nucor presentation

April 1, 2015

Qi DangJoseph TalaricoMeggie ToppinNathan WainwrightMaintian Yu

5071 Strategic Management

Agenda

• History of Nucor• Issue Identification• SWOT• Porter’s 5 Forces• Corporate Level Strategy• Business Level Strategy• Nucor Structure & Control Systems• Alternatives & Recommendations• Implementation

Nucor: Company History

Formed from two corporate failures: Nuclear Consultants Nuclear Corporation of America

Nucor: Company History

Ken Iverson brought Nucor to prominence Navy officer training Master’s degree in Mechanical

Eng./Metallurgy 1962: Ken joins Nuclear Corp. building up

Vulcraft division—Nuclear Corp. only profitable division

1965: Ken heads Nucor and gets rid of high tech division and focuses on steel manufacturing

Nucor: Company History

Sanborn Chase – Original owner of Vulcraft “Scientific Genius” Engineer by trade Compassionate Developed Mini-Mill

technology Established incentive

programs that were later adopted by Ken Iverson and Nucor as a whole

Nucor: Company History

Dave Aycock Met Iverson during

the purchase of Vulcraft

Worked closely with Iverson

Managed all joist operations of Nucor

Became President and COO in 1984

Nucor: Company History

Dan DiMicco becomes President & CEO September 2000 Iverson ousted by Board of Directors in 1998 over

“disagreements” Aycock retires after hiring DiMicco (Iverson’s

replacement) Pushed for U.S.A. government protection from

international competition in 2001 Began aggressive expansion through mergers &

acquisitions and joint ventures 20003.15 Bn Market Cap 200610.52 Bn Market Cap 201313.72 Bn Market Cap

Issue Identification

Remaining competitive with emerging markets Emerging markets producing more of their

own steel Much cheaper labour costs and steel

Growing domestically or globally Slowing growth of North American

markets means less demand for steel Exporting to emerging markets is a

challenge with shipping costs and possible trade barriers

SWOT Analysis: Internal

STRENGTHS WEAKNESSES

• Human Resources practices

• Management Style/Leadership

• Organizational Culture• Materials Management• Mini-Mills• Vertical Integration

• Safety• No foreign locations• Rising Manufacturing

Costs• No brand loyalty—

competitive on price only

• Changing Leadership

Porter’s Five Forces: The Steel Industry

Industry

Rivalry

Threat of

Substitute

Products

Bargaining

Power of Buyers

Threat of New

Entrants

Bargaining

Power of Supplier

s

LOW

HIGH

MEDIUM

LOW

LOW

Industry Rivalry—Highest Threat

Industry is fragmented (Top 10 steel makers supply less than 30% of global production

Demand Global: growing quickly due to emerging markets Domestic: growing slowly

Rising fixed manufacturing costs domestically High barriers to exit—investment in mills,

production & materials Established companies are merging with

others

SWOT Analysis: External

OPPORTUNITIES THREATS

• Emerging market in China and India – rapid market growth

• New technology – electric arc furnaces

• Mergers & Acquisitions (horizontal integration)

• Vertical Integration• Increased competition• Fluctuating industry

demand• Increased consumption

overseas than in the US (International Competition)

• High Cost• Mature industry

Business Level Strategy

Scope

BroadCost

Leadership

Differentiation

Narrow

Cost Focus

Differentiation Focus

Cost Differentiation

Competitive Advantage

Corporate Level Strategy

Nucor is using all three corporate level strategies: Vertical integration (forward & backward) Horizontal Integration (mergers & acquisitions) Cooperative Relationships

Empire building vs. profitability:What is the most effective strategy? Continue building empire (using all 3 strategies) or focus on one strategy?

Leadership

Strategic leadership is provided by an organization’s founder and top managers

Founder imprints values and management style on organization

Established leadership style is transmitted to the company’s mangers; as the company grows, typically attracts new managers and employees who share the same values

Leadership: Ken Iverson (CEO 1984-1998)

Entrepreneurial spirit Risk taker Focused on building up Nucor to one of

the top competitors in the industry through innovation, collaborative culture and strong alliances with outside parties

Informal communication Gave autonomy to division managers

“Allowing people to function on their own and by judging them on their results”

Leadership: Dan DiMicco (CEO 2000-2013)

Informal communication Focused on empire building Horizontal and vertical

integration Levels added to Nucor’s

structure: Executive Vice President

Restructuring

2 Steps:1. Streamline hierarchy of authority & reduce

number of levels 2. Reduce number of employees to lower

operating costs

• Necessary because of changes in the business environment, shifts in technology, competition

• Sometimes restructure when in a strong position

Organizational Structure

Becoming taller because company is growing, but still try to maintain a decentralized structure

Principle of the Minimum Chain of Command Decentralize Authority

Reduces bureaucratic costs Reduce information overload; top management can

spend time on competitively positioning company Increases lower-level management motivation and

accountability Lower level employees given right to make important

decisions

Organizational Structure: 1991

Organizational Structure: 2000

Organizational Structure: 2009

Organizational Structure: 2013

Control Systems

Personal Control Output Control Behaviour Control Strategic Reward Systems

“Safety, quality, productivity” -Nucor Philosophy

Personal Control

Face-to-face interaction Direct Supervision Vacation policy

Empowered, self-policing teams

Is team-based work the best option?

Behaviour/Output Control

For Workers: 90% history output in allotted time

For Managers: Division contribution (net revenue)

For Administrative Staff: Division or corporate ROA

For Sr. Management: 9%/5% ruleIs paying employees 75% market value +

bonuses ideal?

Strategic Reward Systems (Workers)

Unique & objective salary + bonus system

Output vs. Time Calculation

One weak member ruins the bonus of the entire team and foremen. Can

this lead to bullying and other undesirable results?

Alternatives

Alternative 1: Nucor manufactures overseas to meet emerging markets

Alternative 2: Mergers & acquisitions with foreign-owned companies

Alternative 3: Stay in the US and continue to grow operations

Which alternative is the best option?

Implementing Strategy

Four strategies that companies use as they begin to market their products and establish production facilities abroad

1. Localization2. International3. Global Standardization4. Transnational

1. Nucor Manufactures Overseas Localization strategy Implemented through Internal New

venture to create own business overseas Brings Nucor culture, structure,

leadership style overseas – difficult but necessary

In line with “mini-mill” philosophy currently implemented by Nucor in the US

2. Mergers & Acquisitions Overseas Transnational strategy

Achieves local responsiveness and cost reduction

Decentralized at global locations Implemented through mergers & acquisitions

Difficulties with integrating new companies into original operations

Appoint specific division to do acquisitions – Select companies in steel industry

Transfer culture to new facilities

3. Continue to Grow in US

Implemented through cost leadership Possibly Diversify business due to

slowing demand in local market Keep acquiring, trying to consolidate the

industry, become monopoly (BHAG) Develop new potential technology to

compete with foreign companies

Which alternative is the best decision for Nucor?

Recommendation

Mergers & Acquisitions overseas in emerging markets Acquire established companies

(political/legal issues) Workforce – lower labour cost

Implementation

Select appropriate overseas firms to horizontally integrate with

Establish structure with overseas firms – create international division structure while maintaining decentralization, establish lines of authority Worldwide Product Division Structure: Focus on

local responsiveness, scale of economies and transfer competencies and skills across national boundaries (worldwide learning)

Implementation

Select capable leader for Nucor’s overseas division

Continue to maintain Nucor’s collaborative culture at new plants overseas New firms may have unique norms, values

and culture Adapt control systems (personal,

behaviour, output)