• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12

Why has Nucor performed so well in the past?

Extracts from this document...


Kirrily Van Riel Why has Nucor performed so well in the past? The following section discusses the reasons that Nucor has been able to perform so well in the past. It examines the internal and external (industry) factors impacting success. Industry Analysis This section examines industry forces using Porters Five Forces Analysis (See Appendix 1). Porters Analysis illustrates that both Industry Competition and Barrier to Entry are HIGH. Threat of Substitutes and Buyer Power are Medium and Supplier Power is Low (See Appendix 1 for detailed analysis). However, even in the face of such stable and fiercely competitive market, Nucor was continually able to maintain its strong position within the industry. Thus we now look to Nucor's internal characteristics as a source for competitive advantage. Internal Analysis This section compares Nucor's superior resources and capabilities to its competitors, and discusses how it has exploited them for competitive advantage. Resources Capabilities * Strong Financials Resources with forecasted growth in cash flows further strengthening its investment or borrowing capacity. * Pioneering technology and technical sophistication in Thin Slab casting * Critical Mass of existing Mills and geographic locations in proximity to customer base. * Its reputation, brand equity and relationships with suppliers within the industry. * Its large existing customer base. * Its highly motivated workforce, build through a series of performance goals and "high powered performance incentives" (Nucor Case, 1990) * Lower cost production through pioneering technology. * Technological Superiority for greater efficiency in volume production * Rapid supply to assist in low inventory levels for customers. ...read more.


The SWOT points out that whilst Nucor's strengths far outweigh the weaknesses, so to do the threats outweigh the opportunities. Thus, by combining these factors, the market attractiveness can be illustrated in the BCG Growth Share Matrix (below). The analysis places the new market in the "Star" quadrant. Here the market is characterised by high earning potential and strong cash flows deeming the overall the market an attractive one. Economic Attractiveness An NPV model is used to assess the viability of expansion into the Thin Slab Market. A summary of the NPV analysis is attached in Appendix 3. The model identifies the project as NPV positive after 11 years. It also makes some assumptions about the mix of cold and hot rolled produced and the capacity and utilisation rates attainable. With these assumptions in mind there are a number of points that should be noted about the economics of the model. 1. The project is cash flow positive but only after 11 years. This is a long and unlikely lifecycle in an industry that is characterised by changing demands and technologies. 2. The discount rate 9.41% (from the case) is an unlikely one. In fact it is probably a lot higher than this, extending the payback period beyond 11 years. 3. It doesn't take into account tax implications, tax shields, or depreciation which would have a negative impact on the payback period if incorporated. 4. It assumes that revenue and cost forecasts remain constant over the payback period which is an unlikely scenario. ...read more.


In addition there are many factors working against sustaining competitive advantage and not many for this argument. However, the fact is that we know Nucor entered the TSC market and made significant profits through the early 2000's. But, given the economics of the model, and all the factors adding up to no-one would ever recommend to go ahead with the investment. Hindsight is brilliant though so perhaps Nucor had its disposal more information than was disclosed at the time of the case, or maybe Nucor just kept a strong focus on their strategy of, "building steel plants economically and operate them efficiently." (Nucor Case, 1990) STRENGTHS OPPORTUNITIES * Size and Scale - Largest Mini Mill & 2nd Largest Steel Producer in US. * Low Cost Leadership Strategy * Quality and Reputation: Reputation for consistency in quality * Technological Leadership - Pioneering of Thin Slab Casting for competitive edge * Financial Strength - For growth and acquisitions * First Mover Advantage - First plant in the world for thin slab casting * Geographical Strength - Location of Mini Mills to customer base * Organisational Culture - Strong focus on employee relations, training, reward and recognition * Diversification Opportunities - Move into manufacturing to take advantage of vertical integration * Technological Development - Advanced technical capabilities for new markets and products * Financial Strength - ability to buy out small operators for further growth WEAKNESSES THREATS * Resource Dependency - Scrap Metal * Organisational Structure - Highly decentralised impacting its growth potential * Resources and Capabilities - geared around narrow product range - risk to further diversification and growth * Cost of Resources - Rising Price and reducing availability of scrap metal, rising costs of energy. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Airline Industry and Contestability Project - What is a contestable market?

    * Freedom to market/ advertise and enter a market * The absence of sunk costs. To what extent is the airline industry an example of a Contestable market? The airline industry is very competitive and dynamic; the performance of the industry depends on how well the European economy is performing.

  2. PEST and competitive analysis facing by confectionery organisations

    Cadbury also use high technology equipments to produce more chocolate and cheaper cost chocolate and will increase the profit of Cadbury and Nestle. Cost of machinery, it would be expensive running machinery to package and make confectionery products. This part of the production must be fast.

  1. Evaluate the impact of Nike's outsourcing strategy and factory location on the host nation

    We need to consider the reasons behind Young conducting the assessment of Nike, as there may be a vented interest to him to promote Nike's activities as ethical, which could lead to his report being biased in favour of Nike.

  2. One thing that really impressed me about Southwest was their ability to maintain high ...

    Passengers would not fly at high prices, and demand for air travel is highly elastic. Two segments exist that are separated. On the one hand are pleasure travelers, where demand tends to be elastic, and business travelers, where demand is typically inelastic .

  1. Selecting international modes of entry and expansion

    selection of particular modes of entry (Aulakh and Kotabe, 1997; Erramilli and Rao, 1993; Kim and Hwang, 1992; Kumar and Subramaniam, 1997; Root, 1994). The target market factors include elements related to risk, competition, host government involvement, culture, partner availability and market size.

  2. The structure of the airline industry.

    of 12 cents, while Airtran operates at 6.87 cents per available seat mile. This is a significant difference in airline operation costs and with the reduced operations straining the larger carriers; Airtran is taking advantage of and exploiting their low cost air route network.

  1. Economics of European Integration

    In this way, liberalisation is not especially associated with "privatisation" and inversely. Moreover, note that in the context of the electricity liberalisation, the question of the ownership mainly concerns the monopolistic elements of the electricity supply chain (i.e. transmission and distribution), whereas the other elements should have been regulated by the rules of competition and a complete private ownership.

  2. Critically evaluate the perceived competitive starategies of the five clothing retail outlets, namely Edgars, ...

    The South African Textiles and Apparel Industry has embraced the General Agreement of Trade and Tariffs (GATT) and the philosophy of trade liberalization and is striving to become more efficient and competitive. The textile industry has plans to dedicate R3 billion of investment over a five-year period.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work