Specific elements of current strategy and describe what Nucor does and how

it allows the firm to create capture value- resources and capabilities specific.
Whether it should go forward with the investment?
Yes, Nucor should go forward with the investment
o Flat sheet market comprises of more than 50% of the total Steel
market in the USA.
o IRR of the project is 14.54 % which is more than the Corp A bonds
investment return rate.
o Compared to Modern integrated mill this has lower costs. Modern
integrated mills has current forecasts of a loss of 1.3 billion dollars
according to current figures.
o The project is less ambitious than and less risky than other
technologies
o They have an option to keep the payment of the project contingent on
the success of the technology. This way their risk is drastically reduced.
o Early adopter benefit: They have a price advantage over the next 3
years before its adopted by other mills. It gives them an early mover
advantage to capture the flat sheet market from traditional players.
The market currently has volume of 36 million tons with a huge upside.
They can focus on automobile and appliances market, both of which
show great potential for growth in demand.
o It does not need to worry about demand in the first 2 years as its own
Vulcraft unit has a demand for 100,000 tonnes.
o With lower casts it will be able to capture demand of low cost imported
products as the fall in costs in lower than ocean freights.
o Other alternate option is to enter into Modernized Integrated Mill. This
has current forecasts of a loss of 1.3 billion dollars according to current
figures.
o CSP model of 1 million tons is congruent with its own ideology of small
plants of 500 employees per plant.

Concerns for CSP Project

o It is a new technology. If it does not work it will be a big setback for
Nucor.
o Price of Scrap which is a key raw material may increase once the
technology spreads.
o Other integrated plants which has a strong hold on flat sheet market
will have a strong hold on the market once they adopt the technology.
So the time window is really small
o They will have to start off from a non-rural area which is unlike their
successful strategy of starting off from low cost areas.
o They will face tough competition from low cost imports.
o They will face a big financial crunch if they decide to go forward with
the project and will need to take on a debt larger than the limit of 30%
debt to capital they have set for themselves.
o They will have a Managerial resource crunch.

It faces a big risk of technological leap frogging. If another technology

turns out to be better and more feasible than CSP their ROI will fall
down.
Competitor Competitors will also accept this technology on seeing
acceptance.