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Nucor At A Crossroads (Canada, Us; Railroad Equipment)

1025 words - 4 pages

IntroductionAt the end of 1986, Nucor, as one of the most important player in the U.S. steel market, had to make a critical decision on whether to invest in the new thin-slab casting technology, with the risk of loosing everything. We concluded that the investment is worthwhile, and the following are the strategies for Nucor upon the commitment to commercialization of the new technology. Finally is the projected financials for the Nucor after making a "To-Go" decision.QuestionFormulate a strategy for Nucor and provide a rigorous support for it.Technology Innovation StrategyNucor Corporation was planning to purchase an untried technology, Compact Strip Production (CSP), from SMS, an international steel equipment supplier. Based on this technological advance, new scrap-based slab producers would now be able to operate at a substantially smaller scale. Traditional integrated mills normally cast steel slabs to a thickness of 8-12 inches, while CSP allowed slabs to be cast as small as 2 inches thick.By adopting this new technology, Nucor could gain the first mover advantage against its competitors. First-mover would be better-off in the competition by initially occupying the market. This advantage may stem from the fact that the market pioneer can establish its reputation, earlier than the competitors, among suppliers, distributors and customers who become familiar with and even loyal to its products. Also the profit earned during this "monopoly" stage can be re-invested in improving the resource base [1].Nevertheless, there are two obvious drawbacks for being the first mover: the cost and the risk. Not only is it expensive to be a pioneer due to the immature technology, but also it is risky since there are no previous experience to learn from. In Nucor's case, despite the high initial investment, the technology can significantly reduce future production cost which contributes to one of the premises for Nucor to adopt Cost Leadership Strategy.Cost leadership StrategyCost leadership is a strategy "involves producing products or services at a lower per unit cost than the competition" [2], which is a powerful source that allows the firm to gain competitive advantage in the industry. In this connection, Nucor was a successful low cost provider of products by producing at full capacity, keeping competitive price and selling everything which was produced. In addition, Nucor located its plants in rural areas, taking advantage of low electricity rate, plentiful water, cheap labor force and reduce costs consequently.By adopting CSP technology, Nucor would become more cost efficient because of the savings on labor and energy, which would lead to the operating costs being lower than those of the competitors'. According to the case, the average operating cost of a Modernized Integrated Mill was $295.74/ton, while Thin-slab Minimill only ran at $248.88/ton. Such efficiency gave Nucor a $46.86/ton cost advantage on average, equivalent to 16% lower than the industry...

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