Strategic Management of Nucor Corporation in the Steel Industry

Strategic Management
Steel industry
4/12/2018
Nucor Corporation
Student Name:

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Table of Contents
Introduction................................................................................................................................4
Analysis..................................................................................................................................4
Pestle Analysis...................................................................................................................4
Porter Five Force Analysis.................................................................................................5
Key Drivers of Change.......................................................................................................5
Key Success Factors...........................................................................................................6
Strategic Group Map..........................................................................................................6
Life Cycle of the industry..................................................................................................6
Current Strategies of Company..........................................................................................6
SWOT Analysis.................................................................................................................6
Value Chain Analysis.........................................................................................................7
Competitor Analysis...........................................................................................................7
Key Strategic Issue.............................................................................................................7
Alternatives............................................................................................................................7
Recommendations......................................................................................................................8
References................................................................................................................................10
Appendix..................................................................................................................................11
1External Analysis...................................................................................................................11
1.1PESTLE Analysis............................................................................................................11
1.1.1Political....................................................................................................................11
1.1.2Economic..................................................................................................................12
1.1.3Social........................................................................................................................12
1.1.4Technological...........................................................................................................13
1.1.5Legal.........................................................................................................................13
1.1.6Environmental..........................................................................................................13
1.2United States Steel Industry............................................................................................13
1.3Porter Five Forces Analysis............................................................................................15
1.3.1Buyer’s Bargaining Power.......................................................................................15
1.3.2Supplier’s Bargaining Power...................................................................................16
1.3.3Rivalry among Existing Firms.................................................................................16
1.3.4Threats of New Entrants...........................................................................................17

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1.3.5Threat from Substitute Services of Products............................................................18
1.4Factors Driving Industry Change....................................................................................18
1.4.1Product.....................................................................................................................19
1.4.2Raw Material............................................................................................................19
1.4.3People.......................................................................................................................20
1.4.4Cost..........................................................................................................................20
1.5Steel Consumption in Various Countries........................................................................21
1.6Key Success Factors of U.S. Steel Industry....................................................................21
1.6.1Getting raw materials at less costs...........................................................................21
1.6.2Proximity to inputs and market................................................................................22
1.6.3Financial structure....................................................................................................22
1.6.4Varied product mix and section of value-added products........................................22
1.7Strategic Group Map Analysis........................................................................................23
1.8Life Cycle of United States Steel Industry......................................................................26
1.8.1Introduction Stage....................................................................................................26
1.8.2Growth Stage............................................................................................................26
1.8.3Maturity Stage..........................................................................................................27
1.8.4Decline Stage...........................................................................................................27
1.9Conclusion of Industry Analysis.........................................................................................27
2Internal Analysis....................................................................................................................28
2.1Financial Analysis...........................................................................................................28
2.2Current Strategy of Nucor Corporation...........................................................................29
2.2.1Strategies executed by Nucor Corporation..............................................................30
2.3SWOT Analysis..............................................................................................................32
2.3.1Strength of Nucor Corporation.................................................................................32
2.3.2Weaknesses..............................................................................................................33
2.3.3Opportunities............................................................................................................34
2.3.4Threats......................................................................................................................34
2.4Value Chain Analysis......................................................................................................35
2.4.1Primary Activities of Value Chain Analysis............................................................36
2.4.2Support Activities.....................................................................................................37
2.5Competitive Analysis......................................................................................................39
2.5.1Competitive Strength Assessment............................................................................39

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2.6Key Strategic Issue..........................................................................................................41

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Introduction
This report is being presented in order to address the issues that Nucor Corporation is facing
in the Steel industry of United States. It will comprise the environmental analysis, industry
analysis, resources of the organization, success factors, and performance gaps. Along with
this strategic options will be suggested and its justification. Evaluation of the strategies and
strategies through returns, effectiveness, and efficiency will be provided. Along with this
internal analysis of the Nucor Corporation will be done to provide a brief overview of the
performance and position of the company.
Nucor is one of the initial companies of steel in the United States to make use of electric arc
furnaces in order to melt second-hand steel (mainly from scrapped automobiles). It North
America company serve its customers and creates its existence in other nations like China,
South East, Brazil, Europe, and Korea (Thompson, 2014). The stakeholders of Nucor involve
medium and small enterprises and its key fears include large global and regional competitors,
i.e. U.S Steel, Baosteel, Mittal, Bethlehem.
Analysis
Pestle Analysis
Pestle analysis of the company reflects various factors that have a major impact on the
performance of Nucor Corporation (Appendix 1.1).
 The government of United States majorly support the rights and help in saving steel
companies from getting exploit due to international low-cost steel (Appendix 1.1.1).
 Considering the economic factor the GDP of the United States is 16691.5 billion
dollar and 17427.6 in 2014 and contribution of steel and iron industry in the economy
of U.S is 450.9 billion dollar in 2013 and 480.6 in 2014. These data reflect that steel

