University of d

Faculty of Management
Business Management 3rd year
Performance Measurement

Authors:
Piotr Bartenbach
Victor Ituah
Bartomiej Staszczyk
Dominik Wolski

Nucor Case Study

1. Why has Nucor performed so well?
a. Is Nucor's industry the answer?
No. In our opinion the industry itself is not the matter in the performance of
the company as tools and techniques used by Nucor would be successful in almost
every environment. However, the industrys level of advancement in terms of
technology and competition might be the reason of Nucors performance.

b.

Is it the mini-mill effect?

Yes. The mini-mill effect was helpful in case of Nucor as it helped them to cut costs
due to mini-mills cost advantage. However at first the mini-mills had limited
capabilities (they couldnt produce flat steel products) but Nucor as the first
company in the World built the first mini-mill that could make the flat steel
components and gained entry into the premium segment of the steel industry.

c.

Is it market power (scale economies)?

Yes. The market power of the firm, at least partly, gave Nucor financial stability
and easier cost control. With persistent growth and low debt level they were able to
introduce i.e. mini mills that distinguished from competitors with its locally-set
goals and visions.
Furthermore, having many divisions (mini-mills) the company was able to transfer
costs between them and get advantage of i.e. regional prices of resources used.
That way Nucor could create various scenarios for the business and select the one
that suited them best.

d. Is it a distribution channel advantage?

Yes. Distribution channels used by Nucor, made the company able to settle the lowend products transactions directly with its customers like manufacturers and bypass
some of the distribution costs.

e.

Is it a raw material advantage?

Yes. Raw materials might be regarded as Nucors advantage. They are using scrap
metal which is cheap and easily accessible. It means that costs are not high and
they can use a wide range of technologies, including the newest ones. What is more
they still satisfy their customers with the quality of their products.
Was it only an advantage? Of course not as later on the price of scrap metal has
grown up and they were forced to find other sources. Also having only one source

exposes the company to the risk of changing price and makes them dependent on
their suppliers.
f.

Is it a technology advantage?
Yes. Technology is an advantage for Nucor. They are flexible and able to adapt their
processes to the latest technologies. It gives them a competitive advantage
because in most cases they are pioneers in introducing solutions to the industry.

g. Is it a location advantage?
Yes.

The company selected many rural areas for their business so they could
attract dedicated employees with their offer. Also, the localization was firstly
checked for the abiding law - if it was business friendly and did it guaranteed that
union involvement will be not necessary.
With localization selection, comes the problem of factors that determines the choice.
I.e. place could be full of ready-to-be employees and have business friendly law
regulations but be in a wrong place from distribution point of view.

h.

Is it the result of an entrenched brand name?

Yes.

Nucor is a very well entrenched brand. It has the largest number of steel
products sold and it gained positive reputation for their innovativeness and great
attitude towards employees. They have also proven that they have stable finances
as their debt cannot surpass 30% of their capital.
i.

Is it Nucor's choice of a unique strategy?

Yes. It is unique because there wasnt before such a company that builds on low
costs and achieves such a success. Worth mentioning is also the structure of the
company which allows much clearer flow of the information as well as autonomy for
plant supervisors. Another unique part of the strategy is that they were
continuously introducing new innovations, which was unique in the industry.

j.

Is it Nucor's ability to execute its strategy?

Thanks to the well-executed strategy, Nucor was able to build

25 plants and introduce a wide range of steel products to the market
so, to maintain their current position in the market.
Yes.

2.

What are the most important aspects of Nucor's overall approach to

organization and control that help explain why this company is so successful?
How well do Nucor's organization and control mechanisms fit the company's
strategic requirements?

There are many ways, techniques and solutions that Nucor has
implemented and developed on their successful business path. Choices like: the
mini mill method, detailed way of location selection or innovation incorporation
has brought strong market position for the company and ensured overall control.
All the planning and plan implementation have been done according to strictly
set rules which highly improved decision making process and bypassed some of
the errors. Nucor has facilitated its success and balanced growth by stable
financial position, great way of dealing with new products/services and branch

shifts adaptation. Even the fact that the operational control was given to plant
management, Nucors board collected and analyzed all the data needed by
information system that they have applied. By giving this high level of freewill to
each of the mills, they flattened the company structure but still checked if
specific plant is fulfilling company overall vision.

3.

