Nucor Swot free essay sample

The following is Nucor’s Mission Statement from their company website: Nucor Corporation is made up of 17,300 teammates whose goal is to Take Care of Our Customers. We are accomplishing this by being the safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the world. We are committed to doing this while being cultural and environmental stewards in our communities where we live and work. We are succeeding by working together. Strategic Profile and Case Analysis Purpose Nucor is a leading steel manufacturer and recycler in the United States. Their headquarters are located in Charlotte, North Carolina, and the company is made up of about 17,300 teammates, as they are referred to on the company’s website . According to Datamonitor’s Company Profile, revenues for 2006 were $14,751. 3 million, a 16. 1% increase over 2005. In the same profile, net profit was recorded at $1,757. 7 million for 2006, a 34. 1% increase over the previous year. Nucor operates in two main segments: steel mills, which account for 88. % of total revenues, and manufacturing of steel products, which accounts for 11. 7% of total company revenues. â€Å"Nucor in 2005† by Frank Barnes and Beverly Tyler, briefs us on Nucor’s two main core competencies that have kept it successful when competitors have not been: their ability to stay innovative and their distinct organizational structure. These two competencies have made Nucor one of the top leaders in the American steel industry, which has impacted its historical strategic direction and performance, as will be seen in the following case analysis. The purpose of this case analysis is to better understand Nucor’s core competencies, as well as to analyze the current situation surrounding the company. This case analysis will include a general environmental analysis, industry analysis, competitive environmental analysis, internal analysis, and SWOT analysis. These analyses will help us better understand Nucor, as well as help us create competitive strategies for the future. Situation Analysis General Environmental Analysis: PESTEL Understanding the external environment of the steel industry is necessary in order to better understand the internal environment of Nucor Corporation. The following is the PESTEL analysis for the steel industry, with remarks towards Nucor when needed. Political There are a few main political issues currently affecting the steel industry. First is the issue of protective tariffs on the steel industry. In the case study, it is noted that in â€Å"†¦March 2002, President George W. Bush, after an investigation and recommendation by the International Trade Commission, imposed anti-dumping tariffs under section 201 of the Trade Act of 1974. This restricted some imports of steel and placed quotas of up to 30 percent on others. The move was opposed by many, including steel users†. Current CEO and President of Nucor, Daniel DiMicco, had been pushing for protective tariffs after the surge of imports and the current economic recession. Bush’s tariffs led to global responses of import and export tariffs, causing the price of steel to increase 40 percent. In November of 2003, the WTO ruled against the tariffs and Bush withdrew the tariffs in fear of further retaliation. An additional issue is the practice of giving monetary incentives to companies to convince them to build their steel mills in certain locations. Nucor was given $155 million in tax breaks as incentives from North Carolina to build a $300 million steel mill. Debate has rising over whether or not it was worth the incentives to bring 300 new jobs to North Carolina. Economical Economical issues have had a large effect of the steel industry. Current issues they are facing include bankruptcy, a weak dollar, global competitors consolidating, and rising energy prices. According to the case study, 25 percent of domestic steel companies were facing bankruptcy, and out of the 14 companies monitored by Standard and Poor’s, only Nucor was financially healthy. The 25 percent included more than 20 companies, who under bankruptcy protection. These companies were allowed to sell steel cheaper than non-bankrupt companies, therefore maintaining their profit share. The steel industry is still trying to recover from bankrupt companies. Besides bankruptcy, the steel industry is facing economic issues due to a weak dollar, which hurt the domestic market. Global competition has been a large player in the steel industry, with competitors currently consolidating to become â€Å"mega† players in the industry. Many domestic companies are also pairing up with international players, such as Nucor’s relationship with companies in Brazil, Australia, China and Japan. There have been pressures to consolidate in order to obtain economies of scale. Opening up of the market does allow for a wider range of customers, though. Rising energy prices have also had an effect on the steel industry. Rising prices have led to a decrease in demand for construction projects, automobiles, and farm equipment, which are some of the major consumers of steel products. Sociological The current environmental trend and quest to go green has led a shift in consumer attitude towards more sustainable products. This has affected the steel industry in a shift from steel products to alternatives