STRATEGIC MANAGEMENT 5
industry of the country plays important role in the development of the nation
(Appendix 1.1.2).
 The government has implemented Mining Resources Act at PRC and Control of
Water Pollution Act in order to smoothly operate the industry (Appendix 1.1.5).
 The steel industry provides employment to approx. 149,000 people ad it also takes
care of the well-being of the citizens by fulfilling its social responsibilities (Appendix
1.1.3).
 The United States steel industry make use of various advanced technologies in order
to provide better and advanced products to its customers.
Porter Five Force Analysis
The porter five force analyses is a strategic tool used to examine industry and comprehend
fundamental bars of effectiveness and productivity in the respective industry (Appendix 1.3).
This analysis reflects that the power of buyer’s and suppliers is high they are the one that
takes companies in the industry under pressure by showing their dominance. The steel
industry operates under huge rivalry among the companies operating in the industry
(Appendix 1.3.3). Along with this, the threat of new entrants in the industry is high due to
their innovative ideas, and methods of doing things (Appendix 1.3.4). The threat of substitute
is high as there are companies offering low-cost products to the customers in the industry
(Appendix 1.3.5).
Key Drivers of Change
There are four key drivers of change that are identified in this report i.e. raw material, cost,
people, and product (Appendix 1.4).

STRATEGIC MANAGEMENT 6
Key Success Factors
The key success factors of the industry that are helping the companies to gain success are
getting raw material at low cost, proximity to inputs and market, financial structure, varied
product mix and sector of value-added products (Appendix 1.6).
Strategic Group Map
The strategic group map reflects the position of the companies operating in the industry. The
Nucor Corporation is one of the well-known companies which offer low-cost products to the
customers and have a topmost position in the industry. After this, the second position is
gained by the United States Steel Corporation and on the third position, ArcelorMittal USA is
placed (Appendix 1.7).
Life Cycle of the industry
The life cycle of the industry reflects various stages of the whole life of the companies
present in the industry and what strategies they implement in order to attain the top stage.
This life cycle involves four stages i.e. Introduction, Growth, Maturity, and Decline
(Appendix 1.8).
Financial Analysis
Billion Billion Billion Billion Billion Billion
Balance Sheet
2013 2012 2011 2010 2009 Trend
Current Assets 6.41 5.66 6.71 5.86 5.18 Increasing
Current Liabilities 1.96 2.03 2.4 1.5 1.23 Fluctuating
Inventory 2.61 2.32 1.99 1.56 1.31 Increasing
Fixed or Non-Current
Assets 8.79 8.49 7.86 8.06 8.56 Increasing
Long Term Debt 4.38 3.38 3.63 4.28 7.39 Increasing
Shareholders’ Equity 7.91 7.89 7.71 7.33 7.58 Increasing
Retained Earnings 7.14 7.12 7.11 6.8 7.12 Increasing
Income Statement

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Sales or Revenues 19.05 19.43 20.02 15.84 11.19 fluctuating
EBITDA 928.72m 1.03 1.43 452.29m -196.88 fluctuating
G&A 481.91m 484.9m 520.64m 391.37m 351.27m fluctuating
R&D
Gross Operating
Margin ($) 1.41 1.51 1.95 843.66m 154.39m fluctuating
Net Operating Margin
($) 791.12m 852.94m 1.25 267.11m -4131.97m Decreasing
Net Income (Profit) 488.02m 504.6m 778.18m 134.09m -293.61m fluctuating
Cash Flow Statement
Cash from Operations 1.08 1.2 1.03 873.4m 1.18 Increasing
Key Metrics
Net Working Capital
(Current Assets -
Current Liabilities) 4.45 3.63 4.31 4.36 3.95 Fluctuating
Key Ratios
Profitability
Return on Assets
(EBITDA/Total Assets) 0 0.072791519
0.09814687
7 0.00
-
13.9137809
2
Return on Equity
(EBITDA/
Shareholder’s Equity
and Retained
Earnings) 0 0.130544994
0.18547341
1 0.00
-
25.9736147
8
Efficiency
Asset Turnover
(Revenues/Total
Assets)
1.2532894
7 1.373144876 1.37405628
1.13793103
4
0.86276021
6
Fluctuatin
g
Return on Capital
Employed
(EBITDA/Shareholder'
s Equity) 0 0.130544994
0.18547341
1 0.00
-
25.9736147
8
Leverage
Debt to Equity 0.9216182 0.794676806
0.88975356
7 0.89904502 4.99/7.58 Increasing
Liquidity
Current Ratio
(Current
assets/Current
liabilities)
3.2704081
6 2.788669951 2.79966611 2.79966611 2.79966611 Increasing