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Nucor Case Study

Executive Summary

  1. Problem Statement: Nucor, along with the American steel manufacturing industry is facing extinction due to the current situation where the market demand for steel is too low and the market is flooded with cheap steel imported from foreign countries.
  2. Analysis: 

    • Nucor has one of the world’s best management and thus the present predicament is mostly a result of external factors affecting the American steel manufacturing industry.
    • The company is operating within a depressed market, and this affects its organizational performance.
    • Cheap import from countries that have a comparative advantage also plays a significant role in the company’s current woes.
    • Nucor has so many strong points and external as well as internal factors that would work to their advantage if the company is willing to look beyond their present situation.
  3. Alternatives:

    • The first alternative that this company can exploit in order to solve the current predicament is to lobby for a closed or restricted steel market in the US.
    • The other alternative would be to venture into the global market and seek to serve all industries, including the health care sector, financial institutions as well as food and beverage sectors.
  4. Recommendation: Getting into the international market will not only widen the company’s prospects due to reaching a larger market, but also ensure that the company is getting some good return on investment and thus can continue to compete favorably for the limited market demand.
  5. Implementation: Implementing this recommendation will only require trade licenses in various countries and a mode of entry as permitted by the laws of the host country. The company currently has all the expertise, revenue and reputation they need.

Summary

Nucor is facing a sticky situation with its current status of one of the least competitive manufacturers of steel and steel products for the US market (Thompson, 2014). The company has to compete with foreign manufacturers that operate under different and in some cases more flexible regulations. This means that Nucor Corporation has to come up with a great strategy that can offer them some leverage with which to compete in an otherwise unfair market. The company was established on some very specific policies that have not and should not be compromised in favor of a competitive advantage. They, however, continue to suffer the consequences of free trade, and if nothing is done, they may slowly fade into oblivion as a business organization. The company owes it to its shareholders to find a way out of their current predicament, and it may be noted that this will require sticking to their original philosophy while looking elsewhere for the solution. All of the company’s woes are associated with the influx of foreign steel and steel products as well as a not so attractive market demand. These problems are rather continuous and not momentary, as one may like to think.

  1. Analysis

A strategic analysis of this firm indicates that they have numerous strengths as well as weaknesses and threats. This means that with a careful approach, this company may be able to reclaim its former glory in the steel industry not only in the US, but also globally. The problems that face the company at this time are mostly related to the industry and not just the firm. First, it can be noted that the market has been flooded with cheaper products from foreign countries (Thompson, 2014). This means that the domestic steel manufacturers have to compete with countries that probably have a comparative advantage over the US. Depressed market demand for steel is also an industry issue that is mostly attributed to the technological and cultural advancements that have seen people moving away from steel doors, steel vaults and a number of other products made of steel.

PEST Analysis

Political Factors

Nucor is currently operating within a political framework that does not favor their position as a company that is consolidated within the US. The fact that the current political dispensation allows cheap foreign products to compete is a disadvantage that can however be overcome by internationalizing the business.

Economic Factors

The current economic status is rather stable and favors expansion of the business. However, the market demand for steel is relatively low in the American automobile industry, which drastically affects Nucor’s performance. Consumers have power to purchase the company’s products, but they lack the need to do so, especially since they can import cheaply.

Socio-Cultural Factors

Steel remains among the most impressive materials for construction and in the manufacture of a variety of functional equipment for hospitals, factories and even hotels among other establishments. This means that the product still has a place in the society, and thus the company remains relevant despite stiff competition from other materials.

Technological Factors

Nucor’s main advantage is that they have the best terms of R&D and thus can always top their competitors’ technology with their effective and innovative product development systems. With their consolidated operations, the company has so far been able to conduct a lot of research since they do not have to spend so much as companies with numerous locations and manufacturing plants. With their upper hand in the industry with regards to investment in technology, it can be appreciated that this company is able to consistently come up with new products, better product’s quality, higher efficiency in their business processes and more complex but practical solutions to industry challenges like competition from cheaper materials like the infamous plastics.

SWOT Analysis

Strengths

The first strength that one would notice about the organization is their core competency. Nucor is run on the basis of organizational culture, technological innovation and continuous improvement. This means that the company is consistent in its ability to deal with situations as they arise. Nucor’s reliance on technological innovations also implies that the company is willing and able to use management tools like DSS and ERP that promise to give them the best results in operations (Thompson, 2014). Companies that embrace effective technologies are often able to run on minimal costs without compromising on the quality of the products. Regarding continuous improvement, the company can always assure the customers of better products and services, thus fostering customer satisfaction and hence loyalty. The company also has a very wide range of products, meaning that they can satisfy the needs of very many segments of customers provided that the right products are made of steel or are sold to the right clientele. Weaknesses

Rather than going global like the rest of the companies in the world, this particular company sought to consolidate its operations in the US. This explains why they have been dramatically affected by the presence of new market entrants in the country. Over the years, Nucor has also created a heavy dependence on the automotive industry and the construction industry. It should be noted that these are not the only industries that require steel.

Opportunities

Steel continues to be among the world’s strongest materials that combine functionality and aesthetics. This means that steel products will continue to be hailed as beautiful and strong for years to come. It also means that the company will always have some market demand. The company is based on technology, meaning that it will be improving along with the technological advances that may or may not involve the steel producing technology (Hemphill & Perry, 2012).

Threats

The first threat here would be very high energy prices along with tough competition that the company has to face from foreign competitors. Domestic competition is not nearly as bad as foreign competition, thus making free trade a real problem here. Foreign companies have been selling really cheap steel, thus leading to a steady decline in the company’s revenues from $1.8 billion in 2008 to $0.1 billion in 2010 and later on to $0.5 billion in 2013 (Nucor Corporation, 2013). The company also depends heavily on the automotive industry, which is on a steady decline within the US.

  1. Alternatives

The first alternative that this company has in order to solve the current predicament is to lobby for a closed or restricted steel market in the US. This would entail making the government impose strict regulations that are aimed at locking out new entrants, especially foreign ones as the company does not have much domestic competition. They are rather justified in feeling cheated in the market although it is mostly legal for the foreign steel fabricators to do as they are doing. The other alternative would be to venture into the global market and seek to serve all industries including the health care sector, financial institutions as well as food and beverage sectors. This would mean creating demand for the company’s steel rather than hoping for a revival of the American automobile industry. International perspective should enable the company to grow once more along with the emerging markets (Cesnovar, 2006).

  1. Recommendations

Getting into the international market will widen the company’s prospects by providing access to a larger market while at the same time ensuring that the company is realizing good returns. According to Cesnovar (2006), this approach will increase the company’s share of the existing market demand globally. Currently, the company is limited in its scope of market demand. If the company could stop consolidating dealings with the automobile and construction industries as well as within the US only, there is a real possibility that they could regain their former status at the helm of the steel manufacturing industry. Despite their challenges and risks, the emerging markets are actually the best place to start. This is mainly because most of them are still developing and would thus have a greater market for high quality steel in all the relevant business sectors. The idea here is to go beyond the current market share in order to expand the company’s potential and thus survive the seemingly unfair competition that is coming from the imported steel products. Globalization is a real phenomenon that the company should be able to handle, and even benefit from, with the right strategies and business models. This means that going global is Nucor’s best shot at redeeming the company and reclaiming profitability and sustainability in the market that is otherwise restrained.

  1. Implementation

The recommendation above will only require the company to seek trading licenses and in some cases partners, depending on the business laws in their chosen host countries. This means that in order to solve their present predicament, Nucor only has to consider investing in the international market as it presently possesses the expertise, revenue and workforce that it will need.

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