Nucor in 2009 case C150

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Introduction

The case analysis will focus on Nucor Corporation which is the most successful steel manufacturing company in the whole of America. The corporation which is also listed in the New York Stock Exchange is also one of the largest recycling companies for scrap metal in the Northern parts of America.

The company has an employee base of over 20,000 employees and its net income as at 2009 was $293 million dollars (Box and Miller 9). Nucor Corporation is a good choice for the case analysis because as will be mentioned in the study, it has a unique company culture where the entire work force is non-unionized and under various compensation plans.

The corporation also boasts of having advanced technological equipment such as the electric arc furnaces which are used to melt scrap metal. The case analysis will analyze the internal and external environment of the company by highlighting the mission, objectives and strategies of the corporation. A SWOT analysis will also be conducted on the company to determine its key strengths, weaknesses, opportunities and threats.

Historical Background Review

The history of Nucor Corporation falls into three distinct eras which include the Reo Motor Car era, the Nuclear Corporation of America era and the current Nucor era. The Reo Motor Car era refers to the original background of the corporation which originates from auto car manufacturer Ransom E. Olds who in 1897 established and founded the Olds Motor Vehicle Company.

The company later came to be known as Oldsmobile and later as General Motors which is one of the world’s largest car manufacturers. After Ransom E. Olds left the company, he opened a new company known as REO Motor Car Company in the Lansing area of Michigan.

Despite the popularity of the olds mobile vehicle brand manufactured by REO, the sales were not enough to sustain the operations of the company. The motor manufacturer filed for bankruptcy in 1938 which eventually saw REO motor reorganizing its operations to concentrate on the production of trucks and lawn mowers (Box and Miller 4).

The organizational restructuring proved to be unsuccessful and the company was eventually sold off to Bohn Aluminum and Brass Company in 1954. The sale of REO Motor Company led to the Nuclear Corporation Era where the corporation became known as the Nuclear Corporation of America Incorporated. Its offices were first relocated to the Empire State Building in New York and then to Phoenix, Arizona after it began to experience financial difficulties in its business performance.

Nuclear’s attempt to become a conglomerate like other companies in the 1950s and 60s saw the company purchasing companies such as Vulcraft Corporation which was a steel joint manufacturer based in Florence, South Carolina (Box and Miller 4).

Despite this purchase, the company was unable to break even and it filed for bankruptcy for the second time in 1965. The Board of Directors of the company fired Nuclear’s President, Kenneth Iverson, and began the search for a new general manager who would steer the company to a profitable direction.

For two months, they were unable to find a suitable replacement for Iverson, a situation which saw Samuel Siegel, an accountant with Nuclear Company telling the Board of Directors that he would remain with the company if Iverson was made President and he was made the Chief Financial Officer of the company (Box and Miller 5).

After reviewing his proposal, the Board agreed that Iverson should remain the President of the company while Siegel was appointed the chief financial controller. Iverson and Siegel embarked on a restructuring exercise that led to the third historical period of the company known as the Nucor Era.

Nuclear moved its headquarters to Charlotte, North Carolina in 1966 so that it would be near the Vulcraft plant in Florence, South Carolina. As a result of the unfavorable prices, the company was receiving from most American steel manufacturers, the president of the company decided to integrate the activities of Nuclear by building its first steel plant mill in 1968 within the Darlington area of South Carolina (Box and Miller 5).

Nuclear also decided to purchase an electric arc furnace that was meant to increase the efficiency and effectiveness of its steel mills to double that of the traditional steel blast furnaces. This saw the company receiving more orders and contracts for steel manufacturing services because it was now operating its own mini-mill.

Nuclear Company officially changed its name to Nucor in 1972 after it realized that there was nothing nuclear about producing steel. Since that time, the company has undergone major expansion operations that have seen it purchasing and acquiring additional companies to boost its operations within the American steel industry (Box and Miller 5).

Nucor’s Mission, Objectives and Strategies

The mission of Nucor Corporation is “to be the safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the whole world”. The company also strives to take care of its customers through the use of the safest, highest quality, lowest cost and most profitable steel products.

To achieve this mission the corporation has adopted a strategy of being a cultural and environmental steward in the communities in which Nucor Corporation operates. It also utilizes its commitment to the environment to ensure that customers are satisfied with its products and services.

The objectives of Nucor Corporation are to decentralize the management of the organization to ensure that there is performance based compensation within the organization, to provide quality customer service products and services to the various clientele of the company and to engage in technological leadership activities that will ensure that the company is able to advance in technological innovations (Nucor Ch.4).

The company has adopted a strategy that is meant to ensure that it offers innovative products while at the same time returning investments to the company’s stockholders. The management system is made up of five levels which contain 75 members for the corporation that boasts of having an employee base of over 20,000.

