Can our final statement be something like this:
“Based on our analysis, Nucor is operating in a highly competitive environment, characterized by high intensity of rivalry among firms. In spite of that, based on their technology, innovation capability, the human capital and the entire culture of the organisation, we predict a bright future for the company!” please say yes... cause i love it. Espen
1. Evaluate the competitive environment in which Nucor operates. Based on our analysis, Nucors environment is highly competitive characterized by high intensity of rivalry among firms. 2. How would you categorize Nucor’s business strategy? Support your answers with explanations.
Nucor is known for it’s cost leadership model and business strategy, which emphasizes on providing goods and services with features that are acceptable to customers at the lowest cost, relative to that of competitors. As the text clearly states ‘Nucor sought to be the lowest-cost producers in the industry with competition based on price and delivery performance.’ The steel industry is in many ways driven by standardization, which implies that there is little to no room for product differentiation. The industry also prompts high economies of scale, which is another indicator as to why Nucor has chosen a cost leadership strategy. “Just a little something I found laying around :)” Espen
Nucor adopted the cost leadership strategy
-Sell standardized goods such that they cannot really differentiate their products from other competitors
Maintained its own fleet of almost 150 trucks to ensure in-time delivery to all of the states Most businesses was regional due to transportation costs
Plants were linked electronically to each other’s production schedule, allowing them to function in a just-in-time inventory mode. Plants were also located in rural areas near the markets being served - this helps to cut down on their transportation costs as well
Process innovation in melting and casting operations
Less time and lower capital investment were required (as compared to other mini-mills, so Darlington would incur lower costs compared to competitors) Casting machines were “continuous casters”
Result: Texas plant had costs under $80 per ton of annual capacity VS $250 per ton for typical mini-mills Ensure that maximum capacity is achieved
E.g. steel plants were modernized and expanded until the total capacity was three million per year at a capital cost of less than $170 per ton by 1999
Economies of Scale
Nucor try to maximize its plants’ capacity. By producing more, the fixed cost will be shared among the greater number of units produced and thus the fixed cost per unit output will be reduced.
Experimented new processes and new manufacturing techniques
Design and build own equipment
E.g. continuous casting unit, reheat furnaces, cooling beds and own mill stands All have cost under $125 per ton VS projected cost of $1200-$1500 per ton of annual capacity for large integrated mills (~10 times cheaper) Nucor serve as their own general contractor and design and build much of their equipments by themselves. They build their continuous casting unit, reheat furnaces, cooling beds and mill stands. All these cost them under $125 per ton of annual capacity as compared to the projected cost of $1200-$1500 per ton of annual capacity for large integrated mills which is approximately 10 times lower.
Technological innovation in twin shell electric arc furnace (help mini-mills increase production and lower costs and take market share) Increase production by 60%, allows for flexibility of operations Lower cost of producing the output in steel mills
High emphasis placed on quality (e.g. there was an independent quality control inspector who had the authority to reject the run of joists and cause them to be reworked) Reductions in defects which will reduce costs
Highly productive and versatile workforce where avoiding...
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