that are cheaper and more sustainable, like plastics. Although plastics can replace some steel products, they typically aren’t strong enough materials to entirely replace the steel industry. Additionally, with the green trend there has been a stronger movement to find ways to reuse steel scraps and to recycle them. The steel industry is also a predominately male-led industry. This is evident by Nucor’s leadership circle, and executives, where only one woman is present. This lack of diversity has an impact on the industry, and limits the potential of the industry with a mainly male run workforce. Technological There have been many advances in the steel industry, especially many from Nucor. Although the steel industry hasn’t typically been seen as a technological industry, a lot of technology is needed to run the equipment and milling processes. A new development is the twin shell electric arc furnace, which would help mini-mills increase production, lower costs, and take market share, according to the case study. The article goes on further to describe the most important advances in technology, saying, â€Å"Today’s most productive steelmaking facilities incorporate advanced metallurgical practices, sophisticated process-control sensors, state-of-the-art computer controls, and the latest refinements in continuous casting and rolling mill technology. Technology is needed to make the best products in the most efficient manner, and the steel industry will see more efficient and positive changes as technology gets better. Environmental Clean air laws are the main issues involving the steel industry. The Environmental Protection Agency has enacted many federal and state clean air rules as steel mills are typically very polluting and release thousands of tons of pollutants into the air each year. Steel mills produce coke along with clouds of ash and acrid green smoke, which costs mills a lot of money to either modify their plants or close them down, states the case study. Besides air laws, new mills are being built near vulnerable environmental sites, such as the North Carolina mill built near the state’s Albemarle Sound, which is the a national treasure. There is pressure to develop cleaner, more efficient technologies due to the more stringent environmental regulations. Legal Many of the competing firms belong to the Steel Manufacturers Association, which according to their website is â€Å"†¦the primary trade association for scrap-based electric arc furnace (EAF) steelmakers. † This trade organization currently includes 46international companies and 39 North American companies that operate 125 steel plants and employ approximately 40,000 people. The SMA oversees development of public policies to benefit members, provides forums for exchange of information between members, and also serves as a source of information to customers, suppliers, and government entities. Industry Analysis: Porter’s Five Force Model This section shows how different environmental trends are affecting industry competitors, and allows the reader to better understand the steel industry’s competitive structure and profit possibilities within. Threat of New Entrants: In the steel industry, there is a moderate threat of new entrants for many reasons. In this capital intensive industry, a company can only be efficient on a large scale, and to obtain scales of economies for production requires a lot of investment. This deters possible new entrants from wanting to enter the industry. Low switching costs for buyers of steel make the threat of new entrants more of a risk. However, there is low product differentiation, which increases the threat of new entrants, whose products would easily replace those of existing companies. Exporting steel to new entrants overseas is another possibility, though high tariffs imposed by the United States and other countries make this less likely of a possibility. Governmental regulations on the steel industry also deter new entrants from wanting to enter. Threat of Substitute Products: There are a few products that have the chance of becoming substitute products for steel products, though their actual feasibility in replacement is low, making this threat also low. Plastics are one category of products, with their low costs of production compared to steel, and the environmental benefits as well, though plastics are not typically strong enough to be used in place of steel bars. Bricks and stone are also becoming more frequently used for construction materials in replacement of steel, though they also cannot replace the strength and durability steel provides. Aluminum and fiberglass are also products being more frequently used in automobiles for their lightweight qualities and cost effectiveness, though switching costs are incredibly high, and to rework production lines to accommodate to new materials is too costly to make the actual switch away from steel, thus, making their threat low. Rivalry Among Competing Firms: There is a strong sense of rivalry among competing firms, especially with the new trend of mergers and acquisitions in the steel industry, that are creating mega corporations. In this slow growth industry, many companies are joining together and with that, gain a lot more competitive power. Additionally, with the need for scaled