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NUCOR<br />
OverviewofAnalysis<br />Snapshot of Nucor<br />Porter 5 forces<br />Value Chain Analysis<br />PESTEL Analysis<br />SWOT An...
NUCOR IN 2010<br /><ul><li>American steel company
Only continuous profitable firm for decades in America</li></li></ul><li>NUCOR IN 2010<br />So what's their secret of succ...
About NUCOR<br /><ul><li> Incorporated: In 1955 as Nuclear Corporation of  </li></ul>America<br /><ul><li> Profile: 2nd la...
 Headquartered: In Charlotte, North Carolina
1st place in 2005 in the Business Week</li></li></ul><li>Difficult Times<br /><ul><li>Foreign Competition
Slow Demand for Steel
 Insolvency</li></li></ul><li>Ken Iverson<br />
Line of Business<br /><ul><li>Iverson restructured the company</li></ul>     Focus on 2 main lines of business:<br /><ul><...
Joist Production</li></li></ul><li>MissionStatement<br />‘TAKE CARE OF OUR CUSTOMERS ’<br />
Organization Structure<br />
Organization Structure<br />Decentralized<br />Corporate Centered<br />Chairman<br />Plant Manager<br />Department Manager...
Integrated Strategy<br />RBV + IO Model <br />
Strategy<br />RBV <br /><ul><li> Productive workforce
Innovative technology
Reduced throughput time
 Efficient Inventory Management System</li></ul>Capabilities<br />Resources<br />
Strategy<br />IO Model ( Differentiation )<br /><ul><li> Mini Mill technologies and Electric-Furnace, compare to old blast...
Close proximity  to customers</li></li></ul><li>Competencies<br />Innovation<br />
Competencies and Innovation<br /><ul><li>Building steel  manufacturing facilities  economically   and operating  them  pro...
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.</li></li></ul><li>Environment Friendly Technology<br /><ul><li>It used Hismelt p...
It took care of environmental friendliness, worker safety, and its contribution to the community. </li></li></ul><li>World...
Perceptual Map<br />
Main Problems<br /><ul><li>On a global scale there is an excess capacity of steel production and dumping of steel in the U...
Industry environment was volatile, due to economic recession and the weakening dollar, Nucor Steel faced uncertain environ...
Another problem they face is lack of innovation of technology in the fast paced markets.</li></li></ul><li>Financial Growt...
MissionStatement<br />‘TAKE CARE OF OUR CUSTOMERS ’<br />
Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Threat of new entrants<br />Bargainin...
Bargaining Power of Buyer’s<br /><ul><li>With an increase in domestic competition in steel sector in the USA, the options ...
Low Product Differentiation.
Switching costs is low.
Buyers buying in large scale posses strong  negotiating power.</li></ul>Buyer’s Market !!!<br />
Bargaining Power of Supplier’s<br /><ul><li>Scarcity of raw-materials like steel shreds, iron ore, coke, recycled steel.
Few Suppliers.
Most of the raw-materials are imported.</li></ul>Cost strategy drives Joint ventures, Mergers and Acquisitions between sup...
Major players in the United States of America<br />Major M&A involving foreign partner<br />
Internal Rivalry<br /><ul><li>Domestic market – more than 20 players.
Intense rivalry – Price wars.
No differentiated product.
Joint ventures helps in driving economies of scale.</li></ul>Low fixed manufacturing cost is the key !!!<br />
Threat of Substitutes<br /><ul><li>No primary substitutes.
Secondary substitutes: aluminium, plastic and wood.</li></ul>Continuous high demand for Steel !!!<br />
Threat of New Entrants<br />Barriers to entry for Domestic entrants:<br /><ul><li> Low access to raw-materials.
 Difficult to achieve economies of scale.
Lack of product differentiation.
Huge capital requirements.</li></ul>Opportunity for big international Steel Companies to enter the USA market !!!<br />
Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Product differentiation, access to ra...
Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Domestic market:<br /><ul><li>Buyer p...
Supplier power (High)
Internal rivalry (High)
Threat from Substitutes (Low)
Threat of new entrants (Low)</li></ul>Unattractive Industry<br />
Porter’s Five Forces Analysis of Steel Industry in the United States of America<br /><ul><li>With advance of Globalization...
There is huge demand for Steel.</li></ul>Attractive Industry for Foreign Players<br />
PESTEL Analysis<br />Environment<br />Technological<br />Socio-cultural<br />Economical<br />Political<br />Legal<br />Org...
Political and Legislative Analysis<br /><ul><li>Anti Dumping Law :
U.S imposed countervailing duties and anti-dumping duties.
