History of Nucor Corporation

Founded by Ransom Eli Olds as Reo Motor Car Company in 1904

Reorganized and christened as ‘Reo Motors’ and start manufacturing trucks and luxury lawmowers.

TelAutograph Corporation acquires Reo Motors in 1955 and formed Nuclear Corporation of America.

After 1960, Nuclear Corporation diversifies into semiconducts , joists , airconditioning ducts, aerospace,
tin cans and plain paper copiers.

Acquisition of Vulcraft in 1962.

Kenneth Iverson becomes President and A modern minimill built in Darlington in 1968-69

Nuclear Corporation was renamed Nucor Corporation in 1972

SWOT analysis

Strengths

Strong market position with 2.1 million tonnes of production capacity.

Decentralized management philosophy

Performance based compensation

Egalitarian benefits

Customer service and quality

Highly efficient labour force.

Employee’s loyalty to the firm

Nucor’s customer service

Nucor started small plants closer to suppliers &customer

Reduction in transportation cost

Cheap support facilities-Electricity

Employee centric policies

Weakness

Decentralized profit center

Decisions being taken at the division level will lead to divisions competing against each other.
No dedicated R&D team.

No long-term strategic vision of plan.

Presence only in the US market

Opportunities

Most steel companies in the US are in major cities and much higher operating costs.

Import share is low in flat sheet segment.

52% of total steel consumption is in flat sheet segment

Supplier’s power is low.

Exit of Integrated steel makers from buying scraps

Nucor at Cross Roads

Threats

Heavy competition in the industry with excess capacity

Demand for steel stagnated in the US market

Experienced players can enter and sustain in the market.

Threat of substitutes

Plastic, aluminium, advanced composites industry taking over market share of steel in future.

Raw material availability

Technology is changing very fast

Q.1 Why has Nucor performed so well in the past?

Building economical steel plants and operating them efficiently. ATPE is maximum for any US
company and is the second best in the world.

Flatter organisation ( only 5 layers ) results in faster communication and rapid effective
decisions. This results in considerable saving of costs. Also decentralisation at plant level is
there.

Tighter control of plant performance at head office level was there, critical parameters were
evaluated and incentives were fixed on the basis of those parameters. Daily display of group
performance at main gate was there. This prompted employees to perform better .
Weekly payments of incentives.

Non unionised and incentive driven work force .

Good facilities apart from pay to employees and quick responses to employees queries resulted
in boosting their morale.

Some room for risk taking by managers was given provided they learn from their past mistakes
and do not repeat them.

Why has Nucor performed so well in the past?

Monitoring and adoption of new technologies, mettalurgist reporting directly to Iverson and keeping
track of latest developments.

Advantageous location: Plants were located in rural areas with cheap electricity, cheap labour , nearness
to market and plenty of water.

Geographical spread of plants in all four directions and fabrication plants of vulcraft were located near
them.

Success due to Nucor’s HR policies

Four tier management structure

Group-based bonus incentive plan that trickles up to management

They have a scholarship program for children of employees which promotes long-term employee
retention

Managers have dinner with all employees with open forum for discussion on how to improve and
increase innovation, allows employees to ask questions and managers to provide feedback

All managers, including CEO, wear same color hard hat at work

Policies promote teamwork and allow the company to grow from within because of open
communication and experience from their employees

Value Creation at Nucor

Managers are given autonomy at each plant

Decisions are made quickly without the need to wait for decisions from headquarters

Plants can source there inputs from other Nucor plants or from the outside market.
Nucor is constantly innovating

High quality products are being produced using modern equipment at competitive prices.

Promote good customer service.

Competitive advantage of Nucor

Building steel manufacturing facilities economically and operating them competitively

Continuous innovation, modern equipment, individualized customer service and producing at

competitive prices.

Mini-Mills

Large applicant pool to hire from because they are seen as an attractive place to work, allows them to
be very selective for who they hire

Have a willingness to take risks.

Potential benefits of CSP plant

Cost reduction

Increase in efficiency

Consent of the project team

Nucor will gain maximum share of low end flat sheet business

SMS is highly confident on CSP that it will improve on company’s own developmental effort.

Discount of $10-$20 million on immediate purchase.

Constraints of using CSP plant

Expensive

Difficulty in operating

It is still in embryonic stage

Technological leapfrogging

First mover advantage would not sustain for long