economies, companies can no longer afford to not join together, and the high amount of capital invested means sunk costs will bring about high exit costs of leaving the industry, therefore further motivating companies to stay in the competition and increasing rivalry. Currently, foreign markets are also dominating the global market of steel, and the number of domestic steel producers is falling as they are being bought out by international companies. The lack of differentiation between products and low switching costs for buyers between suppliers of steel further adds to the fierce intensity of rivalry in this industry. Bargaining Power of Buyers: In the United States, the most common buyers of steel are from the automotive industry, construction industry, manufacturing industry, and service industry. Since there are a large variety of buyers, their buyer power in this industry is increased. Their power is further strengthened by the low differentiation in products, and low switching costs. However, since steel is a widely used commodity, buyer’s bargaining power is decreased as it is not a special commodity. Therefore bargaining power for buyers is moderate in the steel industry. Bargaining Power of Suppliers: Bargaining power of suppliers is quite strong in the steel industry, and for many reasons. First off, the rising costs of energy and raw materials give suppliers power to charge higher prices. There are also few substitutes to raw materials in the steel industry, as some companies are trying to create new avenues for raw materials, therefore lowering the bargaining power of suppliers. This backwards integration, as mentioned in the 2007 steel industry profile by Datamonitor, mentions companies creating their own production of raw materials, which reduces dependence on third party suppliers because companies can create a new revenue stream by selling their raw materials as well. However, supplier contracts are formulated in long term contracts, which give them more power to bargain. Supplier bargaining power is ranked as moderate, since technology will soon be able to help steel companies find new was to create their own raw materials, or find cheaper materials. Nucor’s Key Success Factors Innovation Nucor prides itself on the company’s constant ability to stay innovative, as seen by their strengths in the SWOT section of the case analysis, and value chain analysis. The beginning of Nucor in the 1960s was helped by then CEO Kenneth Iverson’s developmental technology that used electric arc furnaces to melt scrap metal into finished steel, which saved money instead of using iron ore as raw material. Since then, Nucor has continued their innovate culture and developed many new techniques to decrease costs for both themselves and customers. Innovation is one of the key reasons that Nucor is so successful. Commitment to Employees and Employee Compensation Another key success factor is in their people. Nucor employees actually enjoy their job, and they are treated well, too. Nucor is well known for their trademark employee incentives and benefits, which allow their employees to be one of the highest paid groups for their jobs in steel production. High efficiency is always rewarded, with laborers usually making bonuses of 60% of their base salary from quick production times. Employees also reinvest some of their pretax earnings into a profit sharing plan instead of having a retirement fund. Iverson was quoted in 1998 saying â€Å"I think the first obligation of the company is to the stockholder and to its employees†¦ we have a very interesting corporate policy†¦ First, we give donations to where our employees are. Second, we give donations that will benefit our employees, such as to the YMCA†. Lean Management The last key success factor is in Nucor’s lean management. A decentralized company with autonomous power to many people helps get things done quickly. Division managers enjoy the freedom they have to run their plants they way they want, and come up with creative ways to increase profit margins. There has been a recent move to make the company more centralized with more layers of management, citing reasons of increasing competition and loss of communication for more structure. Only time can tell if this new structure will continue the success that the old structure brought to Nucor. Product Phase The Steel Industry is in the Maturing Phase of its lifecycle. As steel is still a very necessary component of construction, automobiles, and manufacturing, there seems to be a long lifespan for the industry. There is foreseen demand for steel in the future, with the only threats being new technology development of a cheaper and more environmentally-friendly product or a shortage of raw materials to produce steel, although recycling of steel has helped less this problem. Competitive Environmental Analysis The following is a brief analysis of Nucor’s main competitors: Arcelor Mittal, United States Steel, and Tata Steel. This section discusses their strengths and weaknesses compared to Nucor’s and how Nucor can take advantage of current competitor situations to better their position in the industry. Arcelor Mittal Headquartered in Luxembourg with 320,000 employees, Arcelor Mittal is the product of a merger of the largest and second largest steel producers in 2006. In a news article in the Seattle Times, â€Å"Mittal Steel, already the worlds largest steelmaker, †¦ announced an unsolicited $22. 