nucor presentation
DESCRIPTION
nucor steel companyTRANSCRIPT
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April 1, 2015
Qi DangJoseph TalaricoMeggie ToppinNathan WainwrightMaintian Yu
5071 Strategic Management
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Agenda
• History of Nucor• Issue Identification• SWOT• Porter’s 5 Forces• Corporate Level Strategy• Business Level Strategy• Nucor Structure & Control Systems• Alternatives & Recommendations• Implementation
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Nucor: Company History
Formed from two corporate failures: Nuclear Consultants Nuclear Corporation of America
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Business Level Strategy
Scope
BroadCost
Leadership
Differentiation
Narrow
Cost Focus
Differentiation Focus
Cost Differentiation
Competitive Advantage
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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?
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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
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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”
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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
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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
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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
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Organizational Structure: 1991
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Organizational Structure: 2000
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Organizational Structure: 2009
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Organizational Structure: 2013
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Control Systems
Personal Control Output Control Behaviour Control Strategic Reward Systems
“Safety, quality, productivity” -Nucor Philosophy
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Personal Control
Face-to-face interaction Direct Supervision Vacation policy
Empowered, self-policing teams
Is team-based work the best option?
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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?
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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?
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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?
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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
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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
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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
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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
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Which alternative is the best decision for Nucor?
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Recommendation
Mergers & Acquisitions overseas in emerging markets Acquire established companies
(political/legal issues) Workforce – lower labour cost
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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)
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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)