Nucor Corporation Case Analysis Essay

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To: Dan DiMicco

From: McKensie Booth

Subject: Strategic Management

Date: 11/9/2010

Nucor Corporation Memo Response:

Per your request I have analyzed Nucor Corporation and the steel industry. After performing both strategic and financial analysis I offer my recommendations.

Executive Summary:

Nucor Corporation was the most profitable steel producer in North America in both 2005 and 2006. It is regarded as a low-cost steel producer in the United States, and one of the most efficient and technologically innovative steel producers in the world. Nucor is known for its aggressive pursuit of innovation and technical excellence, rigorous quality systems, strong emphasis on employee relations and workforce productivity, …show more content…

Product differentiation is also a major barrier to entry. Steel is not sold on its overall difference, but more commonly on price. Many manufacturers utilize the same technologies and processes. Price wars are seen to minimize fixed costs, which mean there are few switching costs from one manufacturer to another. There is very little brand loyalty in this industry, especially when it does not appeal to consumer loyalty or brand image. Entrants must find ways to compete based on lower costs. Access to raw materials can also be a barrier. A lot of the time materials must be bought in large quantities. There is no cost advantage associated with small material purchases, and that can directly increase the overall manufacturing costs. This can make competition challenging in a market where margins are already very small. Government policy is not a huge threat of entry on the domestic level, but at the international level the barriers become much larger. Well established relationships by larger steel manufacturers with government allows for easy establishment of contracts in a foreign territory. Since most steel manufacturers must be globally competitive to maintain profits government policy is a threatening entry barrier.

Bargaining Power of Suppliers: Strong The supply of raw materials can have a positive or negative effect on a cost strategy. Most of the steel used in domestic manufacturing in the United States is imported. On

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