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Strategic Analysis of Nucor Steel Industry in 2010

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Strategic Analysis of one of America's leading Steel Giant Nucor. This strategic analysis presents: 1. Porter's Five Forces to determine the Steel Industry in USA market. 2. PESTEL framework to understand the Political, Economical, Social, Technological, Environmental and Legal challenges faced by Nucor in 2010. 3. SWOT analysis to understand the Strengths, Weakness, Opportunities and Threats for Nucor. 4. Value Chain Analysis to understand the internal and external business analysis for Nucor. The analysis is followed by summarizing Problems and Issues of Nucor in 2010. This is further followed by a detailed recommendation for adoption of the right strategic-fit for Nucor to conquer and invade the market back again in the USA.

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  • The bargaining power of buyers is high due to various factors. First, there is intense battle in the domestic market with more than 20 players with US Steel, Nucor,Gerdau leading from the front…. Thus providing lot of options for Buyer’s as these battle out the Price war.Second, there is low level of product differentiation and switching cost for buyers is also very low. Competition is basically on price. Third, there is a cyclical demand for steel, and as such there tend to be (sometimes) oversupply and this gives additional bargaining power to buyers. Moreover, Buyers buying in large scale posses strong negotiating power.Thus it’s a Buyer’s market!!!!
  • Bargaining power of suppliers is also high.Firstly due to scarcity of raw materials especially scrap metals whereby suppliers are raising the price. Secondly, there are only few suppliers.Thirdly, most of the raw materials are imported from China and European countries.So Companies strive for cost leadership strategy to earn economies of scale and as such are in lookout for JV, M&amp;A with suppliers.For example – 1. Early in March’ 2010 – Nucor announced a JV with Japanese Mitsui with 50% interest in a newly created Company NuMit. Mitsui is a supplier of iron and steel products and raw materials.2. In 2007, Steel Dynamics acquired Omni Source Corporation – one of the country’s largest ferrous scrap processors.
  • Netherland based ArcellorMittal acquired ISG, which acquired the failing Bethelem steel.US Steel the #1 Steel producer for USA acquired Stelco CanadaJapanese Nippon of course acquired ran a JV with US Corporation inland Steel way back in 1990.Nucor recently acquired Harris Steel group of Canada in 2007 to gain access to Canada market, however they had to shut some of the failing mills because of low demand during recession. There are news of Nucor Other big players include Gerdau, AK Steel, Severstal…
  • As previously discussed, there is intense rivalry among domestic players leading to price wars.Moreover, as there are no differentiated products, low fixed manufacturing cost is the key.Ofcourse, JV with suppliers helps in driving economies of scale.
  • There is no primary substitute of Steel.Although, at many places aluminium metal is increasingly used in place of steel but cannot replace steel because of the strength and power Steel possess. Apart, Plastic and wood are increasingly used to reduce cost, but again cannot replace steel because of Steel’s robustness and durability.As such, there is still a huge demand for Steel, whether its for Aircraft industry, or automobiles or building infrastructure or simply royal watches….
  • Threat of New Entrants is actually low for Domestic players because of the barrier to entry created by 4 factors:Low access to raw materialsDifficult to achieve economies of scale.Lack of Product differentiation.Huge capital requirements.However, these does not apply to big International players who have cheap access to raw-materials, huge capital. The only threat for foreign players comes from the USA Government regulations.
  • To sum up – we see low threats from Substitutes and new entrants.High bargaining power of buyers and suppliers, with high internal rivalry leading to Price wars.
  • Although there is low threat of substitutes, and new entrants with high demand of Steel – Steel Industry is still an unattractive industry.This is mainly because of Few Suppliers with scarcity of raw-materials – this is the biggest concern for Steel industry in the USA.With intense rivalry and bargaining power of buyer with no product differentiation is leading to Price wars and Cost Leadership strategy for Domestic companies.
  • Further, the global steel industry was hit hard by the recession, which had cut demand for steel used in construction, the auto and appliance industries and the capital goods sector.With advance of Globalization, and economy regaining momentum, steel industry is once again looking attractive.Already we have seen ISG (International Steel Group) was acquired by ArcellorMittal.Once again economy is opening up and demand for steel is rising after the economy slowdown during Global Financial crisis.So, it is expected to see other Asian and European Steel companies to eye on American market. However, it is highly recommended for Nucor to acquire and expand its presence rather than sitting idle waiting for someone to pick.
  • Transcript of "Strategic Analysis of Nucor Steel Industry in 2010"

    1. 1.
