Position of Nucor Corporation, a Leading Producer of Steel in the US Market - Case Study Example

Case Study of Nucor Corporation of the Executive Summery The case study provides an analysis and assessment of the position of Nucor Corporation in the market, a leading producer of steel in US. The peripheral and domestic factors affecting the position of the company are analyzed. The aspects which generate issues for the company are industrial and competitive factors (Dzielinski, 2013). These are evaluated to determine the driving forces and important success factors of the company. The evaluation of the internal factors includes analysis of the organization, resource, capabilities, core competencies, financial performance and growth strategies. a) Nucor corporation’s is striving to compete with the low cost foreign steel imports and depressed market demand of steel products (Hang, Chen & Yu, 2011). b) Analysis of Nucor’s challenges are exaggerated competition from global competitors, fluctuating steel cost, increased raw material cost, amplified energy cost and increasing costs to abide by the environmental convention (Nucor, 2013). c) Alternative course of action to deal with such challenges are global expansion, development of innovative technologies, strategic acquisition, hedging and market expansion. d) Recommendation is provided to the company for dealing with their challenging issues. Nucor Corporation needs to practice pricing and revenue optimization which will prove to be successful technique for enabling the company to enhance profitability and competence (Nucor, 2013). e) Implementation of the plan can be possible by the contribution of the company’s readily available human resources, financial resources and time. The company has a strong organizational culture in combination with various technological innovations to support the growth plan. Table of Contents 3 Summary of Nucor Corporation’s Situation 4 Analysis of Nucor Corporation’s Problems 5 SWOT Analysis 6 Pest Analysis 6 Suggested Alternative Course of Action 7 Recommendation 8 Implementation of Plan 9 Conclusion 10 Bibliography 11 Summary of Nucor Corporation’s Situation Nucor Corporation over the recent years has positioned itself as the fourth largest steel manufacturer by market capitalization. The chart below shows the increased revenue increase of the steel company over the two years (Whatley, 2013). The sales of the company has been rising over the several quarters, now having revenue increase of 15%. Figure 1: Nucor Corporation’s Current Revenue (Source: Whatley, 2013) Due to the tremendous consolidation of the steel industry and monopolistic US steel market conditions, the company did not cut its prices much in order to respond to down market in the current years. Nucor Corporations net sales declined due to selling less steel and not lowering prices of steel. The company is making attempts to grow in the UK economic downturn and trying to build a long term value for their shareholders (Dzielinski, 2013). Nucor Corporation is also facing a tough competition from other leading foreign steel manufacturers which are offering steel products in highly competitive prices. Nucor Corporation has positioned itself as the global leader in environmental performance. According to the analysis of the case study the company has been able to make improvements in revenues and has been showing signs of improvement and therefore if the growth strategies are implemented by the company efficiently then the performance of the steel manufacturer is likely to enhance in the coming quarters (Mehta, 2014). Analysis of Nucor Corporation’s Problems The situation of the Nucor Corporation and its problems can be well understood by conducting SWOT and PEST analysis of the company. SWOT Analysis Strengths The company possesses a strong financial position. Nucor corporation possess a calculated risk taking organizational culture. The company is the market leader in innovation and minimization of production costs. Weaknesses Nucor corporation relies on the united states domestic markets. The company is facing challenges of declining market share. Less diversification practices of the company generates competitive issues for the company. Opportunities The company can develop strategies to expand in the US market. Nucor can decide to enter the Asia and Europe markets through joint ventures. The company needs to develop its products and reduce cost with improvements in research and development. Threats The company faces threat from the increasing raw material and labor costs. Rising debt and equity ratios. Poor government regulations permitting dumping of steel from china. Invasion of the US domestic market by overseas steel companies. Week demands of steel products in the economy of UK. Pest Analysis Economic analysis: Extended slowdowns and economic recession impacts on the position of the company. The weak dollar has presented an excellent opportunity for the steel companies to export, but Nucor do not have a global market to utilize these opportunities. Competitive dollar has permitted foreign investment in US steel market (Whatley, 2013). Social analysis: Nucor’s strategy of employment and community positioning is one of the key factors of its success. The company targets small rural localities in order to possess very strong loyal community base (Marco, Clinton, Manna & Matisz, 2012). Technical analysis: The US steel industry is largely influenced by the international development. Nucor utilized the mini-mill technique to manufacture steel which resulted to the industrial revolution. New computer systems have been implemented by the company to accurately control the quality of the steel products (Marco, Clinton, Manna & Matisz, 2012). Environmental analysis: Nucor leads the market when it comes to be environment friendly in the steel industry (Whatley, 2013). Environmental protection agency held Nucor guilty of failing to limit population and incorrectly disposing hazardous wastes. The company complied with EPA for ensuring population control. Suggested Alternative Course of Action Nucor’s corporation can implement various strategies or take up various alternative courses of action in dealing with the troubles encountered by the company. Nucor can take up growth strategies such as new acquisitions, new plant construction, frequent plant upgrades and cost cutback efforts, global expansion through joint ventures and increased control over raw materials (Dzielinski, 2013). The company can continue to make a chain of strategic acquisitions to reinforce its competitiveness, selectively expand their line of products, enhance its capabilities to serve customers in specific geographical areas and increase its overall prospects