Diversification stratagies - Case Study Example

HRM Issues/Diversification Strategies: A Review of the Nucor Corporation Case Introduction Nucor is the largest recycler and still manufacturer in United States of America. The company has a largely centralized model of management, which comprises of a pay for manufacture compensation scheme (Nucor Corporation, 2009). Evidently, with globalization being experienced within steel industry especially in today emerging states, Nucor is considered one of the key players. Because effective management as viewed by many is an organization source of competitive advantage, this paper aims at analyzing Nucor trend especially in current and future expansion plans as well as understanding the impact created by expansion on Nucor strategic human resource management.

Trends within steel industry and Nucor strategy Nikolaev and Lyakishev (2003) maintain that, great electric refining based on significant use of iron bearing scarp as well as direct reduction of iron will be dominant steelmaking technologies by the end of the first half displayed in this century. This kind of steel production is Nucor core process. Hamilton (2009) asserts that the great use of electric arc furnaces will widely put any country possessing a surplus in steel is at a competitive advantage.

Bekaert et al (2009) asserts that, there is a definable stalled growth within the steel industry, which is attributed to slowed construction projects. Nevertheless, it is anticipated that growth ad demand for global steel production will grow to 2 billion tons by the year 2025. Helman (2009) maintain that, Nucor is the biggest efficient steel producer across the globe putting it at a more competitive advantage over china. In order for Nucor to defend its position, the company needs to balance itself in the midst of Cap and trade political controversies.

For instance, china has been developing a competitive advantage over the US steel producers due to engaging in illegal trade practices. Whereas I 2007-08 Nucor had several backlogs of order required to be filled, in 2009 their utilization capacity dropped to only 51%. The company has developed concern on china over capacity as the world’s biggest producer and consumer of steel. The company is aware that “cap and trade” legislation that was passed in 2009 negatively affected its operation.

In addition, based on the Cap and trade greenhouse emission bill that was passed, the company management is concern on recent government regulation, which will have a direct impact on steel production. The company believes that if the Corporate Average Fuel Economy (CAFÉ) takes effect, auto manufacturers will commence on reducing steel content substituting it with other materials. Lyakishev & Nikolaev’s (2003) maintains that steel production across the globe is taking place within a worsening economic climate context, which is resulting to exacerbation of both energy and environmental crises.

Organizational Structure and Management Philosophy Nucor is divided into two separate segments namely steel products and steel mills. Because of its key focus on steel production, the company divisions are widely related to steel production coupled with downstream values added produce such as wire mesh, metal buildings, and fasteners. Recently the company acquired several companies such as Free State Steel, SHV North America, and Harris Steel. These acquisition place the company as the most diverse steel producer in North America.

Further, the company owns 50% stake in an Italian mill, which serves southern Europe, North Africa, and Italy. Nucor has a well-established management philosophy that is well described in the company website. The company has good reputation in that it has never lain off its workers due to lack of enough work. The management follows a philosophy where each employee is paid for his performance. Helman (2009) asserts that, Nucor weekly bonus can sum up to almost 2/3 of employees salary. Being a widely decentralized company, Nucor days to day decisions are made by managers.

The management hierarchy in Nucor comprises of four layers namely; general managers, executive vice-presidents, supervisors’ ad shop floor workers. At the top, a CEO leads the company. The company is has 90 employees in the headquarters and 20,400 across its chain (Ketkar and Sett, 2009). HRM Issues and Recommendation Actions Within Nucor, managers are required to make a 25% return. According to Thomson and Gamble (2009), decentralized decision making experienced within the company requires managers to decide on how various strategy need to be executed.

Further, this decentralization indicates that managers who are not able to execute proper strategies are weeded out. Clearly, with steel mills running just a drop over half competence, it is could be viewed that Nucor management is being left to its own devices in figuring out on how to make production quotas. This is a looming problem since if the management fails to produce their performance quotas they could either be fired or held back from future company advancement. The management engages in weekly bonuses to its employee, which is based on production made by a group of 8 to 20 members.

Although earlier it was stated that the company does not lay its employee off, in the year 2004 Nucor had 10, 600 employees whereas in 2010 the company registered 9,800 employees. This numerical difference is due to employees leaving from acquisition and drop of performance resulting to managers being fired. Hamilton (2009) maintains that, the company human resource management department is small and comprises of a personnel service manager and a benefits administrator. In most of the company plants, someone within the finance department handles the HR roles.

This not right since an individual is given responsibility not based on skills poses but to reduce workmanship involved. My recommendation on this is that the company has a well already established management philosophy that has a pat structure in it. This pay structure can be of help while recruiting. However, there is need for Nucor to reexamine its value on compensatory schemes and greatly readjust it accordingly to retain it employee and competitive advantage. Further, the company needs to reorganize its HR roles so as to contain any downsize losses in future especially in today environment of uncertainties (Ketkar and Sett, 2009).

Recommendation for diversification and its rationale Evidently, Nucor is well diverse in the steel industry because of their acquisition series. Nonetheless, since the passage of CAFE Nucor could perhaps look into acquiring an organization that is unrelated to steel production but within what is known as metallurgical family. The company requires diversifying and expanding into making materials made from a competitive metal like aluminum that is used in the manufacture of light weighted vehicles.

Recommendation to implement diversification Evidently, Nucor has establishes various approaches into globalization but it fundamentally known as an all-American company. The company still holds exclusive rights for strip casting technology in Brazil. In addition, the company has a facility within Trinidad. Currently, the company is operating a joint venture mill I Italy. A recent SWOT analysis for Nucor required the company to develop a substantial presence in china. If Nucor develops across china it needs to elect a site within this country that is optimized with enough sources of natural gas and electricity.

The company needs to work on the various challenges within the steel industry to remain the market leader in steel production. Clearly, the future of steel production is covered with many uncertainties especially in the production of copper and aluminum thus there is need for the company to reorganize its strategy to meet up customer requirements. In addition, it is important for Nucor to re-examine its strategic human resources management so as to ensure that it align its employees’ effort to their mission, vision and objectives.

References Bekaert, F., et al. (2009). Industry trends in the downturn: A snapshot. McKinsey Quarterly, (1), 85-89. Hamilton, C. (2009). A new era for steel – drivers, implications, and risks. Iron making & Steelmaking, 36(4), 255-258. Helman, C. (2009). Test of mettle. Forbes, 183(9), 81-82. Ketkar, S., & Sett, P. (2009). HR flexibility and firm performance: Analysis of a multi-level causal model. International Journal of Human Resource Management, 20(5). Lyakishev, N., and Nikolaev, A. (2003).

Steel metallurgy: Trends, problems, and prospects for growth. Metallurgist, 47(1/2), 66-74. Nucor Corporation. (2009). Datamonitor: Nucor Corporation SWOT analysis, 1-9. Business Source Premier Database. Thompson Jr., A., Strickland III, A.J. & Gamble, J. (2009). Crafting & executing strategy. Strayer University: McGraw Hill Learning.