8 billion offer for rival Arcelor in an attempt to form a global powerhouse capable of producing more than 100 million tons a year. † Now the world’s largest steel producer, Arcelor Mittal has an international span on their products, with customers in 187 countries and operations in 26 countries. Their main buyer industries are in the automotive, appliance, engineering, construction, and machinery industries. Their main competitive advantage lies in their ability to provide â€Å"value-added and customized steel solutions through further steel processing to meet specific customer requirements. † As stated on Datamonitor’s Company Profile, Arcelor Mittal’s strengths include position of market leader, high profit margins, product diversity, and scale and scope of operations. Weaknesses include high debt and charges of concealing income. Nucor’s clean profile gives them an advantage of Arcelor Mittal. According to a feature article in Business Week about Arcelor Mittal, CEO Lakshmi Mittal states that one of their strategies is to make the organization structure leaner, and to take out the bureaucracy culture that impedes making quick decisions. Nucor’s already lean organization and established culture additionally gives them advantage to Arcelor Mittal in this arena. Only time will show if Nucor can step up in market share and product diversity to become leader in the steel industry. US Steel United States Steel (US Steel), is another close competitor with Nucor. It is the second largest producer in the US behind Nucor, with operations in the US and Europe. Interestingly enough, US Steel emerged from a merger of 10 steel companies in 1901, and involved famous industrial pioneers Andrew Carnegie, Charles Schwab, and J P Morgan. According to the Datamonitor Company Profile, US Steel teamed up with Nucor in 1994 to work together to explore new technology in hopes of reducing the cost and pollution from steel making. Datamonitor’s profile goes on future to describe US Steel’s strengths and weaknesses. US Steel is the oldest steel producer with 105 years of experience, and their company focuses on value added steel products that can be sold directly to target customers in a wide end of markets in different industries. Nucor also prides themselves on these strengths, therefore not giving US Steel much advantage over them. Furthermore, US Steel has a lack of presence in emerging and international markets, and has deteriorating relationship with environmental regulators, which adds to their shortcomings compared to Nucor. Nucor must maintain and expand their position in new markets and continue to improve environmental standards in order to stay ahead of US Steel in the steel market. Tata Headquartered in Mumbai, India and employing around 37,000 people, Tata Steel is one of the largest private sector steel producers in India. With their own iron and coal mines, Tata Steel also has operations in Asia, including Thailand, Singapore, China, and Sri Lanka. Tata Steel is differentiated by their low cost steel, which they manufacture and distribute to automotive and construction industries. Their strengths include a strong brand image, vertical integration, and inorganic growth, which they recently adopted to take over Asian companies, according to Datamonitor’s Company Profile. With over 100 years of experience, Tata Steel has built â€Å"Tata† up to be a highly respected company that is self reliant with their own mines, which also gives them an advantage on raw materials over competitors. However, these are counteracted by their geographic concentration, with 88% of their revenues in India, and a huge dependence on imports for coking coal, which is necessary for steel manufacturing and not available in their mines. This dependency further makes Tata Steel vulnerable to competitors and fluctuating raw material prices. Nucor’s global presence and self reliance helps them over Tata Steel, although Nucor can work on building up their brand image. Internal Analysis Value Chain Analysis Primary Activities Inbound Logistics Nucor has begun developing processes to create their own raw materials, through new technologies and by using scrap materials. As energy prices increase, raw material prices will increase in both base price and transportation prices. Additionally, Nucor had one of the first computer inventory management systems in the 1960s, and their sophistication with purchasing has helped them beat out competitors, making them superior to competitors. Operations For the joist division production, steel is cut or bent to the right angle, then assembled, welded, drilled, and welded again before being passed to inspection. The workers themselves have control and responsibility over quality for each product. At the steel plants, steel is made in two phases, the preparation of steel into the proper chemistry to later be turned into the steel that is used to form into desired products. At each of the plants, â€Å"Nucor designed its processes to limit work-in-progress inventory, to limit space, to utilize a pull approach to material usage, and to increase flexibility. † This flexibility has helped cut costs and increase opportunities