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Nucor Corporation Against Low-Cost Steel Imports Case Study

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Updated: Jun 21st, 2020

Abstract

The paper begins by analysing the strengths, weaknesses, threats and opportunities of Nucor Corporation alongside appropriate recommendations. Thereafter, the mechanisms used by Nucor to create value besides the compensation and benefits plan have been discussed. Finally, the paper discusses cost leadership in the context of the given case study and applicability to a real workplace environment.

SWOT analysis

The analysis seeks to explore the strengths, weaknesses, opportunities and threats that the company is facing may encounter in the course of its operations.

Strengths

The company enjoys the following strengths in the marketplace:

  • Myriads of economies of scale
  • Regular and rigorous establishment of latest technological platforms
  • Expansion of capacity and size through strategic mergers and acquisitions
  • The highly competent and able administration
  • Strong CSR Program (Tree plantation
  • A viable Corporate Social Responsibility (CSR) that entails planting of trees.
  • The current employment pay schemes are generally acceptable.
  • The business organisation enjoys a low attrition rate, strong employee relation, coupled with a trained workforce.
  • A rather small ratio of debt to the equity that stands at 0.18.
  • The company has a significant internal sales volume of 33 per cent.
  • A robust, low-cost strategy. For example, labour accounts for only about 8 per cent of the total revenue earned, fro internal and external sales.

Weaknesses

  • Lack of an independent research and development platform for the company.
  • The quantities bought do not attract any deals in spite of the high cost of shipping.
  • Over-reliance on the markets within the United States.
  • High risk of operation since the company does not operate any plants outside the United States. This contributes to a weak location strategy.
  • Product diversity and industry rivalry have not been aligned with the operations of the company.

Opportunities

  • Locating a manufacturing and sales subsidiary plant outside the United States.
  • The company has the opportunity to diversify its activities beyond the US region. For example, it can engage in the automobile industry or real estate sector bearing in mind that it has past exposure in these domains.
  • A broad prospect to apply the HISMELT Technology in other locations. A case in point is Australia. The latter can serve as a powerful launchpad for modern steel manufacturing technology such as the liquid iron project. The new technologies will assist in minimizing pollution setting the right stage for other manufacturing advantages for the company.
  • The new technological platform will also boost the brand name and identity of the company as an innovative manufacturer besides accruing low cost of operation.

Threats

  • The high rate of growth in terms of imports.
  • The main threat facing Nucor Corporation is the emergence of China’s steel markets across the globe. Since 2004, a number of Chinese companies have recorded positive growth in terms of production. Case example of companies that are producing even more steel than before includes Wuhan and Tangshan.
  • The debt to equity ratio has been gradually increasing over the years.
  • The cost of labour is also in the rise.
  • The growth of related sectors is also on the downward trend. For instance, the automobile industry is not performing that well.
  • Source of cheaper raw materials.

Recommendations

  • Latest technological platforms should be adopted across the board in order to lower the cost of labour and market competition against other rivals.
  • The company should immediately initiate an expansion plan to other regions beyond the US.
  • Research and development should be carried out by the company’s independent systems.
  • Embrace the concept of value addition in its steel products.

Nucor creates value in a number of ways as outlined below:

Inbound logistics

  • The company strives to lower its transportation costs by availing raw materials through its own processes. Besides, the inventory management system is highly computerized in order to outwit other market rivals (Othman & Sheehan, 2011).

Operations

  • The quality of products is controlled by employees.
  • Processes are keenly controlled and inspected
  • Attractive exchange rates for steel products dispatched overseas (Thompson, n.d).
  • Sales and marketing carried out by individual plants to enhance efficiency.
  • Customized designs according to the tastes and preferences of customers.
  • The corporation believes and practices the philosophy of ‘pay for performance’. The ‘no layoff’ culture has also been put in place so that the talent and inherent abilities of all employees can be utilized to generate desired results. The profit-sharing strategy is also a major motivating factor for employees. Ten cents of every dollar earned prior to payment of tax is secured for this purpose. Other allowances such as vacation, insurance, travel, and health boost the morale of workers to stick to the set objectives and strategies of the organisation (Thompson, n.d).
  • The educational disbursement/scholarship program is enjoyed by children of employees is a motivating factor that improves the performance and productivity of workers.

The corporation heavily relies on the application of technology in order to cut down the cost of operations. This is referred to as cost leadership. Putting better technologies in place, coupled with innovation, have enabled the company to attain several cost advantages. Cost leadership at Nucor has also been achieved through robust R&D and lean management.

The main lesson learned from this case study is the motivation of employees. The success of any organisation relies on its workforce (Baack & Boggs, 2008). Through a sound benefits and compensation plan, employees feel valued, recognized, and respected at the workplace. As a leader, I can indeed apply the compensation philosophy at my worksite in order to improve efficiency and overall productivity of workers.

References

Baack, D. W., & Boggs, D. J. (2008). The difficulties in using a cost leadership strategy in emerging markets. International Journal of Emerging Markets, 3(2), 125-139.

Othman, R., & Sheehan, N. T. (2011). Value creation logics and resource management: A review. Journal of Strategy and Management, 4(1), 5-24.

Thompson, A.A. (n.d.). Nucor Corporation: Competing Against Low-Cost steel imports. New York: University of Alabama Press.

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IvyPanda. "Nucor Corporation Against Low-Cost Steel Imports." June 21, 2020. https://ivypanda.com/essays/nucor-corporation-against-low-cost-steel-imports/.

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IvyPanda. 2020. "Nucor Corporation Against Low-Cost Steel Imports." June 21, 2020. https://ivypanda.com/essays/nucor-corporation-against-low-cost-steel-imports/.

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IvyPanda. (2020) 'Nucor Corporation Against Low-Cost Steel Imports'. 21 June.

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