Nucor at a Crossroads

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Topics: Steel, Steelmaking
Nucor at a Crossroads

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Nucor’s Historic Performance, Competitive Advantage, and Five Forces Analysis

With roots dating back to 1904 in the automobile manufacturing industry, Nucor’s business strategy has morphed many times over the course of the past century in response to struggling sales and unrealized business strategies. Since F. Kenneth Iverson’s appointment as Nucor’s President in 1965, however, Nucor has performed very well. With a focus on efficiency, Nucor is committed to minimizing bureaucracy and maximizing performance and productivity via the utilization of an open-door/continuous improvement/ entrepreneurial culture, a compensation scheme premised on performance-based incentives, and — last, but not least —commitment to technological advancement. With this approach, in an industry with 36 different companies, Nucor enjoyed the second largest market share in 1986, with 16 plants and an annual production capacity of 2.1 million tons of steel. In 1985, Nucor was ranked the most productive steel-maker in the United States and the second most productive in the world, averaging 981 tons per employee, per year. Nucor managed to achieve this success using a low-cost strategy, which proved to be particularly suitable in the highly competitive, commodity-like steel industry.

Despite its positive performance, competition in the U.S. steel industry was keen in 1986. At that time, the industry had sustained seven straights years of decreasing domestic demand, falling 22 percent since 1979 — but still demanding 90 million tons annually. Mini-mills accounted for 16 percent of domestic steel capacity, up from seven percent in 1975. Meanwhile, integrated steel-makers, although a major competitive force, were plagued by the complexity of their steel-making process as displayed in Exhibit 3 of the case, their own failure to invest in new technology, price-competition from imported steel, and turbulent labor

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