Strength(i) - Unique Management Idea. Among Nucor key power lies in its unique management viewpoint that is targeted on bringing out the best in their people. Nucor empowers their people by permitting them to make decision in the work they do. Workers also have their salary pegged with their productivity and for that reason, received much higher wages than the common in the us that they work in. Nucor avoided laying off their staff whenever you can and seek substitute means to control labor cost and these actions have helped to foster devotion among its people. It is no marvel that Nucor have got one of the most productive workforces on the market this management school of thought of theirs remain one of the key strength.
Strength(ii) - Cost control In something market with little room for differentiation, Nucor knowledge in keeping cost down is of a great gain. Starting out as a joist supplier, it went down the value chain in order to acquire its recycleables cheaply and was later so successful in processing steel that the majority of its steel creation were sold externally. Nucor keep itself abreast of the latest scientific improvements and adopts them to be able to continually keep product cost down. Their cost of producing every ton of steel is significantly less than their domestic challengers. This knowledge will provide them well in the evolving metal industry.
Strength(iii) - Advancement. The past of Nucor's key strength is that it's progressive and constantly adjusts itself to stay before changes in the industry. They stood at the forefront of the little mill technology which revolutionized the industry and new technology is continually studied to ensure that the company stays prior to the technological contest. Old patterns set up in then your industry is continually challenged. The knowledge of the business in innovation will be a key strength in an industry in change.
Weakness(i) - Exposure to fluctuation in price of scrap metal. The main fresh material in the production of steel in the mini-mills is scrap metallic. The immediate adoption of the twin shell arc furnace technology by the industry is speedily reducing the availability of scrap metal to Nucor. Because of this, prices surged which threatens the success of Nucor. Their contact with fluctuation in the price tag on scrap steel presents a significant weakness in their business model.
Weakness( iii) - Lack of market diversification. There is a insufficient market diversification as it derives almost all of its earnings from the united states. This exposes these to the fluctuation in the US market as demand for material will lower when the current economic climate slacken and they would not have alternative avenue to derive their income.
Opportunities (i) - Growth through acquisition of declining steel creators. The onslaught of cheap material imports is generating many inefficient US metallic makers into individual bankruptcy. This represents a chance for Nucor to develop through acquisition. This can help Nucor to increase its market show and also enjoy further cost advantages through increase economies of scale.
Opportunities(ii) - Politics support in the enforcement of trade legislations. One of the key reasons in the reduction in profit percentage of Nucor is due to the dumping of cheap foreign metallic by its international competitors. After failing to impose tariffs to them, the Bush administration was then still seeking ways to limit dumping through legal means. These trade regulations against dumping, if efficiently enforced, will protect the profit margin of Nucor in america market.
Threats(i) - Increase overseas competition in its local market segments. Steel prices in the us have been battered by the increase competition from imports. The slowing of demand in China in the end of 2004 threatens to escalate this issue as China becomes a online exporter of metal. These improvements are quickly eroding the market share and profit percentage of Nucor in america. Furthermore, global steel producers are consolidating and improving their cost framework through boosts economies of scale. Mittal Steel in particular, has entered the united states markets with its acquisition of ISG.
Threats(ii) - Technical advancement. Technological growth in metal making poses a menace to the reduced cost strategy of Nucor. The development of a fresh technology by Posco Steelworks can reduce production cost by 1/5 and lower unsafe emissions by 90%. These systems might provide a competitive advantages to its competitors and threaten the price control position of Nucor.
Threats(iii) - Aging baby boomers. - Aging baby boomers in the US represent a risk to Nucor as it may decrease the pool of workers available to Nucor and increase its labor cost. Working in the manufacturer is often an unattractive option for younger generation. The ability to have a regular way to obtain new staff as their experience employees ages post a risk to the permanent future of Nucor as it might erode their cost position in accordance with their foreign challengers.
Among the four proper options produced by the Ansoff model, only two options stood out as viable alternatives. The improvements of new product for either the local or international marketplaces might not exactly be feasible options. Although they offer opportunities for potential product diversification, it requires the development of a new key competency. Furthermore, it could also divert attention from the immediate market stresses that Nucor was facing in rivalling in its local market.
In the ultimate analysis, I'll advise that the firm follow the strategy of Market Development in the Ansoff Matrix by expanding in to the international marketplaces. Nucor can utilize their durability in managing cost in the international market and shoot for a cost command position, as what they have achieved in the local market. Further justifications are as follows.
Saturation of local market - The local market has become saturated and has become less attractive for Nucor to use in. In something market with little room for differentiation, surplus capacity will probably lead to further price competition and the availability of cheap foreign material will depress sales and income further. Even when Nucor do achieve further cost advantages though know-how, the dumping of metallic by their overseas competitors will erode the cost advantages that they may temporarily enjoy. But the Bush administration has been aiming to enforce international trade laws and regulations against dumping, it'll only provide non permanent coverage for the local steel creators and the truth is that the rapid rate of globalization can make the US steel market significantly competitive.
Spreading of risk through market diversification - As mentioned, one of the weakness of Nucor is the fact that is highly dependent on the US current economic climate due to the insufficient market diversification. Heading overseas will mitigate this risk and provide them with a far more balanced market profile.
Access to labor - Expanding abroad will probably provide them with better usage of labor and thus reduce labor cost associated in the development of metallic. As aforementioned, Nucor encounters a threat of shortage of labor because of the aging of the baby boomer technology as blue collar work seldom attracts younger generation. These are unlikely to face such problems in expanding countries and their unique management school of thought of presenting very attractive incentives and HR procedures to motivate staff will tend to be well received by individuals.
I recommend that Nucor expand by acquiring a material maker with significance existence in India. This is because of its proximity to Midsection East, the guts of a building boom anticipated to profit from oil sales. This has led to a huge demand in steel. Direct investment in Me personally is avoided because of the political complexness of investing in this region and also the more expensive of labor in accordance with India. Nucor should continue steadily to leverage on its strength cost control in its international enlargement and gain edge over its rival predicated on cost. The new technology in creation metal, the Finex method, should be researched and put in place so that their exposure to price of scrap material can be reduced.
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