Business Summary and Strategy
Nucor is the largest steel manufacturer in the United States. It remains a profitable company despite being in one of the most cyclical industries in the economy. Nucor enjoys this success for several reasons, employee relations, quality, productivity, and aggressive pursuit of innovation and technical excellence. Nucor's strategy is that of a low cost provider, they know they are selling a commodity and understand their competitive edge in the industry is lowering prices through innovation and productivity. The company operates primarily in two business areas, steel mills and steel products.
Steel Industry Outlook
„« Globalization - Low cost foreign manufacturers "dumping" steel in the U.S. and other markets.
„« Changes in the economy
„« Changes in currency valuations
„« Input/raw material prices
Key Success Factors:
„« Technological innovation such as the strip casting technology, investing in technology such as this allows Nucor to take calculated risks to ultimately lower their cost to produce steel subsequently raising margins. They now own the U.S. and Brazil rights to this technology.
„« Employee relations - Nucor employees are more productive, loyal and Nucor has lower employee cost than competitors.
„« Global Economic growth - if global and U.S. growth continue, Nucor will continue growth.
„« Product Quality - Nucor has a reputation for quality products.
„« Market Share - gain market share, squeeze out competition by being low cost provider. Once competitors are limited, then margins can be increased.
Porter's Five Forces:
„« Competition - as stated earlier, competition is fierce and foreign competitors are dumping steel.
„« Barriers to entry are typically high, it requires a very large amount of money and expertise to enter the industry. The industry is consolidating not growing.
„« Substitute products - plastics and other components have taken market share from steel and will continue to do so.
„« Seller-Buyer - since there is such heavy competition in the industry and there is excess capacity it is a buyers market.
„« Supplier Seller - Nucor is heavily reliant on the producers of iron ore and scrap.