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INTRO
Nucor had once been considered the fastest-growing steel company in America that was unstoppable. In the twenty-first century Nucor is being challenged by a changing industry where there is a worldwide decrease in demand for steel and steel related products, increasing competition, especially from foreign competitors, in a maturing market and environmental concerns about alleged violations of federal and state clean air rules.
In response Nucor's management has embarked on a growth strategy in the course of a shakeup of the management structure through the adding of outside directors to the board as well as a centralization of the organisation's procedures. Nucor hopes that this growth strategy will have a positive impact on the future profitability and help realize its goal of becoming the largest steel maker in the United States.
Porter's Five Forces
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Rivalry in the industry
The industry is not only fragmented but the boundaries of its various sub-parts are vague and overlapping. Steel products are marketed principally through in-house sales forces. The principal competitive factors are price and service.
The company is not the strongest, but it can defend itself from stronger rivals and capitalize on the vulnerabilities of weaker rivals.Nucor has better cost management skills than other U.S firms. Nucor consistently improves its technological capabilities. Nucor's employees are paid for performance, making them very productive.
Threats of Substitute
Nucor vs. integrated mills, other mini-mill, foreign mills, and specialty mills.
Nucor's success as a low-cost provider could not be accomplished without utilizing the cost reduction capabilities in every element of their value chain; this is the biggest difference between Nucor and its rivals.
Nucor's rivals, for the most part, still use traditional integrated steel mills, which inefficiently use a single large scale plant to perform all of the steel making functions.
Barriers to entry by Potential Competitor
Considerable competition exists from numerous domestic manufacturers and foreign imports. The markets that Nucor serves are tied to capital and durable goods spending and are affected by changes in economic conditions.
Global demand for steel expanded continuously throughout the 160s, a demand domestic producers elected to not meet, choosing only to match domestic consumption requirements. This presented an opportunity for up-start foreign producers to rejuvenate and strengthen themselves without directly competing against U.S. producers.
Antidumping Rulings U.S. integrated steel producers filed charges of dumping against foreign competitors -- primarily the Germans and Japanese.
Bargaining Power of Suppliers
The bargaining power of suppliers within such industry is low. The supply factors of production (transformation factors) are labor to operate plants, capital facilities, and land. Recent modernization has significantly substituted technology for labor in steel production. Yet, Not all stakeholders have been happy with the way Nucor does business. There were also concerns about the excess incentives the stat gave to convince Nucor to build steel mill and it also argues that their new federal law should go for extra care with the restoration of spawning and nursery habits and improve water system due to the fast track of facility being built in Hertford by Nucor.
Bargaining Power of Customers
The bargaining power of customers is medium to high because of a reduced demand by the auto industry as of the result of the lower steel content in a modern automobile; a trend steel producers are aggressively trying to counter by banding together to form the Steel Alliance which is running a $100 million advertising campaign targeted at consumers touting the advantages of steel for automobile design (and house construction).
Service centers are also playing an increased role in the industry, acting as major distributors and wholesalers for finished steel products to steel consumers (construction firms, shipbuilders, machine fabricators, etc.). With the exception of the auto and auto part manufacturers (who contract directly with producers), most finished steel is delivered to end users is via the steel service center, moving some of the inventory management burden to the service centers for a marginal mark-up to the end user. This presents a forecasting complication to planners and strategists as all demand for steel is a derived demand, the forecaster must be able to look into the macro forces affecting an economy and project steels role in the broader economic system from which a consumer demand pattern could be ascertained.
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