Nucor Corporation

Topics: Steel, Steelmaking, Recyclable materials Pages: 14 (4469 words) Published: August 7, 2010
Week Four

1. Read the following from the textbook and be prepared to discuss in class:

Chapter 9:Diversification: Strategies for Managing a Group of Businesses.

Chapter 10:Strategy, Ethics, and Social Responsibility.

Chapter 11: Building an Organization Capable of Good Strategy Execution.

2. Perform Decision Fifth Round for Year 15 of the Business Strategy Game.

4. Prepare a written case study in APA format on, and be prepared to discuss in class the case study: “Nucor Corporation: Competing Against Low-Cost Imports” Case on page C-193. Use the following questions to perform your case study.

“Nucor Corporation: Competing Against Low-Cost Steel Imports” case 10 page C-193 case study Assignment Questions:

1. What are the primary competitive forces impacting U.S. steel producers in general and the producers like Nucor that make new steel products via recycling scrap steel in particular? Please do a five-forces analysis to support your answer. The steel industry is characterized by a number of dominant traits. First and foremost, the industry is highly competitive. The low level of product differentiation causes the industry to be extremely low-cost oriented. Essentially, the company that can provide buyers with the lowest cost will usually win out. Because of this, it is very important to be well established and big in size. The large companies will be able to obtain larger contracts which will greatly help them to increase in growth. Furthermore, the industry is very economy dependant. Economy cycles play a major role in industry success and will be touched on more later. Lastly, the industry is global. Buyers will purchase both internationally and domestically depending on price. Imported steel into the United States is very common and greatly threatens U.S. steel producers, such as Nucor. The industry is currently at a point of maturity in its life cycle. However, it appears as though the maturity stage may be indefinite assuming a couple of factors. One major factor is that supply for iron ore lasts. Iron ore is vital for the production of steel. Therefore, if the supply runs out or even gets low, prices for steel will skyrocket at which point substitute products may be further considered. An industry environment analysis through Porters five forces of competition model helps to better outline the current state of the industry and represent the intensity of competition within it. The model is broken up into five parts—threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competing firms. First, the threat of new entrants is relatively small. This is derived from the extremely high barriers to entry. Starting a company in the steel industry is very costly and calls for huge capital requirements due to expensive up-front machinery requirements. Additionally, the competition is simply too fierce from larger firms. In an industry where size matters, it is hard for new entrants to compete with established firms that dominate the market. As a result, their lack of experience and size upon market entry usually wont let them last long enough to become established and increase in size. Often times this can be combated by offering a unique product that can compete with rivals. However, the steel industry offers little room for product differentiation and so larger companies can offer the low prices that buyers want which cannot be duplicated by new entrants. Next, the bargaining power of suppliers is relatively high. In the steel industry, the supplier group is powerful due to the importance of raw materials in the manufacturing process. Basically, the supplier group has control due their critical role as satisfactory substitutes to scrap metal and iron ore are not currently available. As supply decreases for raw iron ore, prices increase....
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