Nucor at Crossroads

Q1. What is bothering Mr. Iverson?

 Whether to go for CSP plant developed by SMS or sustain
with Hazelett thin-slab caster??
 Potential benefits of CSP
 Cost reduction
 Increase in efficiency
 Consent of the project team
 Nucor will gain maximum share of low end flat sheet business
 SMS is highly confident on CSP that it will improve on
company’s own developmental effort.
 Discount of $10-$20 million on immediate purchase.
Q1. What is bothering Mr. Iverson?
 Constraints of using CSP plant
 Expensive
 Difficulty in operating
 It is still in embryonic stage
 Technological leapfrogging
 First mover advantage wouldn’t sustain for long.
 They are quick follower in adapting to technology
 Flat roll products presumed steelmaking expertise somewhat
different from that required for non-flat product
 Financial and managerial resource constraints
 Joint venture with Yamato is already agreed upon
Q2. What are the strengths &
weaknesses of Nucor?
 Strengths
 Strong market position with 2.1 million tones of production
capacity.
 “Nucor Culture”.
 Decentralized management philosophy
 Performance based compensation
 Egalitarian benefits
 Customer service and quality
 Highly efficient labour force.
 Employee’s loyalty to the firm.
Q2. What are the strengths &
weaknesses of Nucor?
 Nucor’s customer service-A key differentiator
 Buyer power was mildly unattractive.
 Nucor started small plants closer to suppliers &
customer
 Reduction in transportation cost
 Cheap support facilities-Electricity
 Employee centric policies
Q2. What are the strengths &
weaknesses of Nucor?
 Weaknesses
 Decentralized profit center
 Decisions being taken at the division level will lead to
divisions competing against each other.
 No dedicated R&D team.
 No long-term strategic vision of plan.
 Presence only in the US market.
Q3. What are the opportunities &
threats in US steel market?
 Opportunities
 Most steel companies in the US are in major cities and much
higher operating costs.
 Integrated steelmakers are reluctant to adopt new technology
 Import’s share is low in flat sheet segment.
 52% of total steel consumption is in flat sheet segment.
 Opportunities for joint ventures.
 Supplier’s power is low.
 Exit of Integrated steel makers from buying scraps.
Q3. What are the opportunities &
threats in US steel market?
 Threats
 Heavy competition in the industry with excess capacity
 Only experienced players can enter and sustain in the market.
 Import of steel
 Threat of substitutes
 Demand for steel stagnated
 Plastic, aluminium, advanced composites industry taking over market
share of steel in future.
 Raw material availability
 Change in technology
Q4.If you were Mr. Iverson, what will
you decide? Please justify.
 Sign the deal with SMS
 It’ll help in grabbing flat sheet segment.
 Less import & more opportunities.
 Sustainable first mover advantage.
 Motivated team willing to work on this technology.
 It’ll increase overall efficiency.
 Flat steel market of 36 million tons for next year because they
are expecting same demand as last year.(Exhibit-2)
 Integrated US steel makers produce 16.21 million tons.
(Exhibit-5)
 Nucor can enjoy same economy of scale by producing .8 million
tons.(Exhibit-11)
Thank You..!!