for Nucor in each of their different industries. Since this is pretty typical for the industry, this keeps Nucor equivalent to their competitors. Outbound Logistics Nucor operates differently from competitors in that they do not absorb the cost of shipping. This led to a new trend of customers relocating manufacturing plants next to Nucor’s steel plants, which helped guarantee both companies low costs. In addition to relocation, Nucor’s production system is electronically linked to the customer’s production scheduling, allowing for both to operate in a just in time inventory mode, which further cuts down on costs. Neighboring buyers account for 60 percent of shipments from steel mills, according to the case study. In addition to near by customers, Nucor also operates a large fleet of 150 trucks to ensure on-time delivery to customers. Nucor prides themselves on being lowest-cost producers, doing so with materials and freight. These aspects keep Nucor at the same level as their competitors. Marketing and Sales Each plant or division of Nucor is responsible for selling of products. Nucor does not have a corporate advertising or public relations, instead relying on individual plants to do their own marketing and sales, as well as strong alliances Nucor has with outside parties. The use national advertising campaigns to market products like their joist industry. Their selling force is strong because they use computer programs to create designs for customers and market at competitive prices. The computer programs use the time of production estimated, labor value of production, and materials cost to estimate the cost of each project. By not having their own marketing or sales division, Nucor’s decentralized style may make them inferior to centralized companies who can strategize better. Service Nucor is well liked by all. Seen as an innovate company that puts their employees and stockholders first, the constantly try to obtain and supply the lowest prices possible. Their latest venture was in February of 2008 when Nucor announced plans â€Å"†¦to construct a sheet and coiled plate processing center in Mexico to better service the growing needs of its customers†, according to a news release on their website . In the same article, CEO DiMicco stated: Mexico is a very important market to Nucor. We have many customers in Mexico, and it is important for us to be able to better service those existing customers and to expand our presence in the growing Mexican economy. We are very excited about this opportunity. This is just one of the examples of Nucor reducing costs for both themselves and their customers, thus adding value to the business, and keeping them superior to competitors. Support Activities Firm Infrastructure Nucor plants are highly decentralized, which allows for more freedom and flexibility for each division manager. With a relatively flat organization with few layers, division managers of each plant are responsible for their own manufacturing, selling, accounting, engineering, and personnel management. Their only responsibility is to contribute profit to headquarters. This autonomy is appreciated by division managers, with one saying â€Å"We’re not constrained; headquarters doesn’t restrict what I spend. I just have to make my profit contribution at the end of the year. † But managers cooperate with each other, often collaborating and sharing efforts to improve each others’ divisions; all vice presidents and general managers share the same bonus so there is a real effort for everyone to succeed at Nucor. This unique organizational style sets Nucor apart from its competitors, keeping them superior in this aspect. Human Resource Management Employees are likely to be the most valuable part of Nucor’s success. Nucor has a history of treating their employees very well. This is shown through their policy of not laying off employees, giving college funds to employees’ children, and the great incentives and bonuses employees receive. Even at times when the company was hit by poor economic conditions, the company froze wages and executive officers took 5% pay cuts to show that they were all in it together. Nucor believes that keeping employees happy and giving them autonomy is one of the secrets to keeping their production costs low. They keep employees informed about company issues, and try to treat all employees as equal as possible. This is shown by the lack of company cars, company planes, fancy offices, and no vacation homes in the Nucor Corporation. The money is instead reinvested in the company and the focus is on the products and the people. This is best summed up by HR Magazine: â€Å"No-frills at Nucor: A lean, bottom-line approach at this steel company empowers employees. † This type of treatment is definitely paying off at Nucor as employees go on record on attitude surveys that they enjoy working for Nucor because it is the best, most productive, and most profitable company they know. This helps keep Nucor superior to their competitors in HRM. Technological Development Innovation is one of the strong points for Nucor, and it may be a shock to some that they do not have their own research and development department. Instead, they create task forces to investigate new technology advances, such as when they researched and then created their