    2. 2. NUCOR<br />
    3. 3. OverviewofAnalysis<br />Snapshot of Nucor<br />Porter 5 forces<br />Value Chain Analysis<br />PESTEL Analysis<br />SWOT Analysis<br />Problem & Recommendation<br />
    4. 4. NUCOR IN 2010<br /><ul><li>American steel company
    5. 5. Only continuous profitable firm for decades in America</li></li></ul><li>NUCOR IN 2010<br />So what's their secret of success ?<br />
    6. 6. About NUCOR<br /><ul><li> Incorporated: In 1955 as Nuclear Corporation of </li></ul>America<br /><ul><li> Profile: 2nd largest steel manufacturer in USA
    7. 7. Headquartered: In Charlotte, North Carolina
    8. 8. 1st place in 2005 in the Business Week</li></li></ul><li>Difficult Times<br /><ul><li>Foreign Competition
    9. 9. Slow Demand for Steel
    10. 10. Insolvency</li></li></ul><li>Ken Iverson<br />
    11. 11. Line of Business<br /><ul><li>Iverson restructured the company</li></ul> Focus on 2 main lines of business:<br /><ul><li>Production of Steelfromrecycledscrappedmetals.
    12. 12. Joist Production</li></li></ul><li>MissionStatement<br />‘TAKE CARE OF OUR CUSTOMERS ’<br />
    13. 13. Organization Structure<br />
    14. 14. Organization Structure<br />Decentralized<br />Corporate Centered<br />Chairman<br />Plant Manager<br />Department Manager<br />Supervisor<br />
    15. 15. Integrated Strategy<br />RBV + IO Model <br />
    16. 16. Strategy<br />RBV <br /><ul><li> Productive workforce
    17. 17. Innovative technology
    18. 18. Reduced throughput time
    19. 19. Efficient Inventory Management System</li></ul>Capabilities<br />Resources<br />
    20. 20. Strategy<br />IO Model ( Differentiation )<br /><ul><li> Mini Mill technologies and Electric-Furnace, compare to old blast-furnacemethods</li></ul>IO Model ( Cost Leadership )<br /><ul><li>Ownfleet of trucks
    21. 21. Close proximity to customers</li></li></ul><li>Competencies<br />Innovation<br />
    22. 22. Competencies and Innovation<br /><ul><li>Building steel manufacturing facilities economically and operating them productively.
    23. 23. Benchmarked organizational style and empowering division managers.
    24. 24. 1st company to introduce computer inventory management systems and engineering process.
    25. 25. Sophisticated in purchasing, sales and management and beat competition by its design effort.
    26. 26. New technologies to lower operating cost.</li></li></ul><li>Environment Friendly Technology<br /><ul><li>It used Hismelt process to produce iron from iron ore with less energy and pollution, actually reducing the greenhouse emissions and costs.
    27. 27. It took care of environmental friendliness, worker safety, and its contribution to the community. </li></li></ul><li>World Ranking top steel producers - 2009<br />Source: www.worldsteel.org<br />
    28. 28. Perceptual Map<br />
    29. 29.
    30. 30. Main Problems<br /><ul><li>On a global scale there is an excess capacity of steel production and dumping of steel in the USA, which diminishes profit.
    31. 31. Industry environment was volatile, due to economic recession and the weakening dollar, Nucor Steel faced uncertain environment.
    32. 32. Another problem they face is lack of innovation of technology in the fast paced markets.</li></li></ul><li>Financial Growth<br />Stock Price: $38.09 as per July 16, 2010<br />Source: www.worldsteel.org<br />
    33. 33. MissionStatement<br />‘TAKE CARE OF OUR CUSTOMERS ’<br />
    34. 34. Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Threat of new entrants<br />Bargaining Power of Suppliers<br />Bargaining Power of Buyers<br />Internal rivalry within Industry<br />Threat of Substitutes<br />
    35. 35. Bargaining Power of Buyer’s<br /><ul><li>With an increase in domestic competition in steel sector in the USA, the options for buyers are on a rise.
    36. 36. Low Product Differentiation.
    37. 37. Switching costs is low.
    38. 38. Buyers buying in large scale posses strong negotiating power.</li></ul>Buyer’s Market !!!<br />
    39. 39. Bargaining Power of Supplier’s<br /><ul><li>Scarcity of raw-materials like steel shreds, iron ore, coke, recycled steel.
    40. 40. Few Suppliers.
    41. 41. Most of the raw-materials are imported.</li></ul>Cost strategy drives Joint ventures, Mergers and Acquisitions between suppliers and manufactures !!!<br />
    42. 42. Major players in the United States of America<br />Major M&A involving foreign partner<br />
    43. 43. Internal Rivalry<br /><ul><li>Domestic market – more than 20 players.
