Individual Case Analysis
BUS490 Comprehensive Examination
Nucor Steel Corporation
Written by: Lukas Kubilius
Professors: Bonnie J. Straight Julian J. Prewitt
Lithuania Christian College
2 March 2005
Overview of situation
Nucor Corporation with 24 plants/divisions and 8,000 employees, operated in nine states recycling more than 10 million tons of scrap steel annually. Producing carboy and alloy steel in bars, beams, sheet, and plate; steel joists and joist girders; steel deck; cold finished steel; steel fasteners; and metal building systems, the corporation was known as the most modern and efficient, having streamlined organizational structure,
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More attention to own business than to competitors is their strategy. South magazine observed that Nucor is “stripped down, no nonsense” organization. It keeps maintaining low cost and efficiency, which is the key to making profit in steel industry, by keeping the employee force at the level it should be, empowering them, being totally honest, involving them in decision making process, and using effective incentive compensation system.
Nucor’s ten year goals are:
• Achieving average annual earnings growth of 10%-15%.
• Exceeding return on capital
• Maintaining minimum 14% return on equity.
• Delivering 8%-10% return on sales.
• Becoming market leaders of every product group and business where they compete.
Key Issues and Problems
Growth in troubled steel industry. How to sustain Nucor’s earnings growth in the industry, which has many marginal competitors and production overcapacity.
Market position. How to protect and establish Nucor’s market position.
Organizational structure. Need for expanding size of executive management team and adding new corporate layers in the corporation.
Human Resource Management. Need for reanalyzing employee wages and bonus system.
Finances
A typical Gross profit margin depending on the industry may be 25 to 30%. Nucor’s Gross profit margin ratio indicates that industry is intense and cost of goods is one of the main of factor in profitability. After examining the five year
3/ What is your recommendation regarding Nucleon’s long-term manufacturing strategy? What should this company look like in 10 years (e.g. an R&D boutique, an R&D boutique with pilot scale manufacturing capabilities, or an integrated manufacturing enterprise)?
Nucor has been facing many industry challenges including the overall development of the industry. They are competing with foreign firms on cost and efficiency. Nucor has a low cost strategy because as they say their product is not necessarily very attractive. It does not have attractive or unique selling features other than its cost. The commodity of steel is in a very competitive market. Nucor understands that innovation and productivity are going to be key factors to keep their buyers satisfied with their prices. Nucor is facing many challenges with a growing world market and many of their competitors merging in order to create stronger more dominate
On December 7, 1986, F. Kenneth Iverson, chairman and chief executive officer (CEO) of Nucor Corporation, awaited a delegation from SMS Schloemann-Siemag, a leading West German supplier of steelmaking equipment, at his company’s headquarters in Charlotte, North Carolina. Iverson had to decide whether to commit Nucor to a new steel mill that would commercialize thinslab casting technology developed by SMS. Preliminary estimates indicated that the mill would cost $280 million, and that start-up expenses and working capital of $30 million each would push the total cost to $340 million, or nearly as much as Nucor’s net worth. Successful
Nucor Corporation (NYSE: NUE), a Fortune 300 company headquartered in Charlotte, North Carolina, is one of the largest steel producers in the United States, and the largest of the "mini-mill" operators (those using electric arc furnaces to melt scrap steel, as opposed to companies operating integrated steel works with blast furnaces). Nucor claims to be North
B. Nucor (NUE) was ranked the first of steel producer in the U.S., and the first “mini-mill” operator, with operating facilities in 14 states. Nucor’s products include sheet steel, bar, structural, plate and others. The company was known for its aggressive pursuit of innovation and technical excellence, rigorous quality system, environmentally friendly products. Nucor’s core strategy is that of cost leadership through the use of technology; it is known as being the low-cost provider. Most business is conducted in the U.S., but the company does have foreign operations and looks at international expansion as a strategic opportunity.
The National Steel Car company is based in Canada in Ontario and it happens to be the leading railroad freight cars company in North America. The company has been respected for its respected value in the market and has always been committed to success. National Steel Company is 9001:2008ISO certified, and it is the only freight car in the region to have been awarded the certification. It was established in the year 1912 and took the right turn when it was purchased by Gregory James Aziz who has made the company improve capacity since the purchase date in the year 2005. Greg Aziz happens to be the president, chairman, and the company’s CEO and has dedicated his time and resources to the company success. His only commitment is making the company
In this paper, we will present an analysis of Nucor Corporation in Case # 10 (Arthur, Strickland, & John, 2010). The paper will discuss the trends in steel industry and how it may impact Nucor’s strategy. In addition, the paper will describe the organizational and management philosophy at Nucor.