mini-mills for steel production. Making steel themselves has helped reduce costs significantly as compared to buying it from foreign companies. Nucor monitors technology advances on a worldwide scale and then attracts investors to bring technology to them, thus saving them money from researching and creating it themselves. Having great technology allows Nucor to also manufacture at more efficient rates, thus lowering the man hours needed to produce products. These extra hours are reflected in incentives given to employees for working at above average levels of efficiency and productivity. Nucor’s constant ability to stay innovative will only keep them slightly above their competitors in this fiercely competitive industry where technology is always changing. Procurement On March 3, 2008, Nucor acquired The David J. Joseph Company, which had been selling scrap metal to Nucor for 38 years. Adding this additional avenue of raw materials has helped increase flexibility for Nucor and lowered dependence on outside parties for raw materials, therefore helping improve the bottom line. Nucor’s ability to produce their own raw materials also helps them when they have extra capacity to sell raw material to outside customers, thus adding extra revenue to the company. Their thrifty company culture also is reflected in their strong desire to cut costs as much as possible or create ways to produce their own materials, as seen with their Crawfordsville plant that manufactured sheet steel, or the Trinidad plant that supplies Nucor with iron carbide pellets. Nucor is constantly creating value by looking to new ways to cut corners, which keeps them equivalent to competitors. Four criteria of sustainable advantages: VRIN Steel is a valued commodity, and necessary in producing automobiles, construction of new buildings, manufacturing, and more. Although it is valued, it is not a rare commodity. There is a high amount of competition with many players in the steel industry. It is costly to imitate steel, but products like fiberglass, aluminum, and plastics are possible substitutes though cannot fully match the benefits of steel as a strong building material. SWOT This details how Nucor can position itself to take advantage of opportunities and strengths while also avoiding environmental threats and weaknesses. Strengths Innovation is one of the top things Nucor prides itself on. Nucor is constantly striving to be ahead of the industry, developing new technologies that allow them the competitive advantage. According to the case study, â€Å"Nucor was very innovative in steel and joists. Its plant at Norfolk was years ahead in wire rod welding. In the late 1960s, it had one of the first computer inventory management systems and design/engineering programs. The company was very sophisticated in purchasing, sales, and managing, and beat its competition often by the speed of its designing efforts†. Nucor’s company website credits innovation as the foundation of their beginnings, saying â€Å"Nucors rebirth was sparked by innovation making steel from recycled scrap on a larger scale than had ever been tried. Since then, Nucor has thrived on intelligent risk-taking. † Some of their current technology projects, as listed on their company website, include: â€Å"strip-casting, a process to make ultra-thin sheet steel using a minimum of rolling stands; HIsmelt, a process that converts iron ore to liquid metal through the injection of non-coking coal and iron ore into a molten iron bath and load-bearing light gauge steel faming†¦ Nucor also introduced the worlds first integrated DC power supply arrangement in the manufacture of steel plate. It is innovations in technology like these that keep Nucor a leader in the steel industry. Risk-taking is another strength that Nucor prides itself on. Risk was instilled in Nucor first by the founders, who took a chance on steel, and then later by Ken Iverson, one of Nucor’s past leaders. The case study talks about Iverson being a very good leader with an entrepreneurial spirit that gave him the courage to take a lot of risks. This is best summed up by one of the company’s sayings: â€Å"Failure to take risk is failure†, which was personified by the founder of Nucor and reinforced by Iverson’s leadership . Risking taking is just part of the strong company culture Nucor has, which is another one of their strengths. Nucor is a â€Å"no nonsense† company that does not take part in any frills or excess. There are no company cars or jets, and excess money isn’t thrown around. The company has been characterized as â€Å"stripped down† and thrifty with their modest offices. â€Å"They were simple, routine, and businesslike†, describes Fortune magazine. The focus of the company is on the products and the people. The organizational structure is also a defining part of Nucor. The organization is very lean, with a lean management structure with few layers. Corporate staff only included 45 people, with a decentralized strategy to grant more autonomy to each of the different divisions. Each division his seen as a profit center whose main responsibility is to contribute profits, but do so in their own ways. Focus is on the earnings, and not the methods. Nucor has cut down costs and distractions even more by outsourcing most of the other departments not related to