    44. 44. Intense rivalry – Price wars.
    45. 45. No differentiated product.
    46. 46. Joint ventures helps in driving economies of scale.</li></ul>Low fixed manufacturing cost is the key !!!<br />
    47. 47. Threat of Substitutes<br /><ul><li>No primary substitutes.
    48. 48. Secondary substitutes: aluminium, plastic and wood.</li></ul>Continuous high demand for Steel !!!<br />
    49. 49. Threat of New Entrants<br />Barriers to entry for Domestic entrants:<br /><ul><li> Low access to raw-materials.
    50. 50. Difficult to achieve economies of scale.
    51. 51. Lack of product differentiation.
    52. 52. Huge capital requirements.</li></ul>Opportunity for big international Steel Companies to enter the USA market !!!<br />
    53. 53. Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Product differentiation, access to raw-materials, economies of scale and capital requirements are biggest barriers to entry for Domestic market.<br />Threat of new entrants<br />Bargaining Power of Buyers<br />Bargaining Power of Suppliers<br />Few suppliers.<br />Mostly raw materials are imported.<br />Low switching costs for Buyer . Low product differentiation.<br />Internal rivalry within Industry<br />Intense Rivalry between Domestic Companies leading to Price Wars.<br />Other Determinants:<br />Low Government ‘s regulations in domestic market, high barrier for international entrants. <br />Economy Slowdown<br />Few substitutes like Plastic, woods and other metals like Aluminium, but can not be compared with Steel’s durability and robustness.<br />Threat of Substitutes<br />
    54. 54. Porter’s Five Forces Analysis of Steel Industry in the United States of America<br />Domestic market:<br /><ul><li>Buyer power (High)
    55. 55. Supplier power (High)
    56. 56. Internal rivalry (High)
    57. 57. Threat from Substitutes (Low)
    58. 58. Threat of new entrants (Low)</li></ul>Unattractive Industry<br />
    59. 59. Porter’s Five Forces Analysis of Steel Industry in the United States of America<br /><ul><li>With advance of Globalization, and economy regaining momentum, steel industry is once again looking attractive.
    60. 60. There is huge demand for Steel.</li></ul>Attractive Industry for Foreign Players<br />
    61. 61. PESTEL Analysis<br />Environment<br />Technological<br />Socio-cultural<br />Economical<br />Political<br />Legal<br />Organization<br />
    62. 62. Political and Legislative Analysis<br /><ul><li>Anti Dumping Law :
    63. 63. U.S imposed countervailing duties and anti-dumping duties.
    64. 64. Laws were opposed by many European countries and WTO.
    65. 65. SOX Act :
    66. 66. To increase the transparency of the USA accounting standards.
    67. 67. To increase the responsibility of corporate office and board members.
    68. 68. The costs of compliance is quite high approx $3.4 million per company.
    69. 69. 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. </li></li></ul><li>Economical Analysis<br /><ul><li>The steel industry is cyclical.
    70. 70. Heavy reliance upon economic growth in construction and infrastructure.
    71. 71. Prolonged slowdowns and economic recession have a direct impact on Nucor.
    72. 72. The weak dollar has provided a great opportunity for steel companies to export. But Nucor does not have a global market to exploit.
    73. 73. 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.</li></li></ul><li>Social Analysis<br /><ul><li>Nucor’s employment policy and community positioning is one that is very key to its success.
    74. 74. Nucor targets small rural towns in order to have a very loyal community base.
    75. 75. The increasing age of baby-boomer’s has led to a nationwide decrease in blue collar workers.
    76. 76. Students feel lack of social status while taking blue collar workers.</li></li></ul><li>Technical Analysis<br /><ul><li>The U.S. steel industry is heavily influenced by global development
    77. 77. Nucor was the first mover in adopting the new technologies in the U.S market.
    78. 78. Nucor used the mini-mill method to create steel, which has led towards an industry revolution.
    79. 79. 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.</li></li></ul><li>Environmental Analysis<br /><ul><li>Nucor is ahead of the pack when it comes to being environmentally friendly in the steel industry.
    80. 80. Nucor complied with the EPA adding 85 million pollution controls to its 14 plants.
    81. 81. 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
    82. 82. The issues was handled with the EPA effectively and both Nucor and the EPA showed excitement for the new technology.</li></li></ul><li>
    83. 83. SWOT Analysis<br />STRENGTHS:<br /><ul><li>Industry leader in innovation and minimization of pollution and production cost.