for excellent profitability. Commercialization of new technologies and plant constructions can be other successful courses of action for improving company’s performance (Hang, Chen & Yu, 2011). Nucor’s can continue to be leader in technology by being opportunistic in constructing new plant capacity which can enable the company to expand its operations in new and existing market segments. Nucor can implement strategy aiming at attaining increased control over the costs of various types of metallic outputs utilized in its steel plants. The key element of this action is to backward integrate its production. Another growth action can be the shift of company’s low-end steel products to value-added products (Balasubrahmanyam, Kaipa & Akhilesh, 2012). Entering into joint ventures with the foreign companies for investing in steel manufacturing projects outside North America can prove to be beneficial. Finding suitable partners will help the company expand internationally. Another strategy can be driving the low cost production and plant efficiency. The company can make ongoing capital investments for improving efficiency and limited cost production at every facility it operates (Mehta, 2014). Facilities can be built in an economical manner and invest in plant modernization and new technologies that will provide the company with cost saving opportunities. Investing in new construction of steel plants will improve the production capabilities and strengthen competitive position with respect to rivals. Recommendation Based on the evaluation of the Nucor Corporation’s problem areas it can be recommended that the company needs to respond to the challenges on two global areas: global expansion and new technology implementation. These recommendations are proposed to address these issues as they fit well to the problem areas of the company. The first recommendation is to retain global growth through joint ventures. Another recommendation is to diversify the company’s business by setting up steel plants in Brazil and other areas (Reynolds, 2013). This will prove to be the Nucor’s initial steps to global expansion effort. The backward integration strategy will help the company to combat the threat of mounting raw material prices and additionally Nucor can gather experience for its future globalization effort. Another recommendation is to exercise pricing and revenue optimization which is a relatively new technique to the manufacturing industry but is observed to be successful in other industries. This involves installation of new system, alteration in pricing practices (Williamson, 2012). This technique will prove to be successful in enhancing Nucor’s competences and profitability which will further lead to gaining competitive advantage if implemented accurately. Along with these recommendations various courses of action discussed in the study can help the company to maintain its leadership position and survive through the cut throat global competition in the UK steel industry. Implementation of Plan Implementation of the proposed action plan can be successful through Nucor Corporation’s efficient human resources, financial resources and accurate exploitation of time. The company maintains a lean staffing and streamlined organizational structure and recruits people with right mindset and technical skills (Nucor, 2013). The company maintains a strong organizational culture and the employees are dedicated towards enhancing the operations of the company. The company is focused on people oriented management, has a performance based incentive system, non-union surrounding of workplace and provides motivation to the employees as a result they feel dedicated to the company and generate excellent productivity. The incentive plan proposed by the company generates healthy competition in all its plants (Agnihotri, 2013). Nucor has strong financial resources to support the implementation of growth plan. It has incredible profitability, strong cash position, phenomenal revenue growth, low debt liabilities, stable dividend payment and growth, a strong balance sheet position (Nucor, 2013). These financial strengths can help the company to implement these strategies and gain profitable benefits from it. Nucor Corporation can implement the recommended strategies as it has the capability to manage time efficiently. Conclusion Nucor Corporation’s case depicts growth of the company towards a strategic fit against competitive background of ultimate commodity market. Over many years Nucor has evolved towards well-built strategic approaches with a consistent activity system. By fortifying around its core elements in its planning system, the company has shown strong commitment towards its growth strategies. Despite of economic downturn and strong competition Nucor Corporation continues to grow stably. To sustain its profitable stance within a mounting competitive industry, the company requires forming and continuing its evolution towards strategic plan. The strategic course of action if implemented by the company can help them to enhance their profitability and help survive through the competitive market. The company has surpassed the expectations of the global market and investors before and it is believed that the company possesses the potential to do so in future. Bibliography Agnihotri, A. (2013). How much is strategic fit important?. Business Strategy Series, 14(4), 99-105. Balasubrahmanyam, S., Kaipa, P. & Akhilesh, K. B. (2012). The impact of a firm’s financial flexibility on its strategic renewal: Key concepts with evidential support from businesses across industries. Global Journal of Flexible Systems Management, 13(3), 165-175. Dzielinski, M. (2013). The role of information intermediaries in financial markets. Swedish House of Finance Research Paper, 13(6), 22-28. Hang, C. C., Chen, J. & Yu, D. (2011). An assessment framework for disruptive innovation. foresight, 13(5), 4-13. Marco, G., Clinton, S., Manna, D. R. & Matisz, K. (2012). Sustainable Case Study: United States Steel Corporation. Journal of Business Case Studies (JBCS), 8(6), 543-550. Mehta, M. (2014). Dumping disputes and dodgy weather. Steel Times International, 38(4), 8-10. Nucor, C. (2013). Annual report of Nucor Corporation. Company 10k report, 2(1), 12. Reynolds, N. J. (2013). Court of International Trades Review of the International Trade Commissions Injury Determinations in Antidumping and Countervailing Duty Proceedings in 2012: An Overview and Analysis, The.Geo. J. Intl L., 4(5), 67. Whatley, H. D. (2013). Principles & Dimensions of Market-Based Management®(MBM). Independent Journal of Management & Production, 4(1), 55-62. Williamson, P. J. (2012). Strategy as options on the future. Sloan management review, 40(3), 44-51. Read More