Global Economy Steel Market example essay topic

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 Driving Forces:" Globalization!

V Low cost foreign manufacturers! SS 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! V 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! V Nucor employees are more productive, loyal and Nucor has lower employee cost than competitors". Global Economic growth! V if global and U.S. growth continue, Nucor will continue growth". Product Quality! V Nucor has a reputation for quality products".

Market Share! V 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! V as stated earlier, competition is fierce and foreign competitors are dumping steel". Barriers to entry!

V 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! V plastics and other components have taken market share from steel and will continue to do so". Seller-Buyer! V since there is such heavy competition in the industry and there is excess capacity it is a buyers market".

Supplier Seller! V Nucor is heavily reliant on the producers of iron ore and scrap. Company Resources Strengths! V Most profitable steel company in the U.S., highly productive, non-union workforce, technological / innovation leader in the industry, decentralized management structure, financial strength Weaknesses! V heavy reliance on the U.S. market, highly cyclical industry, decentralized support structure. Opportunities!

V global market, global economy & steel market is growing, financial strength to acquire companies after an industry downturn after bankruptcy Threats! V heavy competition in the industry, foreign manufacturers dumping products in the U.S., environmental compliance costs Future Strategy and Goals" Nucor has close to $1 Billion in cash on its balance sheet. While earnings outlooks are still good, they should continue to raise dividends and consider share buybacks". Scale back acquisition strategy and pay down long term debt.

Percentage of debt to capital ratio has been steadily increasing each year and is currently over 15%". Continue to explore backward or forward integration in the steel market. Nucor has successfully forwardly integrated into steel products and backwardly integrated into scrap / recycling. Buying scrap from one supplier" The decentralized management structure is a positive aspect of the company, however, the decentralized support structure of the company may hinder it's cost structure.

I would centralize some of the support organizations of Nucor such as sales and Information Technology. U.S. Steel implemented a centralized IT system to streamline it's supply chain subsequently lowering cost. I would implement a similar business process reengineering system further lowering Nucor's cost structure. o SG&A has increase from 3% of sales to 4% of sales in the last two years". Invest heavily in Research and Development, as stated earlier, this industry is about being the lowest cost producer. Technical innovations ultimately lower the cost of producing steel. Fallback Position" Continue torrid acquisition strategy and look for bankrupt steel mills that will Nucor will pay pennies on the dollar for".

Do nothing, stay the course and continue double digit growth in the short term! K increase dividends and milk the cash cow.