MEMORANDUM

FROM: X

SUBJ: “Nucor in 2013” Case Analysis

EXECUTIVE SUMMARY
The success of Nucor results in correct strategy that managers selected. Nucor Corporation is the largest steel manufacturer in the United States. The steel industry is a fragmented industry. There are many marginal competitors existing in the steel industry. Competitions are high. Nucor is in mature stage of the business life cycle. In this stage, Nucor needs to gain more market share. I strongly recommend Nucor develop product diversity, and spread great company culture to earn sustainable profit growth.

ANALYSIS
The steel industry in U.S. is not a great industry to begin business for a company due to the economic environment. A bunch of steel companies are facing bankruptcy. However, Nucor breaks the barrier and has strong development in this environment.

Industry Analysis. The U.S. steel industry is facing recovery from global recession period, and is in the worst economic period dating back to early 1980s. Also, a number of steel companies have faced bankruptcy, reorganization, or no longer operating. Moreover, because of overcapacity, the steel industry has become a burden that U.S. is willing to get rid of. That is to say, trying to break the siege of the status quo in the steel industry is a challenge to Nucor.

Porter’s Five Forces Model.
Porter’s five forces model can help identify the current state of Nucor in the steel industry. First of all, new entry to this industry is high. Since the steel industry is in recovery period, the macroeconomic environment is the first negative factor that Nucor has to overcome. Barriers to new entrants show that establish good brand and build brand loyalty are needed. Changes in national regulations may create new barriers to entry as well. As for bargaining power of suppliers, there are no corporate perquisites. Suppliers in this industry are limited. Thirdly, for threat of substitute force, other than choosing Nucor, potential customers may choose import products. They may also select products sold by other manufacturers. Moreover, as for complements, Vulcraft, subsidiary division of Nucor, or subsidiary of Nucor located outside the country are good choice. The final force is bargaining power of buyers. Nucor holds manufacturers accountable, enabling Nucor to allocate resources effectively. Nucor has good long-term relationships with outsiders. This kind of relationship creates a harmonious external environment in the steel industry.
That is to say, supplier power is strong. In contrast, the pressure from rivals is not that intense. Substitutes are weak. SWOT Analysis. First, Nucor has a lot of strengths. Nucor focuses on two main lines of business which are production of steel from recycled scrapped metals and joist production. Lean management ensures low waste rate and high productivity. Nucor also takes advantage of incentive programs. The incentive program allows employees work hard, create great product quality, provide competitive prices, delivery service, and reduce costs. Nucor has well organizational style and good management relation. The size of company enables Nucor to gain more bargaining power and contracts. The personnel policies Nucor established help it earn above-average earnings as well. Also, there are no corporate perquisites. That means no company planes, no country club membership, and no company cars. It ensures “stripped down” and “no nonsense” in firm.
Weaknesses in Nucor cannot be ignored. High shipping costs need to be overcome. Also, limited range of products and decline in net earnings may cause some problems. Inside the corporation, wages are low, and executives received no bonus. All these factors may have negative impact on employee’s passion to work. Moreover, Nucor overly depends on the domestic market.
Nevertheless, Nucor can take advantage of opportunities. Entering into Asian and European markets through joint ventures would help Nucor acquire more market share. New plant programs would help lower costs of energy needed to produce steel products. Manufacturing infrastructure advantage allows Nucor to expand its business in both domestic and global markets. Technological innovation may bring in new opportunities as well.
Lastly, Nucor has to overcome the threats. Competitions from China and India are intense. Foreign players with absolute cost advantage entering U.S. steel market are able to meet steel demand. Due to economic crisis and overcapacity, price may drop. Furthermore, there are too many marginal competitors already existing in the U.S. steel industry.

CONCLUSIONS/RECOMMENDATIONS
All in all, Nucor has resources and capability in the steel industry, and has earned certain competitive advantage. Nucor owns significant brand loyalty, and is the leader of the steel industry at the time. Therefore, Nucor has absolute advantage than others in the steel industry. Compared with other domestic steel companies, Nucor still have absolute advantage in the U.S. steel industry. Influences from the economic crisis and global competition require Nucor to maintain its competitive focus. To achieve its mission, I recommend Nucor maintain good long-term relationship with customers. At the same time, Nucor needs to enhance internal control environment. Also, cultivate internal research and developments are needed.