A crucial element of Nucor's success is its ability to mobilize two types of

knowledge: plant construction and start-up know-how: and manufacturing
process know-how. What mechanisms does Nucor employ to manage
knowledge effectively?

a. What mechanisms help the company accumulate these two types of

knowledge in individual plants?
These two types of knowledge derive from different sources. As far as the
know-how of plant construction is concerned, we can find out that Nucor looked
up to another companies, for example, competition or even their own suppliers.
They copied things that were already working well in another companies. On the
other hand, processes were developed on their own. Nucors management teams
came up with solutions that turned out to be proper for their company without
looking up to others.
Knowledge accumulation contributes to increasing competitive advantage. In
Nucors case it can be easily noticed how they managed and accumulated the
knowledge. They gathered data form other companies and implemented it in
their own plants and also they had a highly developed system of knowledge
exchange within the company. With such a system they were able to constantly
enhance their processes.
b. What mechanisms exist within the company to facilitate sharing this
knowledge among its 25 plants?
In case of mechanisms that exist within the company we can distinguish
two types. One of them is knowledge sharing among all plants. The data
concerning performance of each site is provided to managers of each plant, so
that they can compare results. In Nucor general managers and machine
operators are obliged to go to the other plans in order to how are their colleagues
working.
c. How does Nucor transfer knowledge to a greenfield, start-up
operation?
We can call a start-up operation a joint venture of Nucor and Yamato.
Together they created an international corporation; in such enterprise knowledge
transfer is a key to success. They came up with new processes based on
combined experiences of both companies.

4.

Nucor repeatedly has demonstrated the ability to be a successful first mover

in the adoption of new technology. How does the company's approach to organization
and control contribute to this first-mover advantage?

Nucor has demonstrated the ability to be a successful first move in the

adaption of new technology. The company has an experienced team and it knows
exactly what approach to the adoption of technology will work the best.
Nucor knows that half of the investment in new ideas will not yield usable
results, so there is equipment that was bought used and discarded. Nucor has
been successful in first move advantage because it has developed a team of
engineers that design and construct new facilities. This internal group that
coordinates the design and construction of the melt shop puts responsibility on
internal employees and helps gain first mover advantage. This also applies a
powerful control over the behavior of employees in the organization. This practice
is also a strong motivator for employees entrusted with the task.
The company's policy of exercising control over factories through
information technology and periodic reports also help it in gaining first-mover
advantage.

5. Would you like to work for Nucor?

Piotr: Yes, I would. Nucor has proven that it is a very reliable and fair employer.
They are also well managed and employees are given quite a big dose of
freedom, so there is place for creativity. Also their approach to the compensations
is very unique and makes you feel more rewarded for the job you have done.
Victor: I think yes, because it looks that what they want is said straight,
everything is clear , there are jobs that are need to be done but at the same time
I know what I will receive for my work, what benefits that I deserve, plus the
friendly environment. Overall it is a very good place to work.
Bartomiej: Yes, I would definitely like to work for Nucor because I find their way
of handling business very organized and thought through. Starting from
innovation area up to human resources they present solutions that connect all
the company making it stronger and highly competitive towards rivals.
Dominik: Yes, because it is a company, which is organized and managed in an
attractive way. They are fair and give people an opportunity to develop. Also the
industry carries a great potential. The last but not least are salary and
motivational system.
Disadvantages:
Even though, Nucor as an employer seems to be very attractive, the continuous
changes may be tiring. It is good when company introduces new things but too
much change is not that good. Another disadvantage might be also the industry
as it requires a lot of knowledge and experience to be able to work efficiently.

6. Why have competitors not been able to imitate Nucor's performance so far?

Nucors performance is a summary of their business strategy they are

adapting to the environment all the time, there is not such a thing like no need
to develop or upgrade they use very simple but for some companies may be
risky management, they have a structure that gives the most of the benefits to
the factory workers not the management and that is not a popular or maybe even
rare trend in big corporations similar to Nucors.
There are two main points that gives them such an advantage to others:
1st as I sad is the company board and running structure that motivates
workers and give them a sense of being an important brick in the machine.
And the 2nd is the never ending development that shows what a confidence
in action this company has, not many companies are willing to change so quick
things that works and as we know not many like to invest all the time cause we
know that investment not always gives desired feedbacks. So the futuristic
movements connected with never ending raising the bar of quality and quantity
can be the reason that other cannot keep up with this company.

7. Lessons learned
From Nucors success story we can draw a couple of useful conclusions.
Based on the information provided, the company seems to always make the
proper decision, therefore, usually everything they have done gave them
expected or even better results. It can be achieved only by following the
strategy, constant strive for process enhancement, rational cost cutting and
dedicated employees. Nucor managed to do so, but it does not mean that
another company can also be so successful. Every case is different, in each
company different people work, just because in Nucor everything worked out
well it does not mean that somewhere else the same success can be repeated.
Also Nucors horizontal management structure enabled them to more
effectively manage their plants and overall activity.
Another fact that helped Nucor and is worth spreading is their excellent
approach towards employees. Very well thought through reward system with a
dose of freedom and time for self-development makes employees more engaged
in the companys activities and makes them work harder and efficient as they
can see results of their work.