RUNNING HEAD: NUCOR CORPORATION AND SWOT ANALYSIS
Founded in 1940 and based in Charlotte, North Carolina, Nucor is the largest steel manufacturer in the United States. Nucor enjoys its present success for several reasons some of them are employee relations and satisfaction, quality product, efficiency in productivity, and aggressive pursuit of innovation and technical excellence etc. Nucor is a low cost provider, because 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.
Nucor Corporation has many different competencies that allow them to hold a strong position in the steel industry. The company has strong industry position and positive financial results for the past several years. The most important elements within the SWOT analysis for Nucor can be highlighted as its strengths and threats. Other two elements are necessary for its overall strategy formulation but these two are the areas where it needs to focus more. They have been described in the following discussion one after another.
Strengths:
Energy saving technology is Nucor’s one of the key strengths. Another key strength of Nucor is they have plants with low pollution levels. These are two key strength of the Nucor because their technology helps them to lower the cost of their product and on the other hand their environmental friendly production system may help them to gain worldwide market share due to the increased environmental concern globally. Lean manufacturing system and employees empowerment is also the strength of the Nucor because it allows them to identify bottlenecks of the production system. Not only this but also after having acquisition with David J. Joseph Company, Nucor owns its major supplier of scrap metals including thousands of rail cars which is use for transportation between hundreds of business entities located in different location domestically. Other key strengths that Nucor possesses are its position in the industry, its financial health, and a strong management team. Standard & Poor mentioned that the Nucor is only company which is indisputably healthy. These are the factors that have made it possible for the company not merely to survive, but to thrive in its highly competitive market, and they are factors which form a strong foundation for facing the future. Being large firm’s size also the strength of the Nucor because sheer size gives the firm advantages of more bargaining power and larger contracts and it gives Nucor, the ability to meet demand and fulfill larger orders which helps to increase market share. Nucor is well known company therefore it enjoys strong buyer and supplier relationships.
They also maintain these relationships despite competition in order to retain market share. Strong supplier relationship will provide them with easy access to lower cost raw materials. Beside this, Nucor does well in cutting costs through the use of division managers. Moreover, Nucor’s innovations in manufacturing techniques provide additional examples of cost cutting and those techniques are constantly being updated to reduce further costs and increase capacity and speed. Recently Nucor commercialized its Castrip technology which is a major technological breakthrough for producing flat-rolled, carbon, and stainless steels in very gauges which drastically reduced capital expenditure for equipment and produced savings on operating expenses. Beside this Nucor’s operations are highly automated which reduces the number of employees required for per ton produced.
Threats:
Recently, increase in competition with the international and domestic rivals and huge decline in demand for steel product is the biggest threats of the Nucor. Beside this worldwide environmental concern and historical low price of the steel set by its market forces and that its competitors is providing another challenge which affects the Nucor’s ability to win the battle of competition in domestic and international market. Nucor faces significant threats through the international market and at domestic market. In the international market the Chinese continue to produce steel related product in cheapest rate which is impossible for other company to win the competition. Beside this, big international manufacturer from Korea, Taiwan, Italy, Belgium, and South Africa are gradually covering greater market share of US steel market share giving huge threats to the US based steel company like Nucor. Furthermore, these international steel giant are receiving unfair subsidies that helps these giant manufacturer to sell their steels at below market prices in international market which is also the threat for the Nucor. Nucor is facing huge threat from the slowing economy because construction companies are major buyer of steel. Therefore, if the economy is in a contraction or recession stage the steel industry will take a major hit due to decreased levels of infrastructure building. Nucor will also suffer additional losses due to their specialization in joists. Reduced building construction will drastically lower the demand for joists and will result in a state of overcapacity which is a major threat for Nucor.
Another external factor is the prices of raw materials (scrap metal, iron ore, and coal). If the prices of raw materials are high then there is an increased cost for steel manufacturers. The cost of these raw materials provides a substantial threat for Nucor because if Nucor cannot continue to purchase these materials at a good price and they will lose market share to international manufactures. Additionally, foreign imports weigh in as a huge factor that can take major market share away from domestic manufactures. Again and European cheaper labor laws and standards can help foreign firms to produce more and still lower the costs of production. In turn, they can provide steel to other countries through imports and free trade that can be very challenging to match. This pushes the market to be import driven rather than domestic and provides major challenges for domestic steel manufacturers. Furthermore, joint ventures and competition creates one of the biggest external factors pertinent to Nucor. Acquisitions among other large international steel manufacturing firms and joint ventures allow these firms to vastly increase in size and pose substantial threats to Nucor.
Moreover, there are some weaknesses of Nucor which can be easily found out. Inability to expand its market in Asia and just concentrating US for production, highly energy intensive company, and not being able to have its own R&D departments are some of its weaknesses. On the other hand, if the company will be able to reduce its weaknesses it can create opportunities by itself. It can actually go into growing market and capitalize its strengths. If it utilizes the strengths then it can expand its territory, and know about various new products and processes.
In summary, the SWOT analysis of Nucor provides us with the overall picture of the company’s strengths, weaknesses, opportunities, and threats. These all elements can be analyzed and then can be used to prepare a long term strategies which can utilize its strengths the most, reduce its weaknesses, safeguards from the threats, and ultimately grab the opportunity of the market.
References
Investopedia. Competitive Advantage. Retrieved on January 17, 2010 from http://www.investopedia.com/terms/c/competitive_advantage.asp
Thompson, A.A., Strickland, A.J. & J.E. Gamble (2010) Crafting and Executing Strategy: The Quest for Competitive Advantage 17th edition. New York, McGraw-Hill Irwin
Nucor Corporation. Investors Relations. Retrieved on February 6, 2010 from http://seekingalpha.com/article/132789-nucor-corporation-q1-2009-earnings-call-transcript?page=4
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