Nucor Corporation: Pursuing Growth in 2001Joelle ChristianKen HaskellKatelynn KendallEd MackAmanda PriorPranav VaidyaBUS470, Business Policy & StrategySubmitted to: Dr. DesmaraisDecember 14, 2008I. Executive SummaryThe North American steel industry is in decline, for the first time two decades. Macro-environmental and industry forces have caused steel prices to drop while costs of production and labor wages are rising. Many companies have filed for bankruptcy and there is significant industry consolidation occurring, primarily in Europe and Asia; the threat of these huge conglomerates entering the US or other profitable markets is inevitable and in progress. The current industry climate provides financially-healthy companies an excellent opportunity to enterinto a phase of acquisition. As “Greenfield growth” is only limited for large domestic steel producers, taking advantage of purchasing opportunities of bankrupt and undervalued companiesseems to be a increasingly worthwhile activity. Thus far, Nucor has been a leader in the industry due to their organizational culture and management values. Nucor has also made switching costs for buyers high and they are a first mover in implementing new technology. An analysis of the industry, its opportunities and threats, Nucor’s competitive capabilities, and Nucor’s strengths and weaknesses has led us to suggest the following recommendations. Each recommendation presents information about the current environment, itscontext, and how we recommend Nucor proceeds. Each also contains the tools needed to measure their success. We recommend that Nucor:1. Maintain current domestic business and functional level strategies 2. Return to lean management structure: The present management structure that Nucor has acquired is a weakness for the company. In addition, stock prices fell by ten percent in 1999 once the management configuration changed from its original design. With that, Nucor should restore its management back to its original composition. This will leave Nucor less susceptible to losing stakeholders’ interest in the company.3. Implement strip casting technology in its mini-mills: Nucor should use their strength of continuously staying ahead of their domestic rivals in implementing new technologies to pursue the opportunity of using new strip casting technology within their production.Strip casting is a process which produces a much thinner strip of steel while also reducingthe firm’s costs. After implementation, Nucor should closely monitor the costs involved in strip casting and be sure there are actual savings to the firm.4. Integrate DRI into production: Nucor’s dependence upon scrap steel is a weakness and they are susceptible to market trends. There is presently nothing to defend against the threat of high scrap prices. DRI provides a consistent alternative that produces superior quality products while cutting costs. After implementation, Nucor should compare their success to rivals and analyze DRI products’ profit margin. 5. Acquires domestic rivals: Nucor is a very liquid company which helps the company pursue the opportunity of acquiring cheap property, plants, and equipment. Nucor should find a suitable company with the proper technology and location. Once a company is acquired, Nucor should implement their management values and culture in order to turn the plants successful. To determine if the acquired plant is successful, Nucor should compare the acquired plants financials to Nucor’s past successful acquired plants.6. Enters India through M&A: Acquisitions of companies with mills capable of facilitating strip-casting, established or easy-to-establish distribution channels, and located near a target city in India are the primary prospects. Due to its growing infrastructure and relatively stable macro-economic future, India proves to be the best location for the next phase of Nucor’s growth. Joint-ventures may be acceptable under the conditions that the joining company is subservient in strategic and tactical decision-making and that Nucor has control over the re-investment of earnings from the venture.II. Macro-environment In 2001 the US ended a phase of tremendous growth, created largely by the increased retail consumption, increased activity in commercial and residential real estate markets, and a boomingtechnology sector. The sharp drop in equity prices that occurred post-9/11, and a tightening of credit markets, caused the Federal Reserve to loosen monetary policies and induce spending. This was reflected in the discount rate being dropped to as low as 1%. Also during year, unemployment saw an increase of 1.8%, which ended a long period of decreasing unemploymentin the US. There was a slowing of the global economy in 2001, as growth decreased from 4.7% to 2.4%. Imports and exports, particularly between the US and developed Asian countries, also saw a significant decrease after the terrorist attacks of 9/11. India, the second-fastest growing Asian economy behind China, also saw a decrease in production due to increase energy prices. Also, the country withstood several shocks during the year, including a severe agricultural drought and a large earthquake in Gujarat. A political concern is the unionization of the workforce that has taken place over the last several decades. It has allowed the workforce for more bargaining power, and subsequently, increased wages and benefits per capita of unionized workers. Those workers who do not enter the union are at a disadvantage in terms or bargaining power, however can take advantage of job offerings at non-union shops. US steel companies benefit from generous government subsidies that protect help protect their businesses from the threat of new entrants. Also, the US has a fairly lenient taxation of corporations when compared to most other developed nations; the corporate tax rate is roughly 35%. Complex enterprise software is helping to reduce costs of production among many industries. The better management of supply-chain has in some cases been a distinctive competency that has lead to their domination of an industry; Toyota, Walmart, and Dell are all examples. Enterprise software has a variety of uses and provides tremendous value to the steel industry. Steel-casting is decidedly the future of steel production technology, and has been implemented in 11 companies in Europe. The improvement in the quality and finish of theproduct, along