Nucor is a company that has largely avoided the travails commonly experienced by other firms in their industry, that being the steel industry. Other than a brief lull in revenue, Nucor has been consistently growing and consistently strong over the years. Nucor was and still is able to belt out parts made out of steel that are not always producible and doable by other firms. Even so, Nucor has not been without its own issues including leader Iverson leaving the firm due to disagreements with fellow leaders of the firm. While there have been a few minor issues, the revenue and other performance metrics of Nucor were strong through the cutoff for this case study.
Nucor is on a short list of people that was in the steel industry but diversified elsewhere that voluntarily proceeded to only be in the former and they made it work through 2012 based on revenues and other performance metrics. Indeed, the steel products that Nucor made and still makes used to be the thing for their Vulcraft division while the corporate parent made other products. However, Nucor (then the Nuclear Corporation) narrowed things down to just steel products. This is a pretty brave decision given that the steel industries is very cyclical and subject to swoon when there are economic doldrums like those in the late 1970’s and the late 2000’s. Indeed, Nucor did have a loss during the Great Recession (the latter of the two periods just mentioned) but it was only one year of loss. This would tend to look great as compared to other firms in the industry that probably suffered wholly in 2007, 2008, 2009 and perhaps beyond that. The economy was in low gear through 2011 to 2012 in many ways but Nucor only lost money one year.
Analysis of Firm
The executives of Nucor did not hold themselves as better than the other people that work with them and for them. There were still disagreements. F. Kenneth Iverson was the leader for quite a bit but left in 1998 due to disagreements. However, they did not do bad while Iverson was gone. For example, Daniel DiMicco joined Nucor in 1982 and rose through the ranks to lead the company starting in 2000 and he remained in this position through at least 2012. During that time, it is noted that the company was quite “opportunistic” in taking actions that would benefit the firm’s position in the steel market. Indeed, the “higher highs” and “higher lows” were indeed reflected during the Great Recession. After all, they were very strong in the good years but they were not all that weak during years where most firms were worse off.
One very strong point for Nucor is that nearly 90 percent of its sales are to external customers. One thing that is noted is that the prevailing price of steel can vary a lot based on the current conditions. Digging a bit deeper, about fifty percent of Nucor’s sales were to contract customers. This was from a prior level of forty percent a year prior and 30 percent the year before that. In other words, Nucor was locking up more and more contracts during the depths of the Great Recession. This likely explains why the Nucor company was able to weather the Great Recession as well as they did. Also important to notice is that Nucor made sure to have salespeople at every location where they made products. This surely made it easier to sell products in each market because there were both manufacturing and sales personnel at every location.
Identification of Strategic Issue
One glaring issue that Nucor should probably take seriously is the fact that they are not very diversified. While it is true that they are very strong in that industry and while it is true that they have weathered some pretty major economic storms despite not being in more than one industry (and the one industry they are in is very cyclical), they are leaving themselves vulnerable by only having one strong area of business. On the other hand, there is something to be said for doing one thing and doing it well. Nucor has proven, at least thus far, that their recent strategy has worked. Also, it is extremely unlikely that a recession on par with the Great Recession will happen again any time soon. Indeed, the Great Depression in the 1930’s, the gas crisis days of the late 1970’s and the Great Recession of the 2000’s reflect a fairly bad economic collapse only once every roughly thirty or forty years. By those metrics, there will not be another major economic calamity until roughly the 2040’s to 2050’s.
Identification of Alternatives
Rather than only be involved with steel production, Nucor would be wise to have a strong area they work in aside from steel. This alternate area would need to be something that is not cyclical like steel but is still a strong point for the company. If the right business avenue is chosen, this would mean that Nucor could get through economic problems without losing any money. Again, this is probably not needed given Nucor’s very strong performance in the steel industry. However, if there were an alternate avenue of business that Nucor could find that was profitable even when economic issues are present, they would be even stronger.
The other main alternative is what they are doing now and that is making themselves ever stronger and stronger in the steel industry. They have done this through organic growth and through acquiring other firms like Harris Steel in 2007. One nasty but unlikely possibility is that steel will become something other than the main “go to” material for making things like building and road products. There is not an heir-apparent in the background thus far but this could always change. That being said, steel has been dominant for a half-century and this is unlikely to changebut it could. For example, the paper industry has been king for a while in the form of lumber creation and harvesting. However, hemp would work as a source of paper and there is also the uprising of digital content over the printed word. Similarly, gasoline-powered cars are still the norm but there are hydrogen, batteries and solar power on the horizon. The point is that steel may not always be the material of choice that is for right now. At the very least, Nucor will need to keep their ear to the ground and shift to a new material or technology if it becomes clear that steel is on its way out. Failure to keep an eye out for that could lead to Nucor becoming the next Blockbuster. Blockbuster apparently missed the signs that video rental on a national scale was on its way out and they had the opportunity to buy Netflix. However, they said no and the brick and mortar stores Blockbuster had are all long gone (Satell).
Even though there have been subtle disagreements within Nucor and even though they have had to majorly shift their business model at times, they are performing quite well even through the worst of the Great Recession. Again, Nucor needs to be careful not to slip up and corner themselves into a dying market or one that is not able to weather economic storms. Even so, they are doing quite well thus far.
Satell, Greg. 'A Look Back At Why Blockbuster Really Failed And Why It Didn't Have To'. Forbes. N.p., 2014. Web. 27 Apr. 2015.