640 Words3 Pages
Business Summary and Strategy
Nucor is the largest steel manufacturer in the United States. It remains a profitable company despite being in one of the most cyclical industries in the economy. Nucor enjoys this success for several reasons, employee relations, quality, productivity, and aggressive pursuit of innovation and technical excellence. Nucor's strategy is that of a low cost provider, they know they are selling a commodity and understand their competitive edge in the industry is lowering prices through innovation and productivity. The company operates primarily in two business areas, steel mills and steel products.
Steel Industry Outlook
„« Globalization - Low cost foreign manufacturers "dumping" steel in…show more content…
Porter's Five Forces:
„« Competition - as stated earlier, competition is fierce and foreign competitors are dumping steel.
„« Barriers to entry are typically high, it requires a very large amount of money and expertise to enter the industry. The industry is consolidating not growing.
„« Substitute products - plastics and other components have taken market share from steel and will continue to do so.
„« Seller-Buyer - since there is such heavy competition in the industry and there is excess capacity it is a buyers market.
„« Supplier Seller - Nucor is heavily reliant on the producers of iron ore and scrap.
Strengths - Most profitable steel company in the U.S., highly productive, non-union workforce, technological/innovation leader in the industry, decentralized management structure, financial strength
Weaknesses - heavy reliance on the U.S. market, highly cyclical industry, decentralized support structure.
Opportunities - global market, global economy & steel market is growing, financial strength to acquire companies after an industry downturn after bankruptcy
Threats - heavy competition in the industry, foreign manufacturers dumping products in the U.S., environmental compliance costs
Future Strategy and Goals
„« Nucor has close to $1 Billion in cash on its balance sheet. While earnings outlooks are still good, they should continue to raise dividends and
Page 2 of 6 Nucor Corporation : Competing against Low-Cost Steel Imports The market opportunities would be to expand in the below areas: a.1. Expansion in US market through mergers and acquisitions a.2. Going Global: Entry into Asia (China, Indonesia) and Europe markets through joint ventures a.3. Technological advancement and Innovation of new products through research and development. 2. Explanation of #1 – 3 points Their current strategy is: They are low cost producer They differentiate by using electric arc furnace to convert scrap to steel. They also differentiate by having no frill, no fat compensation for executives. Yes, their strategy is working which can be seen by below financial and strategic facts. Financial Facts: (In Millions) Nucor Corp 2006 2005 2004 Net Sales $14,751.3 0 $12,701.0 0 $11,376.9 0 Net Earnings $1,757.70 $1,310.30 $1,121.50 % of net earnings to net sales 11.9% 10.3% 9.9% We can see an increase in % of net earnings to net sales which is nothing but the profit margin. Profit margin is very useful when comparing companies in similar industry . When comparing the % of net earnings to net sales of Nucor with its competitors in year 2005, we can see in the below table that Nucor was on the top. Company % of net earnings to net sales (2005) Nucor Corporation 10.30% US Steel 10.30% Mittal Steel 4.00% AK Steel Group 2.00% Strategic facts: Also looking at the strategic facts, Nucor’s ranking moved from 7 th position in 1985 to 2 nd position in US in the year 2000 . Even though Mittal Steel was in first position, a European company which made series of acquisitions in the United States in the year 2006, Nucor steel shipped more tons of steel to customers than Mittal Steel, which is an indication that customer satisfaction was high.