Nucor at Crossroads

1352 Words Jan 23rd, 2013 6 Pages
Nucor at a Crossroads
Nucor at a Crossroads Case Analysis
In 1986, three distinct segments defined the U.S. steel industry; integrated steel mills, mini-mills, and specialty steel makers. The integrated mills have the capacity to produce a maximum of 107 million tons of steel per year, mini-mills produced a maximum of 21 million tons of capacity a year, and the nation’s specialty steel makers could produce a maximum capacity of 5 million tons of stainless and specialty grades of steel. This leads to a total capacity of 133 million tons of production per year. In 1986, the market consumed only 70 million tons of steel, leaving 33 million tons unused. Nucor is at a crossroads. It faces a saturated market suffering from significant
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Finally, Nucor’s business hierarchy was different- mostly flat, resulting in less bureaucracy and more productivity per worker. In short, many of these advantages led to Nucor becoming the second most productive steel maker per employee in the world due by 1985.
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. While new rivals may not pop up immediately, new entrants from existing rivals will dilute Nucor’s competitive advantage.
Nucor needed an innovative technology to be profitable in this segment as a new entrant. However, innovative technologies are risky due to development costs, unknown long-term operating costs, and the unknown quality of future products. Also, as a first mover, increased costs will be realized. Increased maintenance above forecasts, the risk that production will not keep pace with the

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