A case analysis on …..Nuclear Corporation

Introduction

•Nucor a fortune 300 company•Headquartered in charlotte, North Carolina•One of the largest steel producer in US.•Nucor claims to be North America's largest

recycler of any material, recycling one ton of steel every two seconds.

•Since 2007, Nucor has made the two biggest acquisitions: Canada’s Harris Steel Co & DJJ (one of the largest scrap brokerages)

Background First olds mobile 1897-Reo Truck Company Bankruptcy – merger- Nuclear Corp Acquired several businesses Ken Iverson- mechanical engineering Good experience in technical background Nuclear corp. – consultant to find metal businesses to

acquire Built Vulcraft division Approached bankruptcy – Inverson head Rid of esoteric unprofitable concentrate on steel joint

business 1984- 6 joint plants and 4 steel mills People running – divisions Sam Siegal , Dave Aycock – team

Nuclear Organization Divisions – Joint steel , steel mills. Miscellaneous plants Division profit centre , no allocating corporate expenses

, division 25% ROA Divisions having all their own activities Nuclear Corp. strong alliances with outsidersNew facilities low cost – 3 people teamNo exact equipment parameters – manufacturer

responsible No advertising , PR and environmental and legal depts.

– outsiders provided serviceNo volume discounts Management – informal ,trusting and not bureaucratic,

minimum paper workOperations analysis done GMs met 3 times a year

Vulcraft • Major business – manufacture and sale open

web steel joists • Less expensive ,greater strength, many

uses , main - support roof • Nuclear largest supplier of joists – developed

computer programs to come to bid price • Own fleet 15o trucks and on time delivery• Joist production• Steel prod – 1968, raw material for Vulcraft• Objective – steel as cheap as possible • Building mills experimented building won

equipment.

Management Philosophy• Don’t believe in unreasonable costs of mass

marketing.• Be honest , responsibility to workers• Communicate with employees • Non union shop – rapport with employees • Don’t lay off – base pay • Employees received same fringe benefits • Employees well informed about the company • Absenteeism and tardiness – no problems for Nuclear • Safety was a major concern• Attitude surveys conducted • 4 main incentive schemes – group performance • Production workers , Department heads , staff ,

senior managment

Secret to Success … •Revolutionary plant – first ever for sheet steel •Spent millions to improve process •Busse the key man with Nucor •1993 plant at Trinidad – iron carbide pellets •1987 JV with Yamato Kogyo Ltd – structural steel

products •1987- first facility to produce metal buildings.•1995 – international venture steel mill in Ceara •Iverson stepped down as chairman

US steel industry • 1980s worst hit – falling shipments • Slackening economy – fall in auto sales • US steel and Armco worst hit • Difficult to compete with imports • Iverson- opposed import restrictions • 1980s mills moving fast restructuring and cutting capacity • Move towards segmentation• Accelerated shutdown of older plants • Many inefficient plants • JVs increased • 1987 prod. Highest in 7 years • 1995 America best steel market • 1994 US steel –BRR order fulfillment and customer satisfaction • Cut labor costs – improved productivity and reliability • Clear still use better technologies to maintain competitive

advantage.• 1997 /98 decline – slash prices

Environmental and Political Issues•Lots of pollutants in the air •Facility in Herdford country – located on

the banks of the most sensitive stretches.•Care in protecting habitat of herring.•Excessive incentives by the state to

Nucor.

Management Evolution

•Corporate office not involved in the routine

•Aycock owner of 600 thousand shares on Nucor

•Presidency candidates – Busee and Correnti

•Iverson offered Correnti the job •Busse was Aycock choice

Steel and Nucor on 21st century • AK steel holding and Nucor expected to have

profits • Many of the other major steel producers filed for

bankruptcy • Industry hovering over around 75 % capacity • Lots of mergers taking place to survive • Higher energy prices ,weakening demand, touch

environmental rules, changing cost structure• 2001 worst hit – 9/11 ,a recession surge in imports • Anti dumping tariffs – restrict imports• Steel prices rose by 40% in 2002• Nov 2003 ruled against the tariff • Nucor 2001 acquisition of Sumitomo Corp.• Cheaper to buy than build plants

Contd…• Purchased Auburn Steel • ITEC steel leader in load bearings • Nucor- increased steel sheet capacity • Acquired Trico Steel Co – Alabamba • 2002 acquired Birmingham Steel Corp.• Working on new prod. Processes and technological

advantages.• JV with CVRD largest producer of iron ore pellets.• 2002 – revenues rose by 11% and earnings improved by

43% • 2003 prices of steel rose.• Imports of steel fell in 2003 by 22%• Minimills cost rise • Domestic capacity fell and increase in capacity utilization.• 2003 Nucors net earnings declined by 61%

•Nucor worked on expanding their businesses with auto industry, rise in market share and profitability.

•2004 London Mittal family merge with Ispat International NV – most awaited merger

•Mittal steel 40 % of US market in flat rolled steel.

•2005 Mittal – 37% in Hunan Valin Iron and steel group co.

Issues :•Bankruptcy of NUCOR- Formation of Nucor•Commodity nature of steel product.•Cyclic nature of steel demand.•Strong demand with tight domestic supply in

US•Foreign Currency Fluctuation•Dumping of steel in US•Limited Supply of scrap steel & rising

energy prices.•Weakened steel purchase due to recession in

2000-2001

SWOT- NUCORStrengths

•Strong Leadership teams at all levels.•Highly motivated, productive, flexible &

innovative work force.•Close relationship with major customers•Risk taking & innovative Culture•Strong Financial Credibility•Larger Recycler

Weakness

•Almost all the plants suited in US•Energy Intensive•Dependent on scrap metals•No internal R & D•No Co-ordination between divisions for

purchase & sales activity.

Opportunity

•Expansion to outside of US through mergers & acquisitions

•Perform market research to understand customer roadmaps

•Perform R & D to find new products, technology and process.

•Improve inbound and outbound logistics•Export products to emerging markets.

Threats

•Scarcity & rising raw material & energy cost

•Cyclical demand of steel product.

Strategies•Defensive strategies: NUCOR entered into

new strategic alliances, joint venture for supply of Raw material to remain competitive.

•Offensive Strategies: NUCOR should invest in R & D, simply to try to ahead of the

competition by innovating new technology & improving operational efficiency.

•Vertical Integration strategy: Expansion to outside U.S

Implementations•Nucor have to make research for alternative

raw material and investigate for new supplier whether they can give the best deal.

•Sufficient allocation of financial & human resources for expansion and also for research and development activities.

•Proper research on the work culture & political agendas of the regions for the successful implementation of company strategy.

•M & A with local partner.

Challenges

•Local Competition.•Difference in culture, political agenda.

Conclusion

•US Steel and Nucor faced uncertain environment.

•If they didn’t grown – overtaken by foreign companies