NUCOR CORPORATION

1.What is the nature of the competitive environments in which Nucor operates? What are the competitive implications?

IN 1980’S

Sales started declining due to the economic downturn(mainly due to decline in auto sales)

Decline was due to high labour and energy costs in mining and processing iron ore, a lack of profits and capital to modernize plants and conservative management that has hesitated to take risks

Companies sought protection from import quotas Imported steel accounted for 20% of US steel consumption Mid 1980’s the integrated mills were moving on a fast track They were restructuring, Cutting capacity, dropping

unprofitable lines, focusing products, and trying to become responsive to the marker

IN 1990’S

The US steel industry slowly stabilized post economic slowdown

Nucor pioneered the low-cost German technology There was increase in competition globally There was pressure on the US steel mills to defend their home

market In 1994, U.S. Steel, North America's largest integrated steel

producer, began a major business process reengineering project

Cut labor cost and increase reliability and productivity Company had to implement new technologies and business

process to survive

the decline in demand prompted Nucor and other U.S. companies to slash prices in order to compete with the unprecedented surge of imports.

As the 1990s ended, Nucor was the second largest steel producer in the United States

Company's market capitalization was about two times that of the next smaller competitor

What factors have helped Nucor achieve a low-cost position?

Nucor keeps costs below those of their competitors while broadening their markets both in the US and abroad.

Under Iverson and Correnti, Nucor’s decentralized organizational structure allowed each plant manager to make the decisions they saw fit for the company as a whole

Nucor has been able to expand itself by becoming suppliers of low cost steel to other firms, and their production of mini-mills has become a large source of customer sales.

Finally, the company was able to move beyond the scope of their production and move into other areas, such as the development of steel manufacturing technology.

Established raw materials strategy through joint ventures with suppliers.

Efficiency of business units which ultimately results in low cost since the organizational structure is decentralized.

Fast delivery and increased customer integrated technologies.

Strong technological orientation enables the company to reduce its operating costs.

Economies of scale. Increased output per man hours. Forward integration through introduction of

new fleet of trucks which resulted in profitable shipping of joists.

How did Nucor’s organizational structure help the company achieve a low-cost position?

Organizational Structure

Chairman/Vice Chairman/PresidentVice President/Plant General Manager

Department ManagerSupervisor

Maintain low costs by keeping the employee force at the level it should be

decentralized organizational structure allowed each plant manager to make the decisions they saw fit for the company as a whole.

This decentralized organizational structure allowed the firm to “take advantage of growth opportunities available in the environment,” which is a necessary step to stay ahead of competition.

How did Nucor’s incentive systems help the company achieve a low-cost position?

Employee relations principles Employees will have the opportunity to

earn according to their productivity Employees should feel confident that if

they do their jobs properly, they will have a job tomorrow – job security, reduce work week instead of fire or lay off employees

Employees have the right to be treated fairly

Employees must have an avenue of appeal when they believe they are being treated unfairly – grievance process

CompensationProduction Incentive Plan Paid weekly bonuses based on production

Based on actual output in relation compared to expected tonnages produced

Based on group not individual performance Expected output did not change unless there was a

change the production process If tardiness or attendance kept team from meeting

goals, then no one received a bonus in the group If you are 5 minutes late, you lose your bonus for the day If you are 30 minutes late or absent, you lose your bonus

for the week 4 forgiveness days Maintenance personnel were assigned to each team

No bonus paid if equipment is not operating Supervisors were apart of bonus teams

Received same bonus as employees Output and bonus info for each team was posted at the

entrance

CompensationDepartment Manager Incentive Plan Annual bonus received based on performance of the

entire plant Based on return on assets A return of 25% or better was expected by the plant

Non-production and Non-department Manager Incentive Plan

Bonus based on each plant’s return on assets Includes everyone not in previous 2 plans Every month each plant received a chart showing its return on

assets on year-to-date basis Posted in employee cafeteria

Senior Officers Incentive Plan Based on return on stockholder’s equity above certain

minimum earnings If Nucor did poorly, then Senior Officers would only receive

their base pay Senior Officers earned less than other industry executives

RESULT

This unique way of rewarding productivity keeps Nucor’s productivity high and its absenteeism at a low 1 to 1.5 percent a year.

Employees see a direct correlation between what they do and their paychecks.

In fact, this program prompts such high performance that employees were refusing to take time off.

How did Nucor’s management style help the company achieve a low-cost position?

Safety Committee and reduced accidents Vulcraft Credit Association led to job security

and improved morale among employees. Unionization was not encouraged since he

realized that it’s the biggest threat to profitability.

Strong employee relationships. Mini mill production facility which was more

economical.(15% cost advantage when compared to integrated steel manufacturers)

Egalitarian and incentive based worker relation philosophy.

Worker Productivity(four labor hours per ton compared to eight labour hours per ton)

Why was Nucor’s organizational structure changed in 1999?

Iverson stepped down as the CEO of the company leaving the company to Cornetti, a company veteran.

Foreign imports put a downward pressure on prices.

Nucor slashed prices twice to compete against imports from Russia, Japan, Brazil

Sales and earnings declined and to regain price integrity the company raised its prices in 1999.

Correnti resigned amidst disagreement with the board, and chairman David Aycock assumed his duties. In September of 2000 Aycock resigned from the company and Daniel R. Di Micco, became CEO of Nucor.

In the period since 2001, what challenges does Nucor face? What approach has it taken to these challenges? Were its responses effective?

Since 2001 demand was not stable. They tried to fluctuate their price based on demand.

In 2001- bought the assets of Trico Steel . In 2002- acquired Birmingham steel. Since 2002 they strategies was to go

global.