Friday, August 23, 2019

Nucor Corp Essay Example | Topics and Well Written Essays - 1250 words

Nucor Corp - Essay Example The invisible competition is potential in large companies vertically integrating into steel production. This is the competitor environment in which Nucor Corp. strives to maintain an advantageous market position. Facing three categories of competitive tension, Nucor must formulate goals, objectives and strategies accordingly. Nucor Corp. can mitigate some of the competitive tension by acquiring other steel manufacturing companies. In that case the organizational culture of the company must be ready for the social-demographic tension resulting from unionization in the foreign companies. However acquisitions enable the company to get a technological edge as it integrates the operations of the acquired companies into its own operational framework. This is one of the key success factors of operating in the steel industry since the technology is constantly evolving while Nucor is not investing in R&D. Therefore acquisitions provide an effective means of maintaining the company’s te chnological base at the latest standards. There is economic tension in the form of plummeting prices of steel, scrap metal and iron ore. Increased environmental regulation is also adding to the cost of operations. Political regulations such as tariff withdrawal by the World Trade Organization have increased the competitive tension as the industry has been more exposed to foreign competition. The uncertain economic environment is a favorable factor in terms of enabling Nucor to acquire competitors who do not have the resource capabilities to sustain the economic difficulties. The result of acquisitions is further consolidation of the industry leading to reduced competitive pressure. The weak dollar also makes the company more competitive internationally. The marketplace is highly competitive. The competitive tension is increased by the economic uncertainty having repercussions on pricing, demand and access to capital. The companies operating in this environment can address the reperc ussions by achieving economies of scale. However all companies have similar capacities, thereby enhancing the competitive tension. The tension also results from the three buckets of competitors: immediate, impending and invisible. This competitive environment is the result of a highly fragmented industry. The highly fragmented global steel market place leads to an unattractive industry structure. Porter’s 5 forces analysis shows that the industry has high buyer power and competitive rivalry. The supplier power is medium. The high buyer power results from a commodity market in which the suppliers are price takers. Therefore buyers are able to pit suppliers against each other as they are price takers. Companies operating in the commodity market are unable to differentiate their products. As a result industry rivalry is high. It is also important to consider supplier power since the decreasing availability of scrap metal raises their price. As a result the suppliers are gaining greater bargaining power. Suppliers also present invisible competition since they have the ability to vertically integrate into steel manufacturing. Taking these factors into consideration, Nucor Corp. has to formulate strategies which are customized to an industry which has high buyer power and rivalry and medium supplier power. These are the three most important factors to be taken into consideration in determining the attractiveness of the steel industry environment.

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