1. Discuss the trends in the steel industry and how it may impact Nucor’s strategy
Thin-slab casting was a proposed technique for mini-mills to fill orders for flat sheet steel, a segment that accounted for approximately half of the U.S. steel industry. To expand its steel market share, Nucor needed to enter the flat sheet segment. In the thin-slab casting business, Nucor would initially compete with international firms from Canada and Japan that provided high quality flat sheet steel, and cheap flat sheet steel providers in newly industrialized nations. Barriers to entry would include large capital expenditures making new entrants cost prohibitive, but not impossible as the barrier is small comparative to the overall costs for steel manufacturing.
Nucor's has had a stimulating company history that emerged from two corporate failures. Nuclear Corp. which objective was to participate in the conglomerate trend popular at the time. Nuclear at this time acquired a various high-tech business, such as radiation sensors, semiconductors rare earth, and air conditioning equipment. The company did not create profits and was eventually reorganized in 1966 with Ken Iverson in charge. Iverson should be viewed as the founding father of what we know as Nucor today. Iverson was hired because of his great knowledge and experience of both Aeronautical engineering and business management. He singled handily prevent Nucor's 1965 Bankruptcy by liquidity and permanently closing esoteric, unprofitable, unrelated, high-tech divisions and concentrated on the steel joist business. This action proved to be successful. Nucor contained on this successful trend by opening additional joist plants and in 1968
National Steel car success has been realized by working together as a team. Its customer care skills are as well above par as it treats all its clients with much respect as it values their contributions in the freight car industry. Currently, the company has employed more than 2000 employees who are expert in their work and are full of integrity. For that reason, National Steel Car has been internationally certified by ISO. The Company has also been honored with the highest award for its provision of quality, TTX SECO, from 1996
Nucor takes a simple approach to succeeding in the industry of steel. At its mini mills, Nucor produces hot- and cold-rolled steel, steel joists, and metal buildings. It has the capability to produce more than 26 million tons of steel a year. Being one of North America’s largest recycler of scrap metal, it produces steel by melting scrap in electric arc furnaces. Most products are sold to steel service centers, manufactures, and fabricators. Subsidiary Harris Steel fabricates rebar for highways and bridges and other construction projects. Its David J. Joseph Company unit processes and brokers metals, pig iron, hot briquetted iron, and direct reduced iron. In 2014 Nucor recycled 19 million tons of scrap steel.
NuStar Energy L.C. is a limited partnership that went public in 2001. The company is now considered one of the largest solo pipeline operators in the United States . NuStar also has stations in a variety of other countries including Canada, Mexico, the Netherlands, the Caribbean, and the United Kingdom ("PublicPower.org", 2016). The company has over 8,700 miles of pipeline and 80 terminal storage facilities located across all of its locations. The company started with around 150 employees and $380 million in assets and today has grown to about 1,600 employees and $5 billion in assets. NuStar has been on Fortune Magazines “Top 100 Companies to Work For” list for the past eight years consecutively, advancing higher up on the list each year. As of March 2016 NuStar ranks 19th on the annual
Nucor Corporation got its start in the 1950’s making nuclear instruments as well as electronic products. It struggled for many years and by 1964 was facing bankruptcy. Around the mid 1960’s it was decided that it was best for the company to exit its current market and focus on its profitable Vulcraft subsidiary steel joint business. In 1968, management then made the decision to integrate backward into steelmaking. In 2012, Nucor was the largest manufacturer of steel and steel products in North America.
Nucor has many strengths that include being the largest steel producer in North America, having broad product lineup, continuous production process innovations, environment-friendly, streamlined organizational structure, incentive-based compensation system, strong relationship with employees, and having a strong financial position. Nucor manufactures a wider range of steel products, which include steel bars, sheet steel, steel plate, structural steel, steel joists, steel mesh, and fabricating steel reinforcing products. Nucor has incentives and bonuses for its employees for exceeding the standards. It does not lay off its employees, which helps them retain a strong relationship with employees. Some strengths of Nucor are valuable such as