Introduction
In 2007, the world suffered from a global financial crisis that was believed to have originated from the United States of America Mortgage industry. Two years down the lane, companies were struggling to meet their corporate goals and objective amidst the hard economic time. Nucor is an American Steel company headquartered in Charlotte, North Carolina; it is the largest steel recycler and second-largest steel company in the United States.
To remain competitive is the steel industry the company’s management makes strategic decisions to address prevailing challenges. However, in 2009, the company made the largest loss in its history of $299 million; the loss was the first annual loss since 1966 (Nucor Corporation Official Website). This paper undertakes an internal and external analysis of Nucor; it will focus on the situation of 2009.
Background of the company
Nucor is the second-largest steel manufacturer in the United States; it was incorporated in 1955 as Nuclear Corporation of America and listed on New York Stock exchange. The company has the following subsidies: Nucor Building Systems, Nucor-Yamato Steel Company, Nucor Grinding Balls, Vulcraft, Nucor Cold Finish, Nucor Bearing Products, and Nucor Fastener. The main business approach/strategy adopted by the company is the drastic undercutting of the foreign and domestic markets.
To maintain a leadership position in the industry, the company has an organizational culture that motivates employees to be innovative, creative, and inventive. In the late 1960s, the company launched the steel minimill industry which focuses on recycling and the flat-rolled market. In 2009, Nucor made a sale of $11.19 Billion (the revenue was its consolidated revenue both from subsidiaries, and sub-subsidiaries) which resulted in an operating loss of $293 million.
According to the company’s management, the result was the poorest the company has ever had; other than in 2009 the last year that the company had had an operating loss was in 1966. The number of employees in the company as of 2009 amounted to 20,400 up from 6,600 in 1997 (Nucor Corporation Official Website).
The external environment in 2009
The year 2009 is characterized by aggressive business policies aimed at mitigating the negative effects of the global financial crisis, during the period, the world was on a recovery track and individual countries and companies were enacting policies to recover. The following are some of the main external parameters that Nucor had to contend with:
Political Factors
The United States government enacted policies that facilitated the recovery of the economy; the policies involved giving incentives to domestic companies to facilitate exportation. In the international markets, countries tended discouraging exportation in the move to reduce competition to their domestic countries. The company suffered from discouraged international market trends; this leads to the reduction of its international market.
Economic Factors
The United States enacted monetary and fiscal policies to control the economy; on the international scene, there were nontariff and tariff barriers that were enacted by different countries to discourage importation. Although monetary and fiscal policies in the United State aimed at creating a conducive business environment, the net effect from tariff and non-tariff policies lead to a reduction of the company’s sales and gross profit margin.
Socioeconomic Factors
With the challenging economic environment, the disposable income of the Americans among other nationalists reduced. When people have less disposable income it means they are likely to shy off from developmental activities like building among other steel products uses. The depreciated purchasing power parity of the people in 2009 is likely to have resulted in reduced income of Nucor. The 2007 global financial crisis is believed to have been caused by the housing sector (mortgage), with the discovery individuals and corporate were shying off from investing in the segment of the economy, the net result was reduced demand for Nucor products.
Technological Factors
The world is advancing fast in technology; there different products that are being invented and innovated through technology. One invention that was triggered by the need to manage cost during the 2009 economic crisis recovery period was the use of plastic materials to replace come functions that were previous done by metals. Nucor product demand was affected negatively by the existence of substitute products made of plastic. Plastic products are cheaper and are easily molded than steel; this made them a better choice than steel (Haller 1-12).
Internal Analysis
The internal analysis looks into policies and managerial decisions made by a company in the effort to create competitiveness in its operations. In 2009, Nucor made some internal interventions to improve its operations as follows:
Inbound Logistics
Nucor has a robust supply and logistics department that handles the matter of domestic and international supply of goods. In 2009, the company had to look for the best supply chain model that ensured the company delivered quality products to its customers’ at the most affordable time. To do this, the company decided to be hiring the services of transport and logistics companies instead of maintaining a fleet of vehicles for delivery. On the other hand, when buying products, the company preferred those companies that offered transport services either for free or at a subsidized cost; however, the approach did not mean that the company would opt for low standard supplies for the transport incentive (Mentzer, 123).
Operations
Leaders at Nucor had the challenge of developing effective operational strategies to cope with the rising competition and hand economic times of 2009. The management had two main approaches: reduce operational costs and increase product quality and quantity. To attain the objectives, the company adopted effective human resources management policies, total quality management, six-sigma, and customer management policies.
With the approach, the company was able to attain an increased number of customers and at least manage its operational costs. Although in 2008, the company has acquired Gulf States Manufacturers, Kirby Building Systems, and CBC Steel Buildings, it is notable that it did not acquisition in 2009; this is a strategic move to control the flow of funds from the company.
Outbound Logistics
Nucor markets are both international and national markets; to supply products and get raw materials from the international market, the company preferred water transport. Although the method of transportation takes some time, the company ensured it has procured at the right time that it does not suffer a lack of raw materials. On the other hand, the method was preferred as it is cheaper and efficient. When selling products to customers, the company used the CIF (Cost Insurance and Freight) method of costing to transfer any risks to third parties (Kotabe and Helsen 23).
Marketing and Sales
In the year 2009, Nucor had a robust marketing and sales team; the team aimed at creating new markets and retaining older customers. Before enacting certain marketing strategies, the company ensured it had worked closely with the research and development to give an insight into the right approach to marketing. During the time, the company put more emphasis on the creation of healthy relationships with customers (Rakesh 12-45).
Service and Quality
The services offered by a company and its product quality has played a large role in its competitiveness; recognizing this fact, Nucor management enacted service improvement policies. The improvement addresses the speed of delivery, how well the company handled customer demands, customer service, and policies that created customer loyalty. On the other hand, the company developed frameworks that improved its products to meet customer demand in the hard economic times; the policies included making products with alloys and use of recycled steel/iron to make products (Ahire 23-45)
Support Activities
To remain competitive in 2009, companies needed to have a close relationship with their customers. Nucor enacted various supportive activities they included a customer care desk to handle issues raised by customers. Information given at the desk was shared with the research and development department to give recommendations to the company.
Technology
In the contemporary business environment, technology is used to create efficiency, improve productivity, and reduce operational costs. Nucor information and communication department is mandated with the role of coming up with a recommendation to the management on the technology they should adopt to enhance competitiveness. In 2009, the company developed a social marketing strategy and computerized stock management systems; the adoptions were aimed at improving efficiencies in the departments (Nucor Corporation Official Website). After the loss incurred in 2009, Nucor’s management is hopeful that the enacted policies will address future challenges effectively.
Works Cited
Ahire, Sanjay. Management Science, Total Quality Management interfaces: An integrative framework. New Jersey: Wisley, 2006. Print.
Haller, Harold. Managing with profound knowledge: A management process based on the Deming management theory. New Jersey: Harold S. Haller & Company, 1993. Print.
Kotabe, Masaki, and Helsen Kristiaan. Global Marketing Management.New York: John Wiley & Sons, 2004. Print.
Mentzer, John. Supply chain management. London: Sage, 2001. Print.
Nucor Corporation Official Website. NucorCorporation, 2011. Web.
Rakesh, Mohan. International Marketing. New Delhi: Oxford University Press, 2005. Print.