production, including research and development, construction of new plants, advertising, public relations, human resources, and their legal and environmental departments. These are maintained with strong alliances with outside parties, which help Nucor focus most of their time on what is most important: production. Each of the divisions is maintained by a general manager who shares information with other plants with a friendly spirit of competition as they all share the same bonus system. Nucor’s organizational structure is also highlighted by their distinctive personnel system and incentive system. In their personnel policy, Nucor provides job security to their employees. According to the case study, all employees receive the same fringe benefits, insurance plan, holidays and vacations, and money for higher education for their children. Employees enjoy working at Nucor, as is reflected by attitude surveys done around the company. Employees were satisfied with the job besides the high competitive pay, with one saying he enjoy working for Nucor because â€Å"†¦ it is the best, most productive, and most profitable company I know of. † Nucor’s employees typically make over twice the amount of other manufacturing companies in the same states, and are rewarded with a satisfying bonus when they are productive. The incentive program has helped characterize Nucor’s defining strengths. Incentives are based on group performance, which motivates everyone to work together. Production workers’ bonuses are measured by how well they operate compared to historical times of production; they earn a 60 percent bonus when they work 60 percent less of the standard time. There are also incentive plans for department heads, staff people, and senior management, including division managers. Additionally, each employee puts in 10 percent of pretax earnings into a profit sharing plan with a deferred trust instead of a retirement plan, which helps employees reinvest back into their company. By focusing on the plant and the people, Nucor has helped make themselves a more successful company, and a leader that other companies wish to aspire to. Weaknesses Although Nucor is currently leading the US market, they do have a couple weaknesses that hold them back. One is their geographical concentration in the US, which limits them to a specific market. As transportation and logistic costs increase with the increase of energy and fuel, it is becoming more costly to ship around steel products, especially when Nucor’s plants are so concentrated in one part of the world. This not only hinders possibilities with companies not located near a Nucor facility in the US, but to international markets where international competitors have spread out and taken markets. Nucor needs to establish themselves more on a global level and spread out their presence in a stronger way than just clustering in the US. In addition to geographic weakness, Nucor is facing higher selling, general, and administrative expenses. According to Nucor’s Company Profile by Datamonitor, SGA make up 4% of net sales in 2006 compared to 3. 3% in 2004 . Nucor’s profit margins will be seriously affected if costs continue to increase. Nucor already outsources much of the operations not related to steel production, so finding a way to cut costs in this department will help better the profit margin. An additional weakness is Nucor’s lack of dedication to the environment. Although Nucor has made attempts to be environmental with their recycling of scrap steel, and finding ways to produce products with less energy, they still lack the commitment to clean air laws and other US Environmental Protection Agency rules. According to the case study, â€Å"In June 1998, Waste News reported that Nucor’s steel mill in Crawfordsville, Indiana, was cited by the EPA for alleged violations of federal and state clean-air rules. † Events like this are not healthy nor positive for Nucor. If Nucor was able to balance environmental constraints with production, they would be a lot more successful. Opportunities One of the technologies Nucor prides themselves on is their HIsmelt technology, which adds flexibility to the company. According to Datamonitor’s company profile, â€Å"This technology is considered as a major breakthrough and is expected to result in lowering of the company’s production costs, as the HIsmelt plant produces pig iron without using coke through an energy-efficient, low-emissions process. Furthermore, the company expects to generate substantial earnings from royalties derived from the technology’s licensing. This process helps improve Nucor’s environmental outlook, and adds extra revenue from the licensing contracts. Nucor’s joint venture with Brazilian company Companhia Vale do Rio Doce (CRVD), is another opportunity to give them a competitive advantage. CRVD is the world’s largest producer of iron-ore pellets. In Brazil, they have come up with a new way to manufacture pig iron in an environmentally friendly way using a process called Ferro Gusa Carajas (FGC), which uses two conventional mini-blast furnaces full of charcoal from indigenous eucalyptus trees to produce pig iron. Datamonitor says that â€Å"The use of pig-iron as raw material for production would further reduce production costs and would also reduce Nucor’s dependability on scrap iron as raw materials, especially in the face of increasing scrap iron prices. † Having the global connection with Brazil is another positive of this venture that adds international opportunities for Nucor. Additionally, Nucor has been creating opportunities for expansion through acquisitions of steel operations in the US. In March of 2001, Nucor bought out a mini-mill in New York from a Japanese corporation called Sumitomo. Nucor went to later on acquire assets from Auburn Steel, ITEC Steel, Trico Steel Co. , Birmingham Steel Corp. , Connecticut Steel Corp. , Verco Manufacturing Company, and Harris Steel, which, according to Datamonitor, was their largest acquisition to date at $1. 