GROUP 1 Case Analysis: NUCOR in 2009

Background Nucor Corporation was founded in 1940 and is based in Charlotte, North Carolina. It deals in the manufacturing and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials Key Challanges Nucor faced different problems in 2008, The global financial meltdown. Less demand for steal. Plunged earnings. Capacity utilization fell by 50 percent.

Mission Nucor Corporation is made up of 11900 teammates whose goal is to 'Take Care of Our Customers.' We are accomplishing this by being the safest, highest quality ,low cost ,most productive and most productive steel and steel products company in the world.

Top Management CEO Danial Dimicco President John Ferriola CFO James Frias

External Environment
Steep Analysis
Environmental Analysis Nucor is ahead of the pack when it comes to being environmentally friendly in the steel industry. Nucor complied with the EPA adding 85 million pollution controls to its 14 plants. Economic The steel industry is cyclical. Heavy reliance upon economic growth in construction and infrastructure. Prolonged slowdowns and economic recession have a direct impact on Nucor. The weak dollar has provided a great opportunity for steel companies to export. But Nucor does not have a global market to exploit. This competitive dollar has also led towards more foreign investment across the US steel market. This has become a threat to the US steel industry. Technology It used Hismelt process to produce iron from iron ore with less energy and pollution, actually reducing the greenhouse emissions and costs. It took care of environmental friendliness, worker safety, and its contribution to the community.

Political -Legal Anti Dumping Law : U.S imposed countervailing duties and anti-dumping duties.

Laws were opposed by many European countries and WTO. SOX Act : To increase the transparency of the USA accounting standards. To increase the responsibility of corporate office and board members. The costs of compliance is quite high approx $3.4 million per company. Long-term benefits of compliance: creating high barrier to entry, jeopardizes bought up / take over and will also increase investor confidence in U.S financial markets. Sociocultural Nucors employment policy and community positioning is one that is very key to its success. Nucor targets small rural towns in order to have a very loyal community base. Technical The U.S. steel industry is heavily influenced by global development Nucor was the first mover in adopting the new technologies in the U.S market. Nucor used the mini-mill method to create steel, which has led towards an industry revolution. Nucor implemented a new information technology infrastructure that would integrate all the planning, production.

Internal Environment
Nucors Policies and Practices Aggressively pursue and implement cost-saving technology Incentive compensation that motivate above-average output Empower plant employees

Create a low-cost culture Offshore joint ventures Own fleet of trucks Close proximity to customers Efficient Inventory Management System Mini Mill technologies and Electric-Furnace, compare to old blast-furnace methods Nucor creates value Division Managers have control over operations in their plants. 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 very innovative Use modern equipment High quality products at cheaper prices than its competitor competitive prices. Nucor competitive advantage 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. Nucors Core Competencies A total corporate commitment to lowering production costs while maintaining quality Spans management, supply chain, operations, and technology Drive for innovation Enhance productivity Generate new revenue streams Block rivals Building steel manufacturing facilities economically and operating them productively. Bench marked organizational style and empowering division managers. 1st company to introduce computer inventory management systems and engineering process. Sophisticated in purchasing, sales and management and beat competition by its design effort. New technologies to lower operating cost.

Porters Five Forces

Threat of New Entrants Low access to raw-materials. Difficult to achieve economies of scale. Lack of product differentiation. Huge capital Intense Rivalry among competitors

Domestic market more than 20 players. Intense rivalry Price wars. No differentiated product. Joint ventures helps in driving economies of scale. Bargaining Power of Buyers With an increase in domestic competition in steel sector in the USA, the options for buyers are on a rise. Low Product Differentiation. Switching costs is low. Bargaining Power of Supplier's Scarcity of raw-materials like steel shreds, iron ore, coke, recycled steel. Few Suppliers. Most of the raw-materials are imported. Threat of Substitutes No primary substitutes. Secondary substitutes: aluminum, plastic and wood.

Analysis of Strategic Factors

SWOT Analysis Strength Producing quality steel products Consistency Selection and breadth of offerings

Meeting customer requirements and delivery schedule Multiple state-of-the-art plants. Industry leader in innovation and minimization of pollution and production cost. Strong financial position. Calculated risk taking culture. Weakness Nucor highly depends on the United States domestic markets. No diversification. Declining market share. Environmental issues. Opportunity Expansion in the USA market through Mergers&Acquisitions. Entry in Asia & Europe markets through joint-ventures. Innovate and reduce costs with improvements in Research&Development. Threats Rising raw material and labor costs. Rising debt to equity ratios. Weak Government regulations allowing dumping of steel by China. Invasion of the USA domestic market by foreign players. Acquisitions Acquisitions play a key role in Nucor's success . With the acquisitions of Maganatax and Southpacific

SteelCorp in2007 and he acquisition of David Joseph Co in 2008 made them less dependent outside vendors, improved scrap -processing capabilities ,and increased production capacity by more than 75 percent. Nucor's Domestic Competitors Ak SteelHoldingsCorp Steel Dynamics Inc. United state steel corp. Ratio Analysis of Nucor 2009 1.Liquidity Ratios Current Quick 2. LeverageRatios Debt to Equity 3. Activity Ratios Inventory turnover Asset Turnover. 4.Profitability Ratios Gross Profit Margin Operating Margin Net Profit Margin Return on Assets Return on Equity 17.12% 13.95% 7.74% 16.19% 27.91% 8.9% 16.62% 23.51% 18.26% 11.90% 23.4% 38.61% 9.51 1.71 10.82 1.96 42.09% 19% 2008 3.45 1.93 2007 3.2 2006 3.22 2.44