Nucor Corporation Case Analysis

2462 words 10 pages
To: Dan DiMicco

From: McKensie Booth

Subject: Strategic Management

Date: 11/9/2010

Nucor Corporation Memo Response:

Per your request I have analyzed Nucor Corporation and the steel industry. After performing both strategic and financial analysis I offer my recommendations.

Executive Summary:

Nucor Corporation was the most profitable steel producer in North America in both 2005 and 2006. It is regarded as a low-cost steel producer in the United States, and one of the most efficient and technologically innovative steel producers in the world. Nucor is known for its aggressive pursuit of innovation and technical excellence, rigorous quality systems, strong emphasis on employee relations and workforce productivity,
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Because of this it is really common for joint ventures to be established between suppliers and manufacturers. This can help decrease the costs of supplies. The biggest threat is when large suppliers try and enter the market through the elimination of a third party manufacturer.
Bargaining Power of Buyers: Strong Buyers seem to be the greatest threat. Price competition arises from buyers have low switching costs and low product differentiation. Due to these factors, buyers have the power to negotiate the deal down as far as they want. Many buyers purchase in large quantities which creates economies of scale. Ultimately, the goal for a buyer is to get the best product at the most efficient cost. The goal of a seller is to gain the most financial return for the least cost. Since the market is filled with many suppliers, and if you take into account the different goals of a buyer and a seller you would conclude that the steel industry is a buyers market.

Threat of product substitutes: Weak There are few substitutes for the use of steel. The largest alternative to steel would be the use of another material. Alternatives increase market presence at times of economic downturn and times of increase in steel material cost. The goal is to maintain low costs and market share during times of economic fluctuation. Plastics or Wood could be two substitutes, but neither have the same durability that steel has.

Assessment: Although it may not seem like the steel

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