07 billion . Acquiring Harris Steel has made Nucor the largest producer of cold finish steel in North America. Nucor recently bought out The David J. Joseph Company on March 3, 2008, for approximately $1. 44 billion, according to a news release on their company website. DJJ has been one of the leading scrap companies in the country, and has already had a long history of 38 years with Nucor. This is just one of the examples of Nucor’s inorganic growth has helped them efficiently increase their market share and capacity without having to build new costly plants. Analyst Robert Miller believes that global consolidation is the future for the steel industry. He write that consolidations will produce super steel companies that â€Å"†¦embrace new technologies for making steel better, faster, and more cheaply, become increasingly self-sufficient in the necessary raw materials used to manufacture steel—particularly iron ore and coking coal—as the volatility of the market price and availability of these resources in recent years has challenged steelmakers, †¦ and concentrate on producing higher grades of steel, such as automotive steel, in order to differentiate themselves from commodity producers. As global consolidation seems to be the wave of the future, Nucor must continue their path of inorganic growth to achieve super status. Threats Because the steel industry’s cyclical nature, the industry’s success is connected with the economic status of the country. As the United States is currently in a recession, there is less economic growth, therefore leading to fewer orders for construction, automobiles, and manufacturing equipment, which are the main customers for the steel industry. Many US steel companies have gone bankrupt, with others operating at less than full capacity. Nucor, however, has maintained profitability each quarter since their beginning operations in 1966. In the case study, it says that in 2003, â€Å"While the steel industry struggled through one of its deepest down cycles with weak prices and bankruptcies throughout the industry, Nucor increased its market share and held on to profitability. † They’ve done so by expanding their business in the automobile industry, their joint venture with Brazil, and working with Japanese and Chinese to formulate new process without the typical raw materials. Datamonitor reports that â€Å"According to International Monetary Fund’s ‘World Economic Outlook, April 2007’ report, the real GDP growth rate in US is expected to slow down to 2. 5% in 2007, compared to 3. 1% in 2006. † Nucor must rely on their strengths and opportunities to survive during the recession, as the rising interest rates and recession may hurt their sales and financial condition. With increasing interest rates and a recession hitting the US, costs for raw materials will also be rising. Nucor has already tried to combat this problem by creating avenues to obtain and create their own raw materials, therefore relying less on other suppliers in an unpredictable market. On the other hand, Nucor should also beware of too much capacity in the industry with international countries flood the market with below cost products. The Bush government tried in 2002 to create a tariff to protect the US industry from dumping of below cost products, but was forced to withdraw the tariff in 2003 after WTO rulings against it. In 2005, the Bush administration used trade laws to curtail import dumping, which will hopefully give Nucor higher profit margins. China may be one of the culprits of overcapacity of steel into the US since their economy has slowed down and demands of steel have slowly decreased. Nucor will have to accommodate to global economies as well as the US economy to handle fluctuations in the steel market. Global steel companies are also joining together and consolidating to form mega steel companies, which could hurt Nucor’s leadership position in the steel industry. One of Nucor’s biggest rivals is America’s Mittal Steel, which recently merged with Belgium steel company Arcelor in June 2006, making them the leading steel group in the world with a market capitalization of $46 billion and steel-making capacity of 110 million tons, according to Datamonitor. Datamonitor further predicts that â€Å"†¦ the top 10 companies would hold a global market share of almost 35% in 2010; which could lead to three or four players producing more than 80 million tons, and five or six players producing between 40 million and 60 million tons, annually. This consolidation trend puts competitive pressure on Nucor to maintain their status in the industry, no matter how they do it.