Trends in the Steel Industry and How It May Impact Nucors Strategy - Case Study Example

Running Head: Nucor Steel Corporation Case Study Analysis – Nucor Steel Corporation and Section # of Nucor Corporation – Background Nucor Corporation is a large steel producing company that operates in the United States with annual revenues of $23.7 billion. The company is the second largest steel manufacturer in the Northern American region. The steel maestro is deals in the following: Carbon Steel Fasteners Alloy Steel Steel Products Raw materials MSDS by products Nucor Corporation operated in about twenty two states of the US. Not only that, they also operate in Canada, Italy, UK and Ireland, and UAE. This width of operations adds to the managerial complexity of managing operations and the global workforce. This paper is aimed at analyzing the strategies of Nucor Corporation that assist it to become one of the most competitive steel manufacturers across the globe. Trends in the steel industry and how it may impact Nucor’s strategy The global Steel Industry has gone through major changes in the twentieth century. It has grown at a great pace. Steel industry has grown much in the Europe and West and now these countries have become almost stable. Now the focus has changed mostly to countries like China, India, South Korea and Brazil. Steel consumption and production has taken a fast pace in China over a couple of years. According to some statistics, China produced 272.2 million tons in 2004 while 349.36 million tons in 2005. This is much higher than the production rate of countries like USA, Japan, Russia and other European countries. Steel production is no longer labor intensive. Advancement in technology has led to new manufacturing procedures, hence, cutting down labor. Steel industry grows with growing economy. The bigger economies of the world own steel industries on large scale. Steel Production requires high investments which in turn produces high returns. Nucor Corporation is one of the largest steel producing companies in the United States. Not only that they are also recyclers of steel and also lead in it. Nucor got its name in 1972, and after that they have greatly expanded their presence in the US. Since 2007, Nucor has expanded itself by making one of the biggest acquisitions in the history to spread out its product line and regulate its supply of raw materials. Balance Sheet Income Statement Cash Flow (Google, 2009) Seeing the trends in the steel industry Nucor has acquired four brands of Magnatrax to strengthen its share in the market of pre-engineered metal building systems. In 2009, they also made two joint ventures to expand outside of the US and capture other markets of the world. In 2008, Nucor’s revenue was 23.66 billion dollars and they had 21,700 employees. They however, forecasted that they will loose money in the first quarter of 2009 and they did. Their revenue dropped considerably in 2009 as compared to 2008. Organizational Structure and management Philosophy at Nucor Nucor Corporation claims that they have the most advanced production facilities but it’s the people who operate them and make Nucor a successful organization. Nucor follows a decentralized management philosophy. They follow a culture of decentralized management philosophy, egalitarian benefits, performance based compensation, customer service and quality, and technological leadership. Nucor Corporation does not believe in labor unions and strongly oppose them. Management Philosophy Nucor is a much decentralized organization. They have very few hierarchical levels. These levels include: CEO Executive vice president Division general manager Department manager Supervisor or professional Their operating decisions are made mostly at the low levels. They claim to have the smallest corporate staff and most of their workers are the ones who work on sites and steel production. Performance based compensation Apart from base pay, all employees are given incentives to meet the targets and goals. Bonuses are given weekly to employees working the production department to increase their performance. The Department heads are also paid bonuses on an annual basis based on the percentage of assets allocated to their divisions. The employees who are not in the production are not left behind. They are given bonuses based on the income return on assets of each department. The senior officers do not have employment contracts. They have much lower salaries as compared to other companies. They are given bonuses on annual basis as a percentage of net income to stockholders equity. They are paid in cash or stocks. Egalitarian Benefits The senior officers at Nucor Corporation are also not given those benefits or luxuries provided in other companies. Instead the benefits such as scholarships or extraordinary awards are only given to employees at lower levels to increase their motivation. HRM issues related to strategy implementation At Nucor, employees are paid on their performance. If an employee performs well, he is compensated and is guaranteed to have a job the next day. Since there is no job contract, employees they have to perform well every day to maintain their job. One of the drawbacks of this approach is that everyone is concerned with their job and enough time is not spent on carrying out team building sessions or performance appraisals. When the market conditions in The US were grim between October 2000 and October 2001, many companies had to lay of their employees for implementing the new acquisitions strategy. The production capacity was to be reduced which meant the laying off of employees. The other problems were improving plant efficiency and keeping production cost low. The possible solutions will be to provide strong commitment to the workforce and provide them with the best technology available to perform the job. They should also ensure the safety of the workforce to protect them against any possible accidents. The HRM approach hinders team building and focuses more on task achievement rather than building relationships and improving the performance. Creativity is hindered and there is motivation is mostly due to incentives and bonuses than on anything else. Nucor Corporation has focused much on reward base motivation. They should have created a culture that employees would love their work not because they were rewarded but for the company. This is an issue in strategy implementation. Since employees are used to of incentives and bonuses on anything extra they do, they have to be compensated when new strategy needs to be implemented. Diversification With the decline in the financials of Nucor Corporation from 2008 to 2009, the company should diversify in related areas rather than taking risks and diversify in unrelated areas. The cash flows show a decline from 2008 to 2009; hence, they should invest in something related and minimize their chances of risk. Diversification and organizational Structure The company will face some issues when going through related diversification. The company focuses much on lower level staff and production level staff. This can be a plus point as well. The company has to give them compensation or bonuses when implementing something new. For acceptance of diversification, there may be a possibility that new production plants will be setup and some employees may face job rotation. The company will then have to deal with such issues which any company faces when something new is being implemented. Conclusion Steel industry has tough competition and Nucor has to follow the trends of the industry to remain the leaders and survive the competition. For this they need to build their strategies carefully and manage their workforce properly which is their biggest asset and the reason for the company’s success. References Nucor Steel - Finances (n.d.). Google Finance. Retrieved December 17, 2009, from Google Finance Portal: http://www.google.com/finance?fstype=ii&q=NYSE:NUE Nucor Steel – Products and People (n.d.). Nucor Steel. Retrieved December 17, 2009, from Nucor Steel Portal: http://www.nucor.com/products/people/ Overman, Stephanie (1994). No-frills HR at Nucor - human resources. Retrieved December 17, 2009, from HR Magazine: http://findarticles.com/p/articles/mi_m3495/is_n7_v39/ai_15603097/pg_2/?tag=content;col1 Read More