Nucor

NUCOR
Overview of Analysis
Snapshot of
Nucor
PESTEL Value Chain

Porter 5 forces SWOT Analysis
Analysis Analysis
Problem &
Recommendation
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
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 ’

Organization Structure
Corporate
Decentralized Centered
Chairman
Plant Manager
Department
Manager
Supervisor
Integrated Strategy
Strategy
Capabilities RBV
 Productive workforce
 Innovative technology
 Reduced throughput time
 Efficient Inventory Management System
Resources
Strategy
IO Model ( Differentiation )
 Mini Mill technologies and Electric-
Furnace, 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
1 ArcelorMittal 77.5 26 Hyundai 8.4

2 Baosteel 31.3 27 CELSA 7.8
3 POSCO 31.1 28 Metinvest 7.4
4 Nippon Steel (1) 26.5 29 Techint 6.9

5 JFE 25.8 30 Erdemir 6.5
6 Jiangsu Shagang (2) 20.5 31 Metalloinvest 6.5
7 Tata Steel (3) 20.5 32 Kobe 5.9
8 Ansteel 20.1 33 Usiminas 5.6

9 Severstal 16.7 34 JSW 5.5
10 Evraz 15.3 35 Essar 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 Wuhan 13.7 40 CSN 4.4
16 SAIL 13.5 41 Ezz 3.9
17 Handan 12.0 42 SSAB 3.6
18 Riva 11.3 43 Sidor 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
Stock Price: $38.09 as per July 16, 2010

Source: www.worldsteel.org
Mission Statement
‘TAKE CARE OF OUR CUSTOMERS ’

Porter’s Five Forces Analysis of Steel Industry in the
United States of America
Threat of new
entrants
Internal rivalry within Bargaining

Bargaining Power Industry Power of Buyers
of Suppliers
Threat of
Substitutes
Bargaining Power of Buyer’s
 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 strong

negotiating power.
Buyer’s Market !!!

Bargaining Power of Supplier’s
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 !!!
Product differentiation, access to raw-
materials, economies of scale and
capital requirements are biggest
barriers to entry for Domestic market.
Threat of new
entrants
Few suppliers. Low switching

Mostly raw Bargaining Bargaining costs for Buyer
materials are . Low product
imported. Power of Power of Buyers differentiation.
Suppliers Internal rivalry
within Industry
Intense Rivalry between Domestic
Companies leading to Price Wars.
Other Determinants:
Few substitutes like Low Government ‘s regulations in domestic
Plastic, woods and
Threat of market, high barrier for international entrants.
other metals like Substitutes Economy Slowdown
Aluminium, but can
not be compared
with Steel’s durability
and robustness.
Domestic market:
 Buyer power (High)
 Supplier power (High)
 Internal rivalry (High)
 Threat from Substitutes (Low)
 Threat of new entrants (Low)
Unattractive Industry
 With advance of Globalization,

and 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
 Nucor’s 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-boomer’s 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
Strategic Fit
“Mission Invasion” “Mission Internal”
Benefits • 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
• Damaging current • Extremely high costs of new
relationships with joint technology
Negatives ventures • May not achieve desired results
• Could make supplier • Difficult to implement in old
bargaining power stronger mills

Nucor

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NUCOR

PESTEL Value Chain

 American steel company

 Only continuous profitable firm for decades in America

So what's their secret of

 Incorporated: In 1955 as Nuclear Corporation of

 Profile: 2nd largest steel manufacturer in USA

 Headquartered: In Charlotte, North Carolina

 1st place in 2005 in the Business Week

 Slow Demand for Steel

Focus on 2 main lines of business:

 Production of Steel from recycled scrapped metals.

‘TAKE CARE OF OUR CUSTOMERS ’

 Reduced throughput time

 Efficient Inventory Management System

 Mini Mill technologies and Electric-

Furnace, compare to old blast-furnace

IO Model ( Cost Leadership )

 Own fleet of trucks

 Close proximity to customers

 Building steel manufacturing facilities economically and operating

 Benchmarked organizational style and empowering division managers.

 1st company to introduce computer inventory management systems and

 Sophisticated in purchasing, sales and management and beat competition

by its design effort.

 New technologies to lower operating cost.

and pollution, actually reducing the greenhouse emissions and costs.

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

contribution to the community.

1 ArcelorMittal 77.5 26 Hyundai 8.4

4 Nippon Steel (1) 26.5 29 Techint 6.9

6 Jiangsu Shagang (2) 20.5 31 Metalloinvest 6.5

7 Tata Steel (3) 20.5 32 Kobe 5.9

8 Ansteel 20.1 33 Usiminas 5.6

12 Shougang (4) 15.1 37 Salzgitter (5) 4.9

20 tdyssenKrupp (5) 11.0 45 Nisshin 3.1

21 Novolipetsk (6) 10.9 46 Vizag 3.0

24 China Steel 8.9 49 Dongkuk 3.0

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

Stock Price: $38.09 as per July 16, 2010

‘TAKE CARE OF OUR CUSTOMERS ’

Internal rivalry within Bargaining

 With an increase in domestic competition

 Low Product Differentiation.

 Switching costs is low.

 Buyers buying in large scale posses strong

Buyer’s Market !!!

like steel shreds, iron ore,

Most of the raw-materials

Major M&A involving foreign partner

Domestic market – more than

Intense rivalry – Price wars.

No differentiated product.

Joint ventures helps in driving

aluminium, plastic and

Continuous high demand for Steel !!!

 Low access to raw-materials.

 Difficult to achieve economies

 Huge capital requirements.

Opportunity for big international Steel Companies

Few suppliers. Low switching