Nucor business model is designed to take care of the factors driving the steel markets in the USA. The strategic of Nucor plan to expand operations through acquisitions and joint ventures, global leadership and environmental management. Production of value-added products, effective raw material strategies, commercialization of new technologies and organization to ensure maximum capitalization on this industry are strategies that have enabled the company to achieve heights. The material strategy aimed at creating a greater controls over all the inputs by using scrap substitutes in all the plants owned by the Nucor wholly or jointly. These would increase the production and production costs and increase the net sales.
The five competitive forces shaping the world steel industry in The US are:
I. Increased bargaining power of the suppliers.
These involve all the sources of inputs into the industry. These have been as a result of lack of substitutes for the particular inputs such as the iron ores and dominance by few larger global suppliers rather than small fragmented units. The cost of switching to another supplier tends to be high for the Nucor industry because the supplier contracts are formulated in the long term.
II. Increased bargaining power of the customers.
A large variety of buyers allows them to come together and have a loud voice when negotiating for price adjustments. There is low differentiation in steel industry products with low switching costs.
III. Substitute’s threat.
Few products exist such as the plastics, bricks, aluminum and bricks as a substitute of steel in the construction industry. The threat of these products is low due to the durability and strength of steel. Nucor threat came from foreign steel makers who exported cheap steel products to the USA market.
IV. New entrants in the market.
These are moderate threats to the Nucor steel industry. It has been as a result of large capital investments and large economics of scale. Low switching costs for the buyers has contributed significantly. Low product differentiation has increased the threat of new entrants. Market penetration by cheap importation from abroad is a serious threat to the steel industry.
Nucor Corporation controlled the prices based on the demand and supply because of the large market share it had on the industry. The strategic plan of Nucor corporation of acquisitions and was meant to expand the steel corporation and build its network in the USA markets. Nucor was able to upsurge in the steel importation and recession while competitors were declared bankrupt, and this strengthened the foundation of the company.
SWOT Analysis
Strengths.
• Merger and acquisition have increased the capacity and size of the Nucor steel.
• The company has a wide range of economies of scale.
• New technology innovations and production of value added products such as galvanization process.
• Strong corporate social responsibility of through water recycling services.
Weaknesses
• High Industry rivalry and very low product diversity from the two local competitors and cheap imports.
• Dependency of local markets.
• High shipping costs and lack of deals on the raw material purchased.
• Lack of decentralization of the company premises.
Opportunities.
• Adoption of new technology such as the liquid iron project based in Australia.
• Globalization will enable them to explore markets outside America.
• Diversification of businesses such as a real estate and automotive industry.
Threats.
• The China’s rise in steel markets in the global market due to less government intervention and cheap imports.
• Decline in the markets growth such as the Real estate construction.
- Insufficient human resources.
- Recommendations.
• The company should advance its domestic expansion through acquisitions of small steel companies to reduce local competition and increase the production capacity.
• Nucor steel company should invest in technology, research and development of different isotopes of iron to produce steel with better properties and less processing costs to bring down the cost of production.
• Nucor should also venture for international expansion through joint ventures with other steel multinationals such as the steel companies in India and china imports.
• Nucor should also venture in the international market and seek global markets as the competitors from abroad.
The company should increase the human resources to improve the productivity.
