Nucor’s Strategy in the Steel Industry

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

According to Economy Watch, it has been stated, “that from the period starting from 1910 till the year 1960, the first position in terms of producing the largest amount of steel in the whole world was captured by United States Of America. During this period it was observed that almost half of the total steel production around the globe was produced by USA. But the scenario started to change after the countries like Japan and China came to the fore” (Economy Watch, 2010). This is one of the major trends that Nucor was realizing when it came to the Steel industry around the world. Steel was becoming a vastly used product in every developed nation around the continent. This would have a great impact on companies who did and did not produce steel from their beginnings. Nucor began to produce steel after the new CEO was installed. Kenneth Iverson was appointed as the new CEO from a similar position he held with a company known as Vulcor, which happened to dabble in the steel industry before hand. Iverson realized he had great “ opportunities to capitalize on newly emerging technologies to produce steel more cheaply” (Thompson, Strickland, & Gamble, 2010) with his new company at his control.

The steel industry was starting to evolve and there was a great chance that Iverson could get it to work with Nucor. “Nucor embarked on a four part growth strategy that involved new acquisitions, new plant construction, continued plant upgrades and cost reduction efforts, and joint efforts” (Thompson, Strickland, & Gamble, 2010). Nucor thought it would make smart business sense if they were to purchase other operation plants that were already capable of production that only needed to be minimally upgraded. According to Crafting & Executing Strategy, Nucor had over eleven separate acquisitions that help increase the different products they would be able to provide to the market as well as broadening their locations across the continental United States. The second part of their strategy was to capitalize on new plant construction that included the top of the line technological advancements in their new facilities. For example, Nucor had developed a new technology in one if their plants in Crawfordsville called “Castrip”, they were able to implement it into their own facility and made it available to the commercial industry across the world.

“Nucor had exclusive rights to Castrip technology in the United States and Brazil” (Thompson, Strickland, & Gamble, 2010). This gave them the right to make money off of other companies who used this methodology of producing the specialized carbon steel product in these areas. Another area of their strategy that they were particularly focused on was implementing low cost production methods throughout their vast facility operations. Along with the intent to continue low cost implementation, “Nucor management also stressed continual improvement in product quality and cost at each one of its production facilities” (Thompson, Strickland, & Gamble, 2010). This part of their overall company strategy is to produce a high quality at a low price. When these two arts work together they are a very successful combination. By increasing the quality of the products accompanied with the cost cutting methods they are able to produce these items at a lower cost, which in turn the consumer sees the cost difference on their invoice.

“The fourth component of Nucor’s strategy was to grow globally with joint ventures and the licensing of new technologies” (Thompson, Strickland, & Gamble, 2010). Nucor was really able to take advantage of the joint ventures by teaming up with different companies to enter into new markets like Australia. They were also able to put technologies together to help develop even more advanced technologies for the future. 2. Discuss the organizational structure and management philosophy at Nucor. Nucor has a very lenient organization and management philosophy. The company was not all about the corporate headquarters, but more in tune with the individual plants. Each plant had either a general manager or a group manager. “The group manager or plant general manager had control of the day –to-day decisions that affected the group or plant’s profitability” (Thompson, Strickland, & Gamble, 2010). These general managers report to the assigned VPs at headquarters. This gives each plant a sense of independency where they are able to make their own decisions on how their plant will be ran.

Many other companies would be hesitant to implement such a open door policy but this obviously has worked for them. The main concept is to decentralize their operations mas much as possible. Each section does their own thing their own way. As long at each section was making money, operating in the black and hitting their profit target, they could operate without much objection from corporate. needs to step in and help when a plant is falling behind on their numbers for the year. 3. Identify three (3) HRM issues related to strategy implementation and recommend actions to address these issues. General managers must operate at a capacity and efficiency to make a 25 percent return for the company. This is a pro when it comes to running a plant in their own way but it definitely could cause the company to keep a close eye on a general manager if they do not meet their quota for the year. Furthermore, they indicate “managers who consistently produce unsatisfactory results have to be weeded out” (Thompson, Strickland, & Gamble, 2010).

If quotas are not reached at a consistent basis the general managers will be replaced but there is little evidence that Nucor makes an extreme effort to help them better understand the plant they are running. They tend to just go with what they are given and make changes instead of helping them understand what is not right and how to fix it. It should be suggested that corporate needs to step in and help when a plant is falling behind on their numbers for the year. Nucor’s “Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity ” (Thompson, Strickland, & Gamble, 2010). This could pose as a problem based on the fact that some people may be pushing harder than others and this could lead to more work place injuries. It could also lead to more confrontations in the work place between work personnel.

I think that it should be based on the individual performance and not a team performance. Some people may say that they are working harder than another but being compensated the same for the different amount of work. This would eliminate some hard feeling between company personnel. “Employees must have an avenue of appeal when they believe they are being treated unfairly” (Thompson, Strickland, & Gamble, 2010). Because Nucor is not a union company they do not have a union they can go and complain about the management. Nucor needs to develop an open door policy with all of their team members, where people can come in and raise concerns they have about any issue they may have and still feel safe that they will have a job that they can come back to the next day. Many different companies do not like it when they are criticized but it is in the best interest of the company to listen and understand where these employees are coming from when they do voice their concerns. The company will be able to grow in maturity while increasing worker moral. 4. Based on the situation, recommend whether a related or unrelated diversification should be used by the company.

Provide supporting rationale. Based on past performance and past experience, unrelated diversification is most likely the desired direction in which the company would like to pursue growth. These are also known as Conglomerates. “Conglomerates are corporations that have no apparent strategic fit between the activities of their constituent businesses” (Channon). The correct direction for this company is to continue to produce steel while investing and merging into other market areas. This would be a great strategy based on the low demand of steel products the world has at this time. Because there needs to be a demand for a product for them to sell it, it would be a great idea for them to reach out into other ventures to help the company grow into something much larger then ever imaginable. 5. Based on your recommendation for related or unrelated diversification, identify the organizational structure issues that the company would need to address to implement that diversification.

This first area of concern that would need to be addressed based on a move towards unrelated diversification is the management strategy from corporate to the plant divisions. Because the company would be moving into different directions of production with different target markets there would need to more of a corporate presence immediately to make sure everything is operating, as it should. If there was not a shift in the management strategy there could be major implications for the company in the long run. Whenever a company moves to different operations, there needs to be metaphorical hand holding in the beginning to help with the transition. All of this is going to be new to both the leaders and managers of the newly incorporated systems. Because unrelated diversification will give a company the opportunity to increase their presence in different market they will need to be able to incorporate what they have been producing for years and the new products they plan to produce. This will help the company lean on themselves when they try out new ideas. This would make things easier to comprehend between products.

References

Channon, D. (n.d.). Conglomerate strategy. Retrieved from
http://www.blackwellreference.com/public/tocnode?id=g9780631233176_chunk_g978140511828610_ss13-1 Economy Watch. (2010, June 30). Steel industry trends. Retrieved from http://www.economywatch.com/world-industries/steel-industry/trends.html Thompson, A. J., Strickland, A. J., & Gamble, J. E. (2010). Crafting & executing strategy the quest for competitive advantage: Concepts and cases. (2009 Custom ed.). Boston: McGraw-Hill Learning Solutions.