The company is largely segmented and each affiliate of Nucor operates as an independent company. All employees benefit from the business segments as they are run as individual business entities. Such strategic management has allowed the corporation to maintain a high degree of entrepreneurship amongst the various business units within the corporation. The barrier that exists between managers and their employees has been eliminated as the company’s employees are able to enjoy the same benefits as those of higher level managers (Nucor Ch.3).

External Analysis: PEST (Political, Economic, Social and Technological)

Political Analysis

The industry in which Nucor operates in faces heavy political influence from the political environment in the United States which is usually affected by elections and presidential campaigns. Most of the seats in the US Congress and the Senate are usually heavily criticized by various players in the steel industry.

The battles that take place between the Democrats and Republicans have placed a lot of pressure on various members of the steel manufacturing industry within the US which has affected the quality of raw materials supplied to companies such as Nucor.

For example, Republican Phil English who is the advocate for the steel industry within Congress was behind the investigation of the source of low quality steel used in many of the manufacturing industries in the US-Mexican border. English faced a lot of criticism from his democratic rivals who saw his inquisition to be a violation of the buy American products provision (McDaniels 2).

Economic Analysis

The declining strength of the American dollar has helped American steel manufacturers to export their steel to outside countries in the world. Nucor was able to export 19.3 million tons of steel in 2007 when the effects of the financial crisis began to be felt around the world.

The demand for steel within the country however weakened mostly because of the crisis which led to a decline in building materials because of the low values of real estate property. Buying of property within the country continued to experience a major decline partly due to the sub-prime mortgages sector which experienced an increase in borrowing and lending activities because of the low interest rates charged on loans (Box and Miller 8).

Social Analysis

The corporation has adopted an employment policy that is meant to reflect the level of equality that exists between the organizations managers and their employees. All employees working for Nucor Corporation are covered under any of the four basic compensation plans developed by the company which include the production incentive plans, department manager incentive plans and the professional/clerical bonus plans.

The production incentive bonus plans are mostly designed for employees working in the production and maintenance steel plants of the company. Employees under this type of bonus scheme are paid bonuses on a weekly basis while those under the department manager incentive plans are paid their bonuses on an annual basis.

The department manager bonus plans are given to departmental managers, supervisors and other employees within the organization who hold managerial positions. The professional and clerical bonus plans are given to the employees who are not covered under either the production or department manager incentive bonus plans.

Apart from its employment policy, the company has positioned itself in the local community by establishing major production plants within these communities. Nucor mostly establishes itself in small towns avoiding the large cities thereby ensuring that the small or rural communities are able to benefit from employment (Box and Miller 7).

The company however faces demographic problems which have mostly been attributed to the baby boomer generation that wants to be employed in white collar jobs. This has led to a decrease in blue collar employees as manufacturers such as Nucor try to convince the baby boomer generation to work within the skilled profession.

The Bureau of statistics has estimated the shortages of skilled laborers within the United States to average between 25,000 to 30,000 workers. The baby boomer generation has been blamed for this increasing shortage because most high school students do not see blue collar jobs to be important (McDaniels 3).

Technical Analysis

The company is technologically forward with the various innovations it has introduced in its steel mills to ensure that there is the constant production of steel and steel products. Nucor utilizes the mini-mill method to create steel for the company and this has basically revolutionized the technological operations of Nucor.

Because of the mini-mill innovation, steel producers in many of the steel producing plants have been able to use more scrap metal than before leading to 25 percent returns on equity. Nucor’s daily production of steel and steel products was more flexible than before because the mini-mills heated and moved steel faster than the traditional large scale mills.

The mini-mill allowed the company to cut many corners in the production cycle thereby reducing expenditure costs that were needed to produce goods and services within the company. This led to a cleaner environment as there was less pollution from the steel mills when inputted raw materials were being burned or moved (McDaniels 4).

Internal Analysis

The internal analysis of Nucor Corporation will involve using the value chain analysis technique to evaluate the various operations of the company which include production, sales and marketing, logistics (inbound and outbound), the quality of services offered to the various clients of the steel manufacturing company.

Inbound Logistics

The primary inbound logistics of the company involve scrap metal which has provided the company with a competitive advantage compared to other companies in the steel industry. Nucor is supplied with 60 percent scrap metal for its steel which is the highest input needed for steel in the industry.

The company purchased the David J. Joseph Company which was the primary supplier of Nucor’s raw materials thereby enabling it to have a direct connection to the primary inputs needed to produce steel. The purchase saw David Joseph buying 20 million tons of scrap metal which it later sold to Nucor allowing the company to have the most scrap metal supplies in the steel industry. The corporation was also able to obtain 2,000 railcars that would be able to move steel thereby increasing the efficiency of Nucor’s transportation abilities (McDaniels 6).

Outbound Logistics

The distribution strategy adopted by Nucor is mostly international in nature where it is able to send its steel products to outside buyers within foreign countries at attractive exchange rates. It has involved the use of ships and rail cars to transport its various steel products to different clients within the United States and also in the foreign markets.

