Nucor Corporation the Modern Day World Research Proposal

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Nucor Corporation

The modern day world is highly developed and when saying this, most people think of technological advancements. While it is true that technologies did support these impressive levels of development, it must also be recognized that the material infrastructure plays a pivotal part as well. A major commodity in ensuring the material infrastructure (railways, roads, bridges and so on) is constituted by steel, and a major player within the steel industry is represented by the Nucor Corporation.

The aim of this report is to assess the current situation of Nucor in terms of the business and economic challenges with which it is presented, as well as reveal the strategy it has implemented. In order for such a study to be complete and relevant however, it is necessary to assess the industry. This will be best achieved through the presentation of Porter's five competitive forces -- bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of substitute products, all to culminate in the overall rivalry among steel companies.

Once this analysis is completed, a conclusion will be drawn on whether the Nucor Corporation is worth investing in at the time or not. Following this, several recommendations will be made in order to aid the company remove the barriers posed by its context, capitalize on its strengths and improve its competitive position. The report comes to an end with a section on concluding remarks, which will restate the most important findings of the analysis conducted.

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2. Economic and Business Characteristics

The Nucor Corporation is characterized by a wide series of elements, which are derived from the general economic climate, as well as the individual features of the business community. The following lines present some of the most important features impacting Nucor:

Research Proposal on Nucor Corporation the Modern Day World Is Assignment

The American steel industry is currently faced with the threat of cheaper imports; these reduce the competitive power of the national products, reduce demand for them and cause a wide series of shortages for the U.S. steel manufacturers. The problem impacts not only Nucor, but the totality of the players within the American steel industry, element which has forced the White House to take action. The first measures were implemented by the Clinton administration, but the current Obama presidency is also focused on resolving the issue, even more so when the industry is also suffering the consequences of the internationalized economic crisis. Most of the efforts have materialized in the implementation of barriers to entry, generally translated into increased taxes and quotas on imported steel (ABC News, 2009).

In terms of financial performances these have been generally positive and sustainable; with the exception of 2001, the trend in net sales has been an ascendant one; the same trend has been followed by other categories of income and financial highlights, as can be observed throughout Appendix 1

However at a lower level, Nucor remains dependent on the changes affecting the steel industry and the manufacturing commodities sector, namely the prices in steel scrap; moving away from this dependency generates additional expenditure

The company has created and maintained a strong reputation as a reliable business partner, often preferred due to its offering of low cost steel-based products; this low cost reputation generates additional strains through the growing necessity to keep costs to the minimum possible, while the features of the industry evolve

Challenges are also raised by the human resource, which has, to day, been kept away from forming unions; but this threat is growing, and if it materializes, it would also imply additional costs

The future of the steel industry is yet unknown, but an intensifying competition is expected to arise in the aftermath of the financial crash. Additionally, the sector is most likely to be characterized by massive technological innovations (Thompson, Strickland and Gamble, 2008), meaning that change would also impact Nucor

3. Industry Analysis

As revealed throughout the previous section, the steel industry is rather dynamic and challenging, even more so when the threat of foreign competition increases. In order to get a better understanding of the industry however, it is necessary to assess it through the lenses of the five fronts of competition, as identified by Michael Porter. Appendix 2 reveals the diagram of these five forces and the relationships between them.

Threat of new entrants

This feature is a fluctuating one as it is pegged to the political climate. The largest threat in terms of new entrants is given by the chapter steel imports from countries such as Chain, Japan, the European Union, Russia and so on (Steel Guru, 2006). This threat has been reduced recently due to the political actions taken, yet it remains rather high. The threat of national new entrants is generally medium, to reduced, even more so when corporate competitors base their actions on economies of scale and small, new entrants complete on niche markets.

Threat of substitute products

Advancements have been made in reducing the global dependency on steel and this also meant research on identifying materials that could replace steel. The discoveries indicated that, in some instances, steel could be replaced by composite roads, bamboo, tiles, clay and so on. However, the applicability of these products remains reduced within the general context, making this threat of a medium to reduced intensity; it could however intensify in the future as new developments are made.

Bargaining power of suppliers

This threat depends on the means each steel-based products manufacturer employs in gathering the necessary commodities. Nevertheless, as it could be observed in the case of the Nucor Corporation, manufacturers rely significantly on their purveyors, meaning than that the bargaining power of suppliers is fairly increased.

Bargaining power of buyers

The bargaining power of buyers is going though some changes in the meaning that its strength is intensifying. Customers used to be the force purchasing whatever steel companies would manufacture. Nowadays however, as customers plan and design ahead of time, they know exactly what kind of steel and steel-based products they need. This generally materializes in a strong power of buyers.

Competitive rivalry

The competitive rivalry can also be assessed from two standpoints. At an international level, competition is fierce and rivalry is increased. At a national level however, the competitive rivalry is less intense, element which can be generically explained through the fact that American steel manufacturers strive to win the battle against foreign imports, rather than fight among themselves. The market is rather mature and future rivalry is expected to take the form of technological battles on innovating the steel industry.

4. Generic Strategy

Nucor's strategy is characterized by the following:

The company operates primordially at a national level, with its presence within the global community being restricted to a few joint ventures

Nucor continues to rely on steel scrap, however at a lower degree, which materializes in a dependency on the modifications within the steel scarp sector, generally price increases

The company opened a subsidiary in Trinidad, endeavor which materialized in cost savings as well as an increased production capacity

They emphasize operational efficiency (given by high productivity levels against reduced costs, or the most beneficial report between the two) and high product quality

They support the technological development of not only the company, but also the entire steel sector, which further increases their popularity

The Nucor managerial team did not encourage the organization of employees into unions; this materialized in significant cost savings, which further increased the strength of its competitive position

Nevertheless, they implement a successful approach of the human resource by promoting employee empowerment and incentive rewards based on performance; this ensured an alignment of the company's overall objectives with the individual goals of the employees, generating as such increased chances for organizational success

Nucor capitalizes on its reputation of a low-cost steel provider, which enhances its orders and revenues

Given this understanding of Nucor's strategy, one can easily come to the realization that the generic strategy implemented by the steel organization is that of cost leadership. In a more theoretical formulation, a cost leadership strategy refers to "an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors" (Hoskisson, 2008). Based on this realization, it can be stated that Nucor manufactures standard products, revealing reduced levels of differentiation, to be sold to the typical customers within the market, at the lowest possible prices, but also at competitive levels of quality.

5. Investing in Nucor

Within the current status quo, a question is being posed relative to an investor's decision in terms of the Nucor Corporation. Otherwise put, should one invest in Nucor now or should he avoid such an investment? Given the setting so far identified, an investment in the American steel industry seems rather risky, generally due to the threat of cheap imports. Nevertheless, one should consider the real and historic capabilities of Nucor, and realize that they would not invest in a steel "rookie," but in a highly capable and strong agent, which… [END OF PREVIEW] . . . READ MORE

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