NUCOR CORPORATION

Nucor Corporation

Nucor Corporation

Question 1: Discuss the trends in the steel industry and how it may impact Nucor's strategy.

Lyakishev& Nikolaev (2003) have stated that “electric refining based on the use of iron-bearing scrap and the direct reduction of iron will be the dominant steelmaking technologies by the end of the first half of this century”. This type of steelmaking (scrap based minimill) is Nucor's core process.

As Hamilton states, the use of electric arc furnaces (scrap based minimill) will put any country with a scrap surplus at a competitive advantage. According to Bekaert & al. (2009), there is a stalled growth in the steel industry, mostly related to slowed construction projects in 2008. However, Bekeart & al. (2009) anticipate that the demand and growth for global steel will grow to two billion tons by 2025. According to Helman (2009), Nucor is the most efficient steelmaker in the world, which puts them at a competitive advantage over China, considered the world's highest cost steel producer.

However, in order to defend itself in the world arena, Nucor is poised dead center in the midst of the Cap & Trade political controversy. Nucor's efforts have been pushing the Obama administration to enforce trade agreements. China has been receiving a competitive advantage over US steelmakers due to their illegal trade practices, not being held to the same environmental regulations as manufacturers in the USA, and worst of all, through the manipulation of currencies. Nucor has a very protectionist view and wishes to guard American jobs.

Whereas in previous years (2007-08), Nucor had backlogs of orders to fill, in 2009 their capacity utilization rate fell to only 51% (“Sec”, 2009, p. 2). Therefore, Nucor is highly concerned about the overcapacity of China as the world's largest producer and consumer of steel (“Sec”, 2009, p. 7). Nucor is aware that the “cap and trade” legislation already passed by the House in June 2009, will negatively affect their business is the same bill passes in the US Senate this year.

In addition to the cap & trade greenhouse emissions bill already passed by Congress, Nucor's management is also just as concerned about another recent governmental regulation that will directly impact their production of steel. The Corporate Average Fuel Economy (CAFÉ) mileage requirements for new cars and light trucks will take effect in 2011 (“Sec”, 2009, p.12). Since all new cars and trucks must get higher mileage performance, Nucor believes that auto manufacturers will begin reducing steel content, and substitute other materials.

Lyakishev & Nikolaev's statement has now come to ring true: “steel production worldwide is taking place within the context of a worsening economic climate that is exacerbating the environmental and energy crises. From now on, metallurgy will be in stiff competition with the producers of alternative materials (aluminum, plastics, ceramics, and composites)”.

Question 2: Discuss the organizational structure and management philosophy at Nucor.

Nucor is divided into two segments: steel mills (four divisions) and steel products (five divisions). Nucor became a highly focused steel producer in 1971 and went ...