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Nucor Corporation Case Study

Essay by review  •  November 7, 2010  •  Case Study  •  1,256 Words (6 Pages)  •  1,215 Views

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Nucor Corporation is constantly faced with obstacles and competition to overcome. This steel-making company whose name was formally adopted in 1972, has since been on a journey to join the ranks of the worlds leading steel companies. Although this is a highly profitable industry with a U.S. market of $94.9 billion, it is highly competitive and presents many bariers to entry. Three elements of competition in this particular industry include, 1.) Technology 2) Changes in cost and efficiencies and 3) globalization

Advances in technology can dramatically alter an industry's landscape, making it possible to produce products at lower costs and opening up whole new industry frontiers. The management at Nucor believed they could use new technology to their advantage and make bolts as cheaply as foreign producers. The traditional integrated steel mills were outdated and inefficient compared to new electric minimills. Nucor embraced this new technology to produce steel. They became known for constructing state-of-the-art facilities at the lowest possible costs and for investing aggressively in plant modernization and efficiency improvements. New technology enabled minimills to triple their output in the 1990's. The new technology of twin shell electric arc furnaces helped minimills increase production, lower costs, and take additional market shares. Nucor's use of advanced, efficient technologies enabled it to stay afloat when other companies could not. This use of technology also enables Nucor to lower many of the costs of maintaining environmental standards. With technological improvements to the plants and the production process, steel companies can better compete with each other. Because there is no real differentiation between products in the steel industry, companies will have to rely on technological innovation to profit in this industry.

As stated above, there is no real differentiation in products in this industry. Therefore steel companies have to be able to produce high quality products at low cost to compete. By improving production efficiencies and cost management, they will be a more profitable company. Nucor constantly spent money researching new ways to improve the production processes and keep up with the emerging markets. Nucor was known for constructing state-of-the-art facilities at the lowest cost and investing in plant modernizing and efficiency. At the Darlington plant the manger there developed a system where less time and less capital investment were required. This helped keep the fuel usage down and this was the only mill in the United States that was doing this.

The scope of competitive rivalry in the steel industry is global. The U.S., European Union countries, Canada, Mexico, Japan, Brazil, China, and many others compete for customers domestically and abroad. Globalization was the biggest force that affected the steel industry. Overcapacity in the United States lead to foreign steel producers, with few market opportunities, to dump their steel in U.S. markets at cut-rate prices. Nucor was in the best position to defend against foreign competition, with their low-cost German technology started at Crawfordsville, and in 1995 Nucor launched its first international venture with Brazil's Companhia Siderurgica National to build a $700 million steel mill in the state of Ceara. Japan lead in the amount of steel imported into the U.S; Nucor bought a steel bar minimill in Auburn, New York, from Japanese-based Sumitomo Metal Industries for $115 million, to counter the effect of imports. In recent years, several foreign firms had merged to form mega- steel companies. Many domestic steel producers were not able to compete with these foreign giants. Nucor, however, is attempting to meet the challenges of a globalized market, by continuing to grow, especially through acquisitions, which had not been a policy in the past. Nucor hopes that these acquisitions will strengthen its market position and product line and allow it to become a more globally competitive company.

Since this case was written, the government has taken action to restrict the dumping of foreign steel into the U.S market, effectively reducing supply, and allowing the domestic firms to use up some excess capacity.

The key to making a profit when selling a product with no aesthetic value, or a product that you really can't differentiate from your competitors (such as steel), is cost. Nucor maintains low costs by keeping the employee force at the level it should be and not doing things that aren't necessary to achieve goals. Their strategy is to be a low-cost supplier by being the most efficient producer. They have many procedures in place to keep their operation efficient. For example, in the late 90's the corporate staff of the company

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