Nucor Corporation - Structuring for Efficiency and Effectiveness
Introduction
Nucor achieved its position as one of the largest steel producers in the United States by carefully monitoring costs and paying attention to the needs of its markets. This strategy of providing its customers with a competitive product at competitive prices has brought success and growth to Nucor, in sales, income, and stock price. Recently, however, the control of the organization has been brought into question. The recent announcement of a joint venture between Nucor and U.S. Steel to develop, test, and bring on line a new method for turning iron ore into steel added to the concern over the ability of company management to maintain the entrepreneurial spirit for which the company is famous.
Background
Nucor is the second largest steel producer (2nd in assets, 1st in profits) in the United States. Its profits of $123 million have made it one of the most efficient firms in the steel industry. Nucor achieved that position by focusing on the manufacturing segment known as mini-mills - the relatively small, electrically-powered mills that melt down scrap steel to manufacture products. This process saves on costly labor, raw materials, and the capital-intensive machinery necessary to produce steel from iron ore. A major concern of mini-mill steel manufacturers is maintaining quality, since their raw material consists of scrap steel of varying quality, containing a variety of alloys and impurities. Another concern it the recent rising price of scrap steel.
Nucor started out by manufacturing steel for the beams and posts produced in company-owned structural steel manufacturing plants and then expanded by selling its low-cost steel to other firms. Outside customers gradually became the primary outlet for sales by the mini-mills. Nucor was able to expand sales from the mini-mills by keeping costs below its competitors, both in the United States and abroad. Nucor has consistently sought ways to lower costs while broadening markets. During the latter part of the 1980s, much of the company's efforts were placed on developing technology for manufacturing sheet - flat-rolled steel of the type used by automotive and appliance manufacturers - which had traditionally been the sole domain of the big steel companies and foreign competitors. Ken Iverson, former CEO of Nucor, risked several hundr...
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...at the joint venture with U.S. Steel would hinder the quick decision making typical at Nucor. Iverson had gambled by committing to the first phase of the new process on his own, without first testing the process in a pilot plant on a small scale. The next stage was to complete the new process with a plant in the United States, relying on the high level of research and development skills at U.S. Steel and the ability of Nucor to pioneer new methods. Analysts wondered whether Nucor could coexist with U.S. Steel, with its large, hierarchical structure and strong union. This challenge was especially important since the new venture was felt to be the focal point for the continued growth of Nucor.
In the late 1990s, Iverson was fired by the Board of Directors of Nucor. His successor, John Correnti, who along with Iverson were the two major proponents of the mini-mill concept, was ushered out soon afterwards. Daniel R. DiMicco is the new President and CEO, but with years of experience at Nucor, the vision may or may not change. Will the new management attempt to rein in the general managers of the various operating entities of Nucor - a situation neither Iverson nor Correnti supported?
I believe that the union and management did not fulfill their objectives and consequently reached a settlement that did not improve Zinnia’s future competitiveness in the market. Although the union and management initially agreed to focus on wages and health insurance, they bargained a contract that does not reflect their objectiv...
Steel Corporations Forge Tyranny The 1960s marked a time of great change, turmoil, and innovation in American history. President John F. Kennedy worked hard to ensure the best for the citizens of the United States and that is why, when steel corporations raised their prices 3.5 percent in a time of economic distress, Kennedy responded with outrage. In his speech to the American people on April 11, 1962, President John F. Kennedy used a plethora of rhetorical strategies to persuade the American public to join his crusade against the greed of large steel companies. President Kennedy begins his address by immediately stating his opinion on the issue; that the actions of steel corporations “constitute a wholly unjustifiable and irresponsible defiance of public interest.”
Also, the competition between existing players in this industry is high. There are about 619,000 metal enterprises in the USA in 2005 (IBISWorld, 2007).There are many companies that produce different kinds of metal products in the market. Besides, the bargaining power of buyers is high because product difference for the buyers of the metal products is small. It is not easy to differentiate the quality of one metal product from another. In addition, the cost of switching for the buyers is low. The number of substitutes of metal products is also high thus the buyers have great bargaining power.
There are several areas that Miller has problems with concerning his job and the current recommendations from the consultant firm. The first problem is that Miller has been at his current for a long time and on the production line for twenty seven years. This shows that he has not had any initiative to promote within the company and may be complacent in his job now. He knows his job and does it proficiently. So proficiently that he is able to run two machines at the same time where most employees may only be able to run one machine. Even though Miller seems content and not burnt out on his job now, these new changes could push him to that point (Greenberg, 108).
Nucor is the largest steel manufacturer in the United States. It remains a profitable company despite being in one of the most cyclical industries in the economy. Nucor enjoys this success for several reasons, employee relations, quality, productivity, and aggressive pursuit of innovation and technical excellence. Nucor’s strategy is that of a low cost provider, they know they are selling a commodity and understand their competitive edge in the industry is lowering prices through innovation and productivity. The company operates primarily in two business areas, steel mills and steel products.
Harvard Business School case 274-116. Cooper Industries, Inc. Retrieved on August 31, 2008, from University of Phoenix, Resource, FIN/545 web site: https://mycampus.phoenix.edu/secure/resource/resource
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The extraordinary power of the steel industry to shape the life of its communities and the people in them remain...
Industry Analysis – Nucor has established itself as a leader in the steel industry through efficiency and innovation.
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