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Nucor Corporation - Essay Example

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ANALYSIS OF NUCOR’S PERFOMANCE IN THE STEEL INDUSTRY Date Competitive Forces in US Steel industry In a liberal market economy where the forces of demand and supply are the major determinants of price and terms of trade, businesses have to formulate strategies that are aimed at positioning it for competitive advantage…
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Download file to see previous pages To begin with, there is competition for the inputs that are required in the production of steel. The industry core input is from recycling of scrap metal. The many firms in the industry thus compete for these metals used in production. There is also competition for market share between the players. Market share determines the level and volume of sales that a firm makes and therefore influence e the profits to a firm (Porter, 1998). The foreign suppliers further tighten competition for market share in the steel industry. Firms in this industry as well are faced by the threat of entry by new firms as this may influence negatively on the performance of the already existing firms. Michael Porter five forces model can be applied to explain the competitive forces in this market. According to porter, the five factors that influence the performance of firms are the threat of entry of new firms, threat of substitute products, bargaining power of suppliers, bargaining power of customers, and the rivalry among firms (Porter, 1998). These five forces will affect operations and determine the policies to be adopted by firms to ensure that the competitive edge against competitors is attained. In this market for instance, there is high bargaining power of customers. ...
The fight for market share is a zero sum game where if one firm increases its market share then the others will lose their share. In the US industry, there is threat of entry of very new firms or formation of partnership, alliances, or mergers that will make the competition stiffer. Nucor Corporation has therefore increased its acquisition of new firms and reduced the bureaucracy to ensure flexibility and better performance. The industry is thus highly competitive. The bargaining power of suppliers also exists in the industry because of the many firms in the industry. In this industry, firms have to look for scrap metals that are molted and used in producing steel products. The companies must therefore offer good prices for input for them to have continued supply of raw materials and reliable suppliers. The third force is the threat of substitute products. Substitute products have similar uses and satisfy the same need, therefore becoming important for competition. Industries that are characterized by the existence of closer substitutes are highly competitive and must ensure quality production and good pricing. Continuous restructuring and strategies are also important for the success of the firms. Presence of substitute products in the steel industry, together with the imports from china, turkey and other foreign countries have made competition stiff in this industry (Thompson, 2010). The four forces together with the rivalry among firms are the component of the five forces model. The rivalry among firms is determined by the ease of exit, branding, product identity, product difference and switching cost. The low cost of switching and the ease of exit makes the steel industry in US ...Download file to see next pagesRead More
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