucor highly depends on US

markets.
Less R&D.
Declining market share.
Growing competition in

industry.
Cyclical demand.

PROBLEMS
Dumping of steel into US market.
Emergence of foreign players in the

USA.
Rising raw material costs.
Minimal management system creating

communication barriers.
Strict regulations of pollutants by E.P.A.

Recommendations

Recommendations
HR strategy to maintain strong leadership,

motivate workforce and foster innovation.

Streamline/coordinate purchasing, sales and

marketing activities.
To start and grow internal research and development (R&D)
Look for cost-effective, environmental friendly and productive manufacturing.
Turn waste and by-products into energy and re-usable products for other

industries.
To identify new products matching customer future and current needs.
To identify alternative raw materials and reduce dependability on scrap metal.

Recommendations
Build long term relationship with customers by understanding their product and

business roadmaps.
Reduce impact of cyclical demand.
Determine products to be eliminated.
Tailor Nucor pre and after sales services based on customers need and expectation.
Expand international presence through M&A

and JV with local partners in Asia, Europe and

South America, specially India, China and
Brazil.

Strategic Fit

Strategic Fit
Mission Invasion

Mission Internal

VS

Strategic Fit
Mission Invasion
Benefits

Mission Internal

Lower production costs

Lower production costs

Better relationships with

Increase throughput

foreign nations

Hedge company for growth,

Increased Profits

Could move Nucor into top

Potential for innovative

position in U.S. market

methods
Enter BRIC countries

Negatives

Damaging current

Extremely high costs of new

relationships with joint

technology

ventures

May not achieve desired results

Could make supplier

Difficult to implement in old

bargaining power stronger

mills