Case: Nucor Corporation: Competing against Low-Cost Steel Imports

Crafting & Executing Strategy

Submitted to: Prof. James Farmer

Prepared by: Umma Habiba Student ID: 300676370

Submission date: 03 April 2012

1) Rolled steel is a commoditized product. Commoditized products are

extremely difficult to differentiate and distinguish (in terms of marketing and sales methods) from your competitors products. Name and explain at least three strategies that Nucor Corporation has employed to differentiate its products and services, from its competitors. Nucor Corporation is the largest steel manufacturer and recycler in the United States. It is also the largest mini-mill operator in the country. Over the years, Nucor had expanded progressively into the manufacture of a wider and wider range of steel products, enabling it in 2006 to offer steel users one of the broadest product line-up in the industry. The breadth of its product line made Nucor the most diversified steel producer in North America. To be in that position, Nucor implemented several successful strategies to differentiate its products and services from its competitors. Technological Innovation Strategy: Nucors most exceptional growth strategy which differentiated remarkably from other competitors was its aggressiveness in constructing new plant capacity, mostly when

such construction offered the opportunity to be first-to- market with new steel making technologies. Nucor wanted to continue to be a new technology leader. Nucor focused its efforts to introduce disruptive and leapfrog technologies which gave Nucor a commanding market advancement as well as overtake competitors in terms of product quality, cost per ton or market share. One of Nucors biggest and most recent success in pioneering new technology had been the Castrip process which drastically reduced the capital outlays for equipment and produced savings on operating expenses as wellmajor expense savings included ability to use lower quality scrap steel and requiring 90 percent less energy which helped in reducing the greenhouse gas emission up to 80 percent. Nucor Company initiated technological innovation that was Nucor's entry into the fastener steel segment. Fasteners include hardware such as hex and structural bolts and socket cap screws, and were used extensively in an array of applications, including construction, machine tools, farm implements, and military applications. The company also initiated technological innovation that concerns upstream diversification. Scrap steel is a critical input for mini mills. Quality differences in scrap types coupled with insufficient supply have led to large fluctuations in scrap costs. Plan efficiency and low cost production: Another key part of Nucors strategy was to continue making capital investments to improve plant efficiency and keep production cost low. From its earlier days in steel business, Nucor had build state-of-art facilities in the most economical fashion possible and then made it standard company practice to invest aggressively in plant modernization, improvement of efficiency through technology advancement and new cost saving opportunities appeared. By diligently searching for emerging cost effective

technologies to adopt in its facilities, Nucor made a point of staying on top of the steelmaking around the world. Executives at Nucor had a long standing commitment to provide the companys workforce with the best technology available to get the job done right in a safe working environment. Nucor Managements continual stress to improve its product quality and cost results the certification of ISO9000 and ISO 14001.They had a best marking program so that they become the best performer in the industry wide for its production and efficiency. Managers were accountable to demonstrate their efficiency in compare their rival companies to improve product quality and cost reduction. Nucors latest initiative in modernization of vacuum degassers improved Nucors ability to produce highest quality steel in lower cost increment of expansion capacity. Nucors Capital spending was mainly intended to ensure to keep Nucors plants in state-of-art condition and globally competitive on cost. Nucor had a simple, streamlined organization structure to allow employees to innovate and make quick decisions which is also a noticeable time management as well as decentralization policy to become cost effective. There was a minimum paper work and bureaucracy system. There was very friendly spirit of competition from one plant to another and each group was expected to earn about 1 25 percent return on total assets before corporate expenses, taxes, interest or profit sharing.

Acquisitions and Globalization Strategy:

Nucor Corporations acquisition strategy strengthened its customer base, geographic coverage, and line-up of product offering. The company decision was to buy growthminded existing plan capacity rather than building new capacity, provided the acquired plants could be bought at bargain prices, economically viable with new equipment. The

economic recession that hit all over the world and terrorist attacks further weakened steel business. Even though market conditions were tough for Nucor, in 2001 they paid $ 115 million to acquire all of the assets of Auburn steel company, and acquired of ITEC Steel for $ 9 million. In July 2002, Nucor paid $120 million to purchase Trico Steel Company. In 2004, Nucor acquired a cold- rolling mill in Decatur, and acquired a plate mill owned by Britain based Cores Steel that was located in Alabama. In 2005, it purchased Marion operated a bar mill with annual capacity of about 400,000 tons. In 2006, Nucor acquired Connecticut Steel Corporation, Verco Manufacturing Company for $43 and $180 million respectively. Since mid-1990s, Nucor started a few joint ventures with international partners. However, all these joint ventures are not intended to expand the market globally. Instead, Nucor used these joint ventures as a way to leverage technology development or to diversify the supplies of raw materials. Currently, Nucor is working with Companhia Valo do Rio Doce (CVRD) of Brazil to construct and operate an environmentally friendly pig iron production plant in northern Brazil. The joint venture at the Brazilian plant involved using fast-growing eucalyptus trees as fuel which counteracted global warming. In addition, Nucor works with Rio Tinto of Brazil and Shougang of China, among other parties, to develop the Hlsmelt technology. Through the above strategies Nucor became the leader in the steelmaking world and unbeatable among the competitors.

2) Suppose that you are the CEO of a firm, much like Nucor Corporation, that

must heavily invest in production technology, to remain competitive. How

would you balance the need to make heavy technology investments (and new methods of utilizing technological advancements) with your obligation (and desire) to provide your companys workforce with an energized work environment? As a CEO of a firm like Nucor Corporation, if I have to balance between heavy technology investment and energized work environment, the I would prefer to follow same strategy as Nucor because Nucor is the organization known for its aggressive pursuit of innovation and technical excellence, rigorous quality systems, strong emphasis on employee relations and workforce productivity, cost-conscious corporate culture and ability to achieve low cost per ton produced. The company had a streamlined organizational structure, incentive-based compensation systems and steel mills that were among the most modern and efficient in the United States. Nucor proved how with innovation, creativity, and a strong autonomy an organization raises. To make balance between technology and energized workforce, the firm should consider some issues apart from Nucors strategies: The firm should go for market development because Nucors only focusing in U.S. market and are not expanding their business internationally. So To get worldwide market, the firm should focus on globalization in terms of product selling instead of raw materials only.

Product diversity would be another issue to focus on. Due to strong and tough competition, the competitors are focusing on product diversity and introducing more and more new products. So, the firm should introduce new product items to

maintain its competitive frame and position in the market. If the company offers a large variety of steel products, strengthening the competitive position of the group. Diversified product portfolio will allow meeting a wide range of customer needs across all steel consuming industries, including the automotive, appliance, engineering, construction, and machinery industries. This product diversity will help to meet the requirements of both mature and developing markets. A firm become technologically competitive by investing significantly in facilities and research and development. That will help to develop competitive new products and technologies that will contribute to reduce in steel making costs.
3) How can a CEO and the senior executive team, drive a company to greater

accomplishments if the companys use of technology, is the single greatest determining factor in the companys success? The key to survival in the industry is to stake out a position that is less vulnerable to attack from outside opponents, whether they are new entrants to the market, or if they are established organizations. In order to be beneficial an organization must also be less vulnerable to the breakdown by buyers, suppliers, and substitute products. There are a few ways that an organization may be able to do this in the steel industry. They include, but are not limited to: strengthening existing relationships with customers, differentiating their product either objectively or psychologically through marketing. A final major way to separate a firm in the steel industry is to be on top of technological engineering advances. The company with the most updated technology will most often be able to produce steel at the lowest cost, at higher outputs, and for greater profit.