Analysis of Nucor's Business Strategy and Competitive Position

This report provides a comprehensive analysis of Nucor Corporation's business strategy and policy. It begins with an overview of the competitive environment, utilizing Porter's Five Forces framework to assess the threats and opportunities within the steel industry. The analysis then delves into Nucor's key success factors, identifying the advantages and disadvantages of its competitive strategy, including its strategic partnership with Encana Oil and Gas Inc. and its non-unionized labor force. A SWOT analysis is conducted to evaluate Nucor's internal strengths and weaknesses, as well as external opportunities and threats. The report also examines the effectiveness of Nucor's value chain compared to integrated steel mills, highlighting differences in material sourcing. Strategic issues are identified, such as expanding foreign market operations and regulating production costs. Finally, the report recommends strategic steps for Nucor, including gaining access to strategic resources and implementing lean manufacturing processes to enhance its competitive position and future growth.

Running head: BUSINESS STRATEGY AND POLICY
Business strategy and policy
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1BUSINESS STRATEGY AND POLICY
Memorandum
To: John Ferriola
From: Nick Aurther
Subj: Nucor Case Analysis
Date: 05/16/2018
There are number of issues and shortcomings being identified in the competitive strategy
of Nucor. These negative factors should be effectively determined and overcome in order to have
positive and favorable future potentialities. Thus, in order to have effective measures for
overcoming the shortcomings, it is also important to have effective strategies.
Five forces analysis
Threat of new entrants  Threat of new entrants is low due to the reason that
huge investment is required in operating in this
sector.
 Moreover, it is also difficult for the new entrants in
the market to match the economies of scale of the
existing firms.
Threat of substitutes  Threat of substitute is high for Nucor due to the
reason there are number of steel mills currently
operating in the American market.
 The core offerings of all the steel mills are same and

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similar.
Bargaining power of the
suppliers
 Barraging power of suppliers is high due to the
reason that steel industries are heavily dependent on
the supply of iron ore and scrap steels.
 Thus, the pricing of the suppliers determines the
profitability of the steel mills.
Bargaining power of the
buyers
 Bargaining power of the buyers is also high due to the
reason that buyers are having number of options in
the industry.
 Majority of the buyers uses steels as raw materials
and thus they are having basic requirements that are
being offered by every player in the market.
Competitive rivalry  Presence of number of similar firms in the industry
increases the intensity of competitive rivalry.
 There are number of instances where steel mills are
opting for mergers and acquisitions in order to gain
competitiveness in the market.
Key success factors for the industry
The major key success factor for the America steel industry is the return of the major
steel based companies in the America soil. In the recent time, there are number of strict
legislations and regulations being initiated by the government of the United States in order to
reduce the rate of off shoring and outsourcing. This can help the American steel industry in
gaining momentum from the increase in demand (Collard-Wexler & De Loecker, 2015).

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Another key success factor for the American steel industry is having the presence of both
iron ore and scrap steel based mills. This is helping the entire industry in having lower
dependency on only one type of resources. Overdependence on the iron ore only will restrict the
growth of the industry (Melouk et al., 2013).
Pros of Nucor competitive strategy
One of the major advantages of Nucor’s competitive strategy is their strategic partnership
with Encana Oil and Gas Inc. This helps them to regulate and control the volatility in the price of
the natural gas. This also enables Nucor to ensure the seamless flow of the supply of natural gas
along with having the control over their price. Another major advantage of Nucor’s competitive
strategy is the best in the industry productivity level in the steel industry. Nucor is having non-
unionized labors across all their facilities. It also helps them to gain competitive advantages in
the industry.
Cons of Nucor competitive strategy
The major issues identified for Nucor Corporation in terms of their competitive strategy
is that they are having only electric arc type steelmaking process over the more conventional
blast furnace type of steelmaking. Though this process can also be act as competitive advantages
for them, but it is also limiting their productivity. This is due to the reason that productivity of
the electric arc type of steelmaking is less compared to the conventional blast furnace type of
steelmaking. Thus this is causing them to trail in the competition. Moreover, another challenge
being identified is their sole dependence on the scrap steel that is having less constant flow
compared to the iron ore.

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SWOT analysis
Strengths  Positive image in the market and industry.
 Investment in the DRI facilities can help them to get more immune
against future uncertainties.
Weakness  Not having iron ore based facilities.
 Nucor is having fewer resources as compared to the global steel
giants.
Opportunities  Steel market of the United States is regaining momentum.
 Several developing countries are coming up with huge market
opportunities for the steel mills.
Threats  More import of cheaper steels from the foreign market will pose
threat for Nucor.
 Emergence of global economic recession will also pose threat due to
reduction of the demand.
Effectiveness of the value chain for Nucor
In comparison to the integrated steel mills, the value chain for Nucor is different. They
consist of both inbound and outbound logistics. However, the major difference between their
supply chains is sourcing of the materials. While the integrated steel mills are having internal
inbound facilities, Nucor source their scarp materials from the outside supplies (Hudson &
Sadler, 2017). Another competing factor of them is sourcing of the natural gas with having
strategic partnership, while majority of the integrated mills source from external mediums.

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Identification of strategic issues
 Enhancing the foreign market operations beyond the domestic market.
 Ensuring the seamless flow of the scarp materials in order to compete with the iron ore
based mills.
 Regulate the cost of production due to the fact that cost of production in the United States
is more compared to other countries.
 Overcoming the fluctuation and volatility of the fuel price and sourcing trend of the
materials.
Recommended steps
 It is recommended that Nucor should have the access to some strategic resources such as
iron ore. This will help them to gain more control over their backward integration.
 It is also recommended to initiate the concept of lean manufacturing process. This will
enable them to reduce the cost of manufacturing and compete with the cheaper imported
steels.
 It is also recommended that Nucor can enter the foreign markets in order to reduce the
dependence on the American market.

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Reference
Collard-Wexler, A., & De Loecker, J. (2015). Reallocation and technology: Evidence from the
US steel industry. American Economic Review, 105(1), 131-71.
Melouk, S. H., Freeman, N. K., Miller, D., & Dunning, M. (2013). Simulation optimization-
based decision support tool for steel manufacturing. International Journal of Production
Economics, 141(1), 269-276.
Sadler, D. (2017). The international steel industry: restructuring, state policies and localities.
Routledge.