    84. 84. Strong financial position.
    85. 85. Calculated risk taking culture.
    86. 86. Customers sharing their product or business roadmap with Nucor.</li></li></ul><li>SWOT Analysis<br />WEAKNESS:<br /><ul><li>Nucor highly depends on the United States domestic markets.
    87. 87. No diversification.
    88. 88. Lack of R&D.
    89. 89. Declining market share.
    90. 90. Environmental issues.</li></li></ul><li>SWOT Analysis<br />OPORTUNITIES:<br /><ul><li>Expansion in the USA market through M&A.
    91. 91. Entry in Asia & Europe markets through joint-ventures.
    92. 92. Innovate and reduce costs with improvements in R&D.</li></li></ul><li>SWOT Analysis<br />THREATS:<br /><ul><li>Rising raw material and labor costs.
    93. 93. Rising debt to equity ratios.
    94. 94. Weak Government regulations allowing dumping of steel by China.
    95. 95. Invasion of the USA domestic market by foreign players.</li></li></ul><li>Internal Analysis – Value Chain<br />
    96. 96. Internal Analysis – Value Chain<br />
    97. 97. Inbound Logistics<br /><ul><li>Primary logistics - Scrap Metal and Electricity.
    98. 98. Backward integration with David J. Joseph Company.
    99. 99. 2000+ rail cars for transportation of raw materials.
    100. 100. Increasing energy prices by 105% in 2001.
    101. 101. Decreased energy consumption by 91% through innovation - Mini-mill and Castrip .</li></li></ul><li>Inbound Logistics<br /><ul><li>Lean management process and highly motivated, productive and innovative workforce.
    102. 102. Excellent inventory management processes along with reduction of cist, waste and pollution.
    103. 103. Lack of utilization of by-products</li></li></ul><li>Production<br /><ul><li>Lean management process and highly motivated, productive and innovative workforce.
    104. 104. Excellent inventory management processes along with reduction of cist, waste and pollution.
    105. 105. Lack of utilization of by-products</li></li></ul><li>Outbound Logistics<br /><ul><li>150-truck fleet for distribution of products
    106. 106. Production plants near customer locations but restricted only to US
    107. 107. Shipment within 1.5 days anywhere in US
    108. 108. Market coverage with 14 steel plants in US
    109. 109. In-house shipping enables quick and on-time delivery
    110. 110. But questionable when Nucor expands its global presence.</li></li></ul><li>Sales and Marketing<br /><ul><li>Sales to proximity customers and focus on long-term relationships.
    111. 111. Market itself as environmental friendly and worker safety product
    112. 112. Service to the community and compliant to environment regulations
    113. 113. Insufficient research on predicting demand
    114. 114. Frequent and extensive market research to be done due to cyclical demand conditions</li></li></ul><li>VRIO Analysis<br />
    115. 115. Issues & Problems<br />
    116. 116. ISSUES<br /><ul><li>Nucor highly depends on US markets.
    117. 117. Less R&D.
    118. 118. Declining market share.
    119. 119. Growing competition in industry.
    120. 120. Cyclical demand.</li></li></ul><li>PROBLEMS<br /><ul><li>Dumping of steel into US market.
    121. 121. Emergence of foreign players in the USA.
    122. 122. Rising raw material costs.
    123. 123. Minimal management system creating communication barriers.
    124. 124. Strict regulations of pollutants by E.P.A.</li></li></ul><li>Recommendations<br />
    125. 125. Recommendations<br /><ul><li>HR strategy to maintain strong leadership, motivate workforce and foster innovation.
    126. 126. Streamline/coordinate purchasing, sales and marketing activities.
    127. 127. To start and grow internal research and development (R&D)
    128. 128. Look for cost-effective, environmental friendly and productive manufacturing.
    129. 129. Turn waste and by-products into energy and re-usable products for other industries.
    130. 130. To identify new products matching customer future and current needs.
    131. 131. To identify alternative raw materials and reduce dependability on scrap metal.</li></li></ul><li>Recommendations<br /><ul><li>Build long term relationship with customers by understanding their product and business roadmaps.
    132. 132. Reduce impact of cyclical demand.
    133. 133. Determine products to be eliminated.
    134. 134. Tailor Nucor pre and after sales services based on customers’ need and expectation.
    135. 135. Expand international presence through M&A and JV with local partners in Asia, Europe and South America, specially India, China and Brazil.</li></li></ul><li>Strategic Fit<br />
    136. 136. Strategic Fit<br />“Mission Invasion”<br />“Mission Internal”<br />VS<br />
    137. 137. Strategic Fit<br />
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