Question one
The economic recession that happened in Asia in 1990 did not affect the Nucor Company. It affected most of the major steel consumers in the construction, automobiles, and firm equipment companies. The terrorist attack of the USA in 2001 caused an economic recession that hampered production and demand. Some of these sectors are still recovering from the recession.
The decrease in demand is because there are other firms supplying the United States. The firms are from China, Russia, Brazil, and India. These firms are subsidized by the US government thus creating stiff competition.
The raw materials that have increased in price are scrap steel. The supply of scrap steel has increased over the years. Therefore, it has become a major concern for Nucor Company since it increases the purchase price.
Question Two
The essential elements of Nucor’s low-cost strategy include the building steel at a reduced cost and keeping the market margin. In addition, it involves undercutting competition through pricing. Nucor had access to innovation, modern equipment, the commitment to producing high-quality steel products and an individualized consumer service. The factors assisted the company to achieved low cost by being able to expand the product line and created low prices for its products while still creating profits.
Question three
Bargaining power of buyers:
Over the years, there have been new entrances of steel manufacturing in the domestic market. This has lead to the production of similar products increasing the buyer’s options. It will lead to the company reducing its prices for its products to be consumed resulting in decline in profitability.
Bargaining power of suppliers:
There is a scarcity of raw materials such as steel shed, iron ore, and recycled steel. This gives the supplier the power to set the price at which the manufacturers will buy. Apart from that, most of the raw materials are imported thus an extra charge to the manufacturing company. It will lead to merging and creation of joint ventures. It will be profitable to the company as there will be an agreement to ensure that both parties benefit from the transaction.
The threat of new entrance:
This is the presence of foreign companies supplying within the US region. The firms stake a claim on the demand. It will reduce the demand that is present for Nucor and makes it difficult for Nucor to achieve economies of scale.
Internal Rivalry within the industry:
The steel sector has been competitive over the years, and this has created competition within the industry. The competition will lead to price wars.
The threat of substitutes:
The demand for the substitutes such as wood and plastics is low compared to that of steel thus a no worry for Nucor.
Impact of each force
Buyer power (high)
Supplier power (high)
Internal rivalry (high)
Treats from substitutes (low)
Treat from new entrance (low)
Summary
Bargaining power of suppliers: there is the presence of few suppliers who import the raw materials.
The power of buyers: Low buying cost for buyers due to low product differentiation in the domestic market.
Internal rivalry within the industry lead to price wars and achievement of economies of scale become difficult.
The threat from substitutes: the substitutes cannot be compared to the durability and robustness of steel thus not affecting demand.
Other determinants are the economy slowdown, threats of new entrants and weak government regulation in the domestic market (Bensoussan & Fleisher, 2008).
The presence of advancement in globalization and the economy regaining its momentum, the steel industry is looking attractive.
Question four
Nucor’s resources
It has its fleet of trucks and proximity to its consumers. The technology used is also a resource; the company uses mini mill technologies and electric furnaces.
Nucor’s capabilities
The firm has different capabilities such as being the first company to have an efficient inventory system, use of innovative technology to make quality products, reduce throughput time and having a productive workforce.
Question five
For the success of any company to be achieved it must be willing to sacrifice some thing for that success and risks are also part of any business success.
References
Bensoussan, B. E., & Fleisher, C. S. (2008). Analysis without paralysis: 10 tools to make better strategic decisions. Upper Saddle River, N.J: FT Press.
