Environmental And Industry Analysis Of Nucor Corporation – A Strategic Report

Dominant Economic Features analysis

This report is being presented in order to address the issues that Nucor Corporation is facing in the Steel industry of United States. It will comprise the environmental analysis, industry analysis, resources of the organization, success factors, and performance gaps. Along with this strategic options will be suggested and its justification. Evaluation of the strategies and strategies through returns, effectiveness, and efficiency will be provided. Along with this internal analysis of the Nucor Corporation will be done to provide a brief overview of the performance and position of the company.

Nucor is one of the initial companies of steel in the United States to make use of electric arc furnaces in order to melt second-hand steel (mainly from scrapped automobiles). It North America company serve its customers and creates its existence in other nations like China, South East, Brazil, Europe, and Korea (Thompson, 2014). The stakeholders of Nucor involve medium and small enterprises and its key fears include large global and regional competitors, i.e. U.S Steel, Baosteel, Mittal, Bethlehem.   

Pestle analysis of the company reflects various factors that have a major impact on the performance of Nucor Corporation (Appendix 1.1).

• The government of United States majorly support the rights and help in saving steel companies from getting exploit due to international low-cost steel (Appendix 1.1.1).
• Considering the economic factor the GDP of the United States is 16691.5 billion dollar and 17427.6 in 2014 and contribution of steel and iron industry in the economy of U.S is 450.9 billion dollar in 2013 and 480.6 in 2014. These data reflect that steel industry of the country plays important role in the development of the nation (Appendix 1.1.2).
• The government has implemented Mining Resources Act at PRC and Control of Water Pollution Act in order to smoothly operate the industry (Appendix 1.1.5).
• The steel industry provides employment to approx. 149,000 people ad it also takes care of the well-being of the citizens by fulfilling its social responsibilities (Appendix 1.1.3).
• The United States steel industry make use of various advanced technologies in order to provide better and advanced products to its customers.

The porter five force analyses is a strategic tool used to examine industry and comprehend fundamental bars of effectiveness and productivity in the respective industry (Appendix 1.3). This analysis reflects that the power of buyer’s and suppliers is high they are the one that takes companies in the industry under pressure by showing their dominance. The steel industry operates under huge rivalry among the companies operating in the industry (Appendix 1.3.3). Along with this, the threat of new entrants in the industry is high due to their innovative ideas, and methods of doing things (Appendix 1.3.4). The threat of substitute is high as there are companies offering low-cost products to the customers in the industry (Appendix 1.3.5).

There are four key drivers of change that are identified in this report i.e. raw material, cost, people, and product (Appendix 1.4).

The key success factors of the industry that are helping the companies to gain success are getting raw material at low cost, proximity to inputs and market, financial structure, varied product mix and sector of value-added products (Appendix 1.6).       

The strategic group map reflects the position of the companies operating in the industry. The Nucor Corporation is one of the well-known companies which offer low-cost products to the customers and have a topmost position in the industry. After this, the second position is gained by the United States Steel Corporation and on the third position, ArcelorMittal USA is placed (Appendix 1.7).

Porter’s 5F analysis

The life cycle of the industry reflects various stages of the whole life of the companies present in the industry and what strategies they implement in order to attain the top stage. This life cycle involves four stages i.e. Introduction, Growth, Maturity, and Decline (Appendix 1.8).  

Can the company pay its bills?

It can be observed that the current ratio of the company has increased from 2.79 in 2009 3.27 in 2013 which depicts that the liquidity position of the company has improved over the period. The increase in the ratio reflects that company is able to pay its bills timely.

From the financial analysis of Nucor it can be observed that the debt to equity ratio is 0.92 in 2013 which reflects that the debt of the company is increasing. Therefore, in order to raise the capital company needs to increase its equity.  

Do the financials provide a competitive advantage? How?

• Well-organized production competences allow Nucor to transfer its savings to consumers with a competitive price.
• The cost of capital of the company is very low which reflects that the company can manufacture products at low cost and this can help company in attaining cost leadership position in the market as compared to its competitors.  
• The employees of the company are also very skilled and experienced.

What are the implications of the financials for future strategy and for the execution of strategy?

The company need to expand its business and can invest in the advanced technology which will help in producing low cost product with less emission. Along with company can expand its business by increasing in the demand.

How does the company perform compared to its competitors?

As compared to the competitor Nucor is able to provide its products at low cost which reflects increase in the revenue of the company and will attract more customers as compared to the competitor because the price of the competitor’s products is high.

What is increasing – revenue, debt, costs, etc.? What is decreasing? What are the implications?

• From the financial analysis it can be observed that the revenue and debt of the company are increasing.
• Gross margin is being influenced the increasing cost of raw material which is decreasing the Net Income of the company.
• Nucor is experiencing growth in the revenue supports anticipation of the company will expand because of increasing demand in the market.
• Comparing growth with the refining revenue of the Nucor suggest that it is taking benefit of economies of scale.

