Industry Driving Forces - Case Study Example

The paper "Industry Driving Forces" Is a wonderful example of a Management Case Study. Nucor Corporation began life as the Nuclear Corporation of America in the 1950s and redirected its efforts into steel production in the late 1960s. By 2000, Nucor had grown to be the second-largest steelmaker in the U.S., with annual sales of 11 million tons accounting for revenues approaching five billion dollars.

Nucor’s situation over the past two years has been favorable. Nucor’s rapid-growth strategy is a form of a broad differentiation strategy. The basic idea of a broad differentiation strategy is to access the widest possible market through the widest possible offering of products; in Nucor’s case, this means producing steel in as many variations as possible, everything from hardware and other finished steel products, to steel in forms useable for the manufacture of other items. Mostly through acquisitions, Nucor has aggressively worked to expand its product line; in 2005-2006 the company made four major acquisitions, including a buyout of Canada’s Harris Steel which provided Nucor with its first large-scale presence outside the U.S.

The strategy has been consistent throughout Nucor’s history, and a particular indicator of its success is the fact that the company has been the most profitable steelmaker in North America in the past two years. This is a remarkable achievement considering the size of the investment Nucor has made in recent acquisitions. The challenge for Nucor is to maintain its growth through differentiation strategy successfully when faced with strong competition that is clearly following a similar pattern. Mittal’s entry into the U.S. market in 2006 relegated Nucor to second place in terms of production capacity. From Nucor’s point of view, it would not be logical to assume that the current lead Nucor enjoys in terms of the amount of steel shipped to customers could be maintained indefinitely while its larger competitor actually has the capability to produce more. The recommendations which conclude this analysis will suggest specific ways in which Nucor can continue to expand and diversify to meet this challenge.

• Strategic Issue

The market for steel products is vast and varied, with the material being useful in an almost limitless number of applications. Because steel is an ingredient in the production of new vehicles, appliances, buildings, other kinds of construction, and so on, the steel market is highly sensitive to overall economic conditions. These two basic conditions – demand and economy – are responsible for the intense competition in the steel industry. Nucor’s response to the competitive pressures has been to pursue a strategy of broad differentiation: offering the widest-possible product line, manufactured in the most efficient and cost-effective possible ways.

Beginning in 2000, Nucor defined this overall strategy through four strategic objectives: acquisitions to expand production capabilities and the product line, new plant construction, continuous efficiency, and cost-reduction initiatives, and joint ventures to expand capabilities through cooperative efforts. This strategic plan was made, however, against the backdrop of a worldwide market that had far more production capacity than it needed. This presented a problem on the one hand by intensifying competition, but an opportunity on the other by expanding the number of potential acquisitions of failed or failing companies.