Nucor Corporation Case Analysis Section 1: Recommendations Recommendation 1: To expand more internationally by building plants in lower property taxed areas with low tariffs to ship products out. Recommendation 2: To put in place job descriptions for employees. By doing this it will save Nucor litigation fees and troubles if something arises in the workplace between the employee and Nucor about job duties, injuries, etc. Recommendation 3: Other than expanding internationally, Nucor should make joint ventures with suppliers to keep the cost down of the product.
A lot of scrap that is used is imported so it would be a good idea for Nucor to utilize that to reduce costs of making their products. Section 2: Problem(s) Even though Nucor is a solid competitor in the steel industry, there are still problems that Nucor has and that are facing the company. There are market problems that will ultimately affect Nucor in the steel industry. One of those problems is that steel and steel related products are having a worldwide decrease in demand. One reason for this decrease is the whole new “green” fad that is occurring lately to protect the environment.
Another problem with the market is that foreign markets don’t have enough markets in their own country and dumping their product in the United States which in return is hurting United States steel companies. Clean air rules are also a problem in the market due to more and more pollution. Even though Nucor does really well with keeping harmful substances from getting in the air, don’t be surprised to see a government regulation put on pollution which will also be more of an expense to Nucor. Finally one of the biggest market problems is that there are many companies in the steel industry.
Even though barriers to enter the market are low because of high capital investments there are still many companies present in the steel industry. Yes, there will be many competitors in any market, but what Nucor has to realize that its ways to be one of the top steel companies in the world can be copied by competitors to get higher market share and more competitive advantage. Another problem I see at Nucor is the non existence of job descriptions. This may sound like it’s not a big deal, but it can lead to bigger problems for Nucor. Not having job descriptions can lead to litigation issues brought up by employees suing Nucor.
This could come up from disputes over what duties to perform, how the employee’s wages are calculates, getting injured on the job and other various questionable situations that could happen. Finally my last problem I see with Nucor is their geographic position. They have over 49 facilities; mostly of them are in the United States and some joint venture plants in other countries. Nucor doesn’t have any of its own plants overseas to make a market presence over in different countries, which in the long run would help profits. Section 3: Analysis
Nucor is one of the leading steel companies in the world with its wide variety of products they offer to many other different industries. Even though steel manufacturing is an old business, it still faces new technological advances and the affect of the rise in globalization. Nucor has increased net sales and net income from 2001-2006 (Exhibit 4) and also had a positive profit margin in every quarter since 1966. Nucor is a very strong company but also faces problems that can affect their business as mentioned earlier. There are ways to get around these problems, but some you cant like government regulation.
If Nucor would want to exercise more in different countries, they would have to look at a couple factors in doing so. First they would have to see how government regulates companies in the country they desire to have plants. Nucor would have to see if the government imposes tariffs to export steel and how much to each of the different countries they would ship to. Taxes are another aspect that Nucor would have to look at for expanding more internationally. There are taxes everywhere but in increase or decrease in property tax does have an affect if Nucor wants to build in that country or not (Exhibit 2).
Another recommendation that I have for Nucor is instead of buying existing plant capacity, make new plants elsewhere or form a joint venture with a supplier to help save money. (Exhibit 3) This would decrease cost of supplies so they would have the extra money to build elsewhere or build a ne plant. By using the SWOT analysis (Exhibit 1) it let me break up Nucor into different parts to see what their strengths and weaknesses are. Nucor is solid with technology and treating the employees correct but the weaknesses that affect Nucor are more market based with some internal problems.
Nucor has products for many different industries including automotive and housing. This can cause issues for Nucor if those industries take a fall, which they have over the last 5 years. It’s a good idea to be in these industries but Nucor has to realize what can happen to sales and revenues when one or both of those industries take a fall. Nucor has been expanding more in the United States, recently just building a plant in Louisiana (Exhibit 5). This plant will be a 750 million dollar purchase and will be a mill for pig iron. Nucor is expanding all over the United States but needs more presence internationally plan and simple.
Nucor is a solid company with shareholder equity increasing each year; they have a solid stock in the NASDAQ market and continue to be a healthy steel company. They can and will make changes to better themselves and continue to be one of the leading steel companies in the world today.