NUCOR Competitive Analysis - Case Study Example

Executive Summary

This study examines the competitive strategies used by Nucor Company a steel manufacturing organization to meet its objectives. Competitive strategies: Nucor utilizes a variety of strategies to achieve its goals. It is an innovative company producing diverse steel products for the existing and emerging market. Nucor utilizes cost leadership strategy to win larger market for its products. Also, through vertical integration the company has maintained steady and cheap supplies that have helped them achieve their strategies. Financial analysis: the report provides a comprehensive analysis of the company’s financial aspects including the profitability, activity and leverage ratios to determine the strength and weakness of the company. The study has established that Nucor is financially sound and has a great future. Findings: The research established that Nucor has engaged in the rigorous acquisition of related firms and establishing new plants to expand its operations. It extended its operations to the international market to increase revenue and grip of the market. However, weak global currencies and fluctuating demands continue to pose great challenges to the global leader in cheap and innovative steel products. Recommendations: Nucor should continue to innovate in order to increase customer satisfaction. Also, they should intensify marketing for their products to reach more customers. Finally, they should focus their acquisition on high-cost producers and convert them into cost-effective firms.

Case Study Report

Internal Environmental Analysis

Nucor operates in a very competitive industry involving steel mills and steel products. The company has employed a variety of strategies to achieve its competitiveness (See Appendix 1). Its focus is on cost leadership strategy which they achieve through low costing hinged on innovative technology and productivity. Also, their produce high-quality products to attract and retain customers thus increasing their market share. After operating for several years non-profitably, Nucor recognized the importance of keeping their prices low and quality high which they achieved through innovative techniques. The cost of supplies was of great significance to the company hence they applied backward integration to increase the profit through reduction of cost of supplies (Thompson, 2014). It has engaged in product development strategy through embracing innovation to produce a variety of new products and production processes to enhance its competitiveness in the market. The company has also maintained its productivity high by providing bonus incentives to its employees which has also helped in maintaining good employer-employee relationship while avoiding industrial conflicts (Garay, 2011). Furthermore, employers have enjoyed the liberty to decide how to carry out their activities and what equipment to use for the right job. They acquire or construct plants at low cost and operate them cost effectively. The strategy has helped them to be profitable even during times of economic downturn.

Nucor used cost leadership strategy to market its products and achieve its objectives. Nucor has well-established structure based on low-cost strategy and high-quality products. Also, they have established a strong relationship with suppliers such as USWA that enhanced them to purchase LTV, Acme assets, and Bethlehem assets (Thompson, 2014). They also implement the philosophy of lean and competent workforce which eliminates redundancy in supervisory management and has reduced the friction between employers and employees through collective bargaining agreement. Nucor has expanded its asset base through acquisitions and achieved a steady revenue growth from $4.8billion in 2000 to 1.98 billion in 2012. Also, during the same period the company completed 50 acquisitions.

Nucor uses low-cost strategy to attract more consumers due to intensive market competition. Considering the human resource management functions, Nucor ensures they have the right staff for the job by hiring competent workers. Also, to retain these workers and ensure their productivity, Nucor offer bonus incentives which sometimes exceeds the basic salaries. This motivates the workers to increase the company’s productivity (Thompson, 2014). Nucor’s brings offers diversified steel shapes and steel products through various products line-ups. When the company first entered in the steel manufacturing business, they were producing steel joists and joist girders. However, they later expanded the business to steel decking.

Financial Analysis

Nucor is performing better than its competitor US steel regarding profitability and activities. The CAGR as shown in appendix 2 demonstrates that Nucor is amassing resources from the trading activities as demonstrated by positive CAGR for net sales, total tons sold, net earnings and stock price. It is able to use its resources well to generate income as demonstrated by positive ROA and ROE. The high inventory ratio depicts efficiency in supplies for continuous production (Appendix 3). Also, the productivity per the resource employed is higher than that of competitor depicting higher efficiency level. Nucor is in sound financial position and has good liquidity as shown by the positive values of the current ratio higher than that of US steel (Thompson, 2014). However, this could imply there is too much idle cash which needs to be put into use. Its credit ratings are higher than the competitors as depicted by lower debt-to-equity ratio. Therefore, Nucor’s financial performance is consistent with its cost leadership strategies which have helped them to compete on higher ground than its competitors. Nucor has strengths based on its innovative culture, low production, and diversified products because this enables them to make a profit even during the period of economic downturn (see Appendix 4). However, its greatest weakness includes the high cost of providing employee’s incentives and developing new technology to keep delivering new products in the market (Thompson, 2014). Nucor has a bright future because of the increasing demand for steel products and its good relationship with suppliers. However, strong competition and fluctuating currency prices remains a major threat to Nucor (See Appendix 4).

Externals environment Analysis

Strength: Nucor has efficient management, low-cost strategy, engages in strategic mergers and acquisitions, continuously developing innovative technology, operates on multiple economies of scale, competent workforce and enjoys a good relationship with its employees (US International Trade Commission, 2008).

Weaknesses: High domestic competition and cheap imports from China and India, lacks established research and development, overdependence on the domestic market (US) and the high cost of shipping products to the global consumers (Slaton, 2007).

Opportunities: There is a growing global market, opportunity to advance into better innovative technology, expansion of operations outside the US market and can diversify to other business opportunities especially real market (Slaton, 2007).

Threats: The cheap imports from China are a real threat to US steel industry, the rising cost of labor and declining market due to weakening global economy (US International Trade Commission, 2008).

Conclusion

Nucor uses a variety of competitive strategies to stand out in the highly competitive market. For instance, they use financial strategies to determine the best alternative to investing their finances in the most profitable product lines. Also, they use product development strategy to offer a variety of products to the consumers. In research and development, Nucor is considered as the most innovative steel manufacturing company in the United States because if offers its customers with highly innovative products. As part of Nucor’s purchasing strategy, they ensure most of their raw materials are supplied by their own firms to avoid unfair competition and reduce the cost of raw materials due to strong supplier relationship. Today Nucor is the leading manufacturer of innovative web steel joists, steel deck, and joist girders. The backward vertical integration enabled Nucor to supply its production facilities with steel at low cost. The low cost of production is extended to the consumers in the form of low-priced, high-quality products. The company also focuses on product quality by ensuring all its products are produced using high-tech. For each of its products, Nucor ensures it is available to the consumers at a competitive price, and this technique enables them to attract demand.