Is the company in a healthy or unhealthy position? Implications

• Positive trend in the cash from operation and net working capital reflects that the company will be profitable in the predictable feature.
• Efficient utilization of capital and balancing of debt to equity ratio by raising funds will provide opportunity to the company.    

What are the spreads – revenue/costs, revenue/EBIT, revenue/debt?

• Revenue/ costs = 488.02m (2013): In 2012 and 2013 the total income of the company has decreased which reflects that the company needs to cover its cost.  
• Revenue/EBIT = 481.91m (2013): The decreasing revenue over EBIT suggests that enhanced competence as earnings rises at a faster rate than Revenue.
• Revenue/debt = 4.349315068: The declining revenue/debt ratio is a worry but it is reliable in the trend of the company of arranging the capital requirement by debt.

Nucor Corporation’s current strategies are well handled by their administration in the matter of compatibility with their central capabilities and the environment of business including both internal and external environment. The united strategy of Nucor is normally built upon two frames and they are input and output model and resource-based model (Appendix 2.2).

Strength – The strength of Nucor Corporation are Exclusive Management Viewpoint, and Cost Control (Appendix 2.3.1).

Weaknesses – Nucor Corporation weaknesses are Disclosure to Variation in Value of Scrap Steel, Lack of Market Divergence or Diversification (Appendix 2.3.2).

Opportunities – The opportunities for the company are Extension by the acquisition of weakening steel manufacturers, and Political Support in the Implementation of trade Law (Appendix 2.3.3).

Driving Forces analysis

Threat – Company’s threat is growing overseas competition in the domestic market and Technology Advancement (Appendix 2.3.4).

Value chain analysis of Nucor Corporation reflects the strategies that help it by adding extra value to the finished goods and examine those strategies in order to decrease the costs and increase diversity .

The steel industry analysis fairly states the statistic that the segment has recently converted into extremely competitive because of entry of low-cost products supplying companies in the market. Maximum of the new participants in the market follow the price skimming strategy which allows these companies to vend products with good quality at reasonable prices .

How to manage the effect of international low-cost goods in the steel industry? (Appendix 2.6)     

• The Nucor Corporation can invest some of the amounts in developing new steel products that will help in overcoming the competition from the foreign companies. New alternatives to steel, fresher blends with improvements in the range of product will beat all type of competition Nucor is dealing with.
• Nucor can also invest some efforts and cost in initiating a merger contract with an international company to attain the opportunity and it will also support in the sector of low cost. Partnership with the international company can also help in attaining the competitive advantage as the base will become wider and can also introduce a new market.
• Nucor Corporation can increase the product price as it will support in reaching the segmented and loyal market as individuals will trust in high price brands of improved quality than an international factory-made one.

Nucor is the U.S market’s second largest producer of steel but still it is facing challenges because of the infiltration of lower cost international steel. The finest way to counter strike this problem is to accept various innovations that can result in acquiring low costs in the process of manufacturing and even the final steel produced will be of lesser cost too. Nucor is already the main organizations providing less cost structure; further struggling the foreign producer of low-cost steel it is going to restate the image of the company into a cost competitive.

The rise in the scrap material price and the increase in energy practice and rate is a key obstacle that is to be intersected while taking the maximum out of the circumstances. The materials sourcing from overseas will increase the cost but merge with or obtain locally the producer of steel for sourcing of the material can incur fewer costs. Going to the different sellers and carefully inspecting the supply chain and handling the power of bargaining will result in cost-effective raw material sourcing.

Depressing the usage of energy is one of the factors that can be attained by resorting to substitute technologies that will help in decreasing the cost. The innovations in the technology and new forms of materials can be utilized that will use less power and energy in the procedure.

Nucor should make its existence worldwide. The absence of the worldwide attitude can be solved by wide initiatives of transferring goods to the emerging nations. These nations will willingly receive the steels of low cost thus offering a new market for Nucor to function. Accepting procedures that will carry the business to the international level will also increase the target and value for company eventually it will take to a new height.

The danger of alliance is less operative for the Nucor as it is a huge among the less cost steel manufacturers. It has acquired a lot of struggling businesses earlier and is not yet fighting with the increasing costs. The finest method to fight the rivalry of alliance it has to upsurge its base in broader and extent for fresher areas where it can set up manufacturing plants.

As the regulations of environment situation are annoying the company, it needs to accept well tune strategies such that the business is not troubled due to any unexpected contrary circumstances. The finest measure that could be occupied is to track what the other companies in the industry are performing. Adjust with the norms and regulations of the industry that are approved by the administration. Endorsing within and externally the maintainable structures of the company will make an optimistic appearance of the Company in the eyes of the competitors and customers. Taking on the modern technological inventions to use supportable approaches in the processes of manufacturing and implementing them in every manufacturing plant, using cost operative lighting systems will support Nucor in avoiding the problems of increasing worry for nature.

References

Thompson, A.A. (2014). Nucor Corporation in 2014: Combating Low-Cost Foreign Imports and Depressed market Demand for Steel Products. U.S: The University of Alabama.  

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