Scrap Steel Into New Steel Products example essay topic

Nucor Corporation is constantly faced with obstacles and competition to overcome. This steel-making company whose name was formally adopted in 1972, has since been on a journey to join the ranks of the worlds leading steel companies. Although this is a highly profitable industry with a U.S. market of $94.9 billion, it is highly competitive and presents many barriers to entry. Three elements of competition in this particular industry include, 1.) Technology 2) Changes in cost and efficiencies and 3) globalization Advances in technology can dramatically alter an industry's landscape, making it possible to produce products at lower costs and opening up whole new industry frontiers. The management at Nucor believed they could use new technology to their advantage and make bolts as cheaply as foreign producers.

The traditional integrated steel mills were outdated and inefficient compared to new electric mini mills. Nucor embraced this new technology to produce steel. They became known for constructing state-of-the-art facilities at the lowest possible costs and for investing aggressively in plant modernization and efficiency improvements. New technology enabled mini mills to triple their output in the 1990's.

The new technology of twin shell electric arc furnaces helped mini mills increase production, lower costs, and take additional market shares. Nucor's use of advanced, efficient technologies enabled it to stay afloat when other companies could not. This use of technology also enables Nucor to lower many of the costs of maintaining environmental standards. With technological improvements to the plants and the production process, steel companies can better compete with each other. Because there is no real differentiation between products in the steel industry, companies will have to rely on technological innovation to profit in this industry.

As stated above, there is no real differentiation in products in this industry. Therefore steel companies have to be able to produce high quality products at low cost to compete. By improving production efficiencies and cost management, they will be a more profitable company. Nucor constantly spent money researching new ways to improve the production processes and keep up with the emerging markets. Nucor was known for constructing state-of-the-art facilities at the lowest cost and investing in plant modernizing and efficiency. At the Darlington plant the manger there developed a system where less time and less capital investment were required.

This helped keep the fuel usage down and this was the only mill in the United States that was doing this. The scope of competitive rivalry in the steel industry is global. The U.S., European Union countries, Canada, Mexico, Japan, Brazil, China, and many others compete for customers domestically and abroad. Globalization was the biggest force that affected the steel industry.

Overcapacity in the United States lead to foreign steel producers, with few market opportunities, to dump their steel in U.S. markets at cut-rate prices. Nucor was in the best position to defend against foreign competition, with their low-cost German technology started at Crawfordsville, and in 1995 Nucor launched its first international venture with Brazil's Compan hia Siderurgica National to build a $700 million steel mill in the state of Ceara. Japan lead in the amount of steel imported into the U. S; Nucor bought a steel bar minim ill in Auburn, New York, from Japanese-based Sumitomo Metal Industries for $115 million, to counter the effect of imports. In recent years, several foreign firms had merged to form mega- steel companies. Many domestic steel producers were not able to compete with these foreign giants.

Nucor, however, is attempting to meet the challenges of a globalized market, by continuing to grow, especially through acquisitions, which had not been a policy in the past. Nucor hopes that these acquisitions will strengthen its market position and product line and allow it to become a more globally competitive company. Since this case was written, the government has taken action to restrict the dumping of foreign steel into the U. S market, effectively reducing supply, and allowing the domestic firms to use up some excess capacity. The key to making a profit when selling a product with no aesthetic value, or a product that you really can't differentiate from your competitors (such as steel), is cost. Nucor maintains low costs by keeping the employee force at the level it should be and not doing things that aren't necessary to achieve goals. Their strategy is to be a low-cost supplier by being the most efficient producer.

They have many procedures in place to keep their operation efficient. For example, in the late 90's the corporate staff of the company consisted of fewer than 25 people. The CEO wanted the headquarters to consist of a small cadre of executives who would guide a decentralized operation where liberal authority was delegated to managers in the field. The company had a very streamlined organizational structure, incentive-based compensations systems, rigorous quality systems, and mills that were among the most modern and efficient in the United States.

They pursued strong alliances with outside suppliers. Nucor didn't have a corporate advertising department, corporate public relations department, or a corporate legal department. It outsourced these activities. Essentially, they were a stripped down, no nonsense organization, and concentrated on their core strength-making steel efficiently.

There are no corporate perquisites, country club memberships, company planes, or company cars. Nucor's leader, Ken Iverson was noted for flying coach class and taking the subway when he was in New York City. All managers reflected a simple, businesslike style in operating their divisions. Nucor has always sought to be the lowest-cost producer in the industry. Materials and freight are two important elements of cost. Nucor has a fleet of 150 trucks to ensure on-time delivery to customers in all states.

Their vertical move into steel production was a move to lower the cost of steel used by the joist and steel deck businesses. They got into the steel-making business because they wanted to build a mill that could make steel domestically as cheap as they were buying it from foreign importers. They did extensive research to determine what type of mill the company should construct. The minim ill was the latest and best technology, which used electric arc furnaces to recycle scrap steel into new steel products.

The incentive based pay system is just one way they take care of their employees. They also allow each employee to make decisions about their work as much as possible. Nucor values risk taking, innovation, and a lean management structure with aggressive, hardworking, and fairly compensated employees who accept the responsibility of failure along with the opportunity for success. Presently, Nucor continues to expand and take advantage of their core strength (being a low cost supplier.) I believe the company should take its superior business model and continue to vertically integrate to produce many different steel products. The company should continue to invest in technology to make its process more efficient. They should also form close bonds with suppliers to ensure the quality and quantity of scrap steel for their mini mills.

They could also look at vertically integrating backwards into the scrap steel business, to see if they could add value by obtaining this step. This would ensure that they could always obtain an adequate economical supply of steel. Strategic opportunities may lie in foreign markets, but they must do extensive market research to ensure they don't have another failed attempt like the one in the state of Ceara. Essentially, the company's business model is superior to other firms in the industry and they should continue doing business as they are doing.