The company has been able to maintain its in-house shipping activities where it has its own trucks and delivery vans to deliver steel products to its various clients in the United States. The proximity of the company’s plants to the local communities and businesses has allowed the company to incorporate just-in-time inventory techniques that allow for the efficient supply of input materials to the fifty three plants owned by the company in the United States (McDaniels 7).

Production

The use of the mini-mills has seen the production capacity of the company increasing exponentially as well as its supply activities. Since it is able to get inputs from its David J. Joseph affiliate company, it does not experience any delays in the supply of scrap metal needed for steel production (McDaniels 7).

The mini-mills and the purchase of David J. Joseph have reduced considerably the cost of production in terms of energy and materials needed by the company to produce steel. The production capacity of the company has been able to increase to between 6,000,000 and 7,000,000 tons per year of steel and steel metal products as a result of the mills (Box and Miller 9).

Sales and Marketing

The company has adopted a strategy for marketing its products where it concentrates on the environmental protection of the surrounding communities where its steel manufacturing plants are located. Nucor develops marketing strategies that are meant to build the image of the company’s products in the local consumers and also the international consumers of steel products.

By focusing on environmental marketing, the company is able to sell its products as green and safe to its consumers at the same time demonstrating that they are considerate to global warming concerns as well as climate changes around the world (McDaniels 8). The company has received ISO 14001 certification for its environmental management system which has focused on reducing the amount of electricity and fuel used to burn and heat steel.

Service and Quality

The services offered by Nucor include mini-mill services to contracting organizations, ferrous and non-ferrous scrap brokerage services as well as transportation and logistical services. The company’s various clientele include small scale steel manufacturers in the United States and also steel, steel product customers.

Service quality within the organization is mostly based on the degree of customer and employee satisfaction where the satisfaction of employees within Nucor directly influences the satisfaction of customers. Employees within the corporation are compensated at the same level as their managers and supervisors which increase the level of employee motivation and morale within the company.

Both motivation and moral have a direct impact on the level of productivity amongst the employees of an organization. Motivated employees are also more than likely to produce products that are of a high quality and also provide superior services to the company’s customers (Nucor Ch. 1).

SWOT Analysis

A SWOT analysis is meant to reveal the smart, market minded corporation that sustains the long-term competitive advantage of a corporation such as Nucor within tough industry conditions. The SWOT analysis for this case study will involve evaluating the internal and external strengths, weakness, opportunities and threats of Nucor Corporation so as to determine the current environment in which the company operates in. The corporation has different competencies and weaknesses that have allowed it to maintain a strong position in the steel industry of America and these are outlined in the table below.

Strengths

Nucor is committed to technological innovations which are mostly attributed to the technological leadership program established by the company.
The technological innovations have allowed the company to have highly automated plants which have led to fewer man-hours.
The company is a low-cost leader in production within the North America
It has a high productivity non-union labor force managed by incentive-based compensation schemes.
Nucor has adopted a corporate culture that is focused on providing employees with incentive based compensation

Weaknesses

The market price of steel is dependent on the demand that exists within the United States market.
The company is susceptible to the fluctuations that take place in the market for scrap steel.
The steel manufacturing industry is a maturemeaning that it cannot experience any further growth.
There is the geographical concentration of companies in one country (US) that produce steel and steel products.

Opportunities

There is an increasing market share because of the expansion of operations beyond the North American region.
There is continued investment in innovative joint-ventures so as to promote long-term cost competitive advantages.
There is an opportunity for the company to patent environmentally favorable production technologies.

Threats

There is the threat of foreign steel imports that have been subsidized by governments who do not follow WorldTrade Organization rules.
Future legislative measures that will measure carbon emissions pose a certain threat for Nucor.
The increase in steel prices has increased the level of competition for both the foreign and domestic competitors of the company.
The increasing energy prices have also presented a challenge for Nucor Corporation.
The increasing costs of raw materials are also a major threat to Nucor’s operations.

Recommendation and Conclusion

From the analysis, it has emerged that Nucor Corporation mostly operates within the borders of the United States despite there being a demand for steel products in the international markets. Industrialized companies such as China have fast begun to capitalize on this gap by providing steel products to various international companies around the world.

Nucor needs to diversify and expand its operations to not only the North American territory of the United States but to other foreign countries such as the United Kingdom, France and Germany which have emerged as the main industrialized countries in Europe; China and Japan which are the main companies that have manufacturing industries in Asia.

The internal and external analysis of the corporation as well as the SWOT analysis will allow the company to revaluate its expansion and diversification activities so that it can be the number one producer of steel and steel products in the whole world.

Works Cited

Box, Thomas and Miller, Warren. “Case analyses: Nucor Corporation 2008-2009”.

ASBE 35^th: Proceedings for the Annual Conference. Pittsburg, US: Pittsburg State University, 2010.

McDaniels, Scott. Nucor Corporation steel manufacturers. 8 March 2008. Web.

Nucor. Our Story. N.d. Web.

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