Nucor Case Study Solution - Performance Measurement 34146n

University of Łódź Faculty of Management Business Management 3rd year Performance Measurement

Authors: Piotr Bartenbach Victor Ituah Bartłomiej Staszczyk Dominik Wolski

Nucor Case Study 1. Why has Nucor performed so well? a. Is Nucor's industry the answer? No. In our opinion the industry itself is not the matter in the performance of the company as tools and techniques used by Nucor would be successful in almost every environment. However, the industry’s level of advancement in of technology and competition might be the reason of Nucor’s performance.

b.

Is it the “mini-mill” effect? Yes. The mini-mill effect was helpful in case of Nucor as it helped them to cut costs due to mini-mill’s cost advantage. However at first the mini-mills had limited capabilities (they couldn’t produce flat steel products) but Nucor as the first company in the World built the first mini-mill that could make the flat steel components and gained entry into the segment of the steel industry.

c.

Is it market power (scale economies)? Yes. The market power of the firm, at least partly, gave Nucor financial stability and easier cost control. With persistent growth and low debt level they were able to introduce i.e. mini mills that distinguished from competitors with its locally-set goals and visions. Furthermore, having many divisions (mini-mills) the company was able to transfer costs between them and get advantage of i.e. regional prices of resources used. That way Nucor could create various scenarios for the business and select the one that suited them best.

d. Is it a distribution channel advantage? Yes. Distribution channels used by Nucor, made the company able to settle the lowend products transactions directly with its customers like manufacturers and by some of the distribution costs.

e.

Is it a raw material advantage? Yes. Raw materials might be regarded as Nucor’s advantage. They are using scrap metal which is cheap and easily accessible. It means that costs are not high and they can use a wide range of technologies, including the newest ones. What is more they still satisfy their customers with the quality of their products. Was it only an advantage? Of course not as later on the price of scrap metal has grown up and they were forced to find other sources. Also having only one source

exposes the company to the risk of changing price and makes them dependent on their suppliers. f.

Is it a technology advantage? Yes. Technology is an advantage for Nucor. They are flexible and able to adapt their processes to the latest technologies. It gives them a competitive advantage because in most cases they are pioneers in introducing solutions to the industry.

g. Is it a location advantage? Yes.

The company selected many rural areas for their business so they could attract dedicated employees with their offer. Also, the localization was firstly checked for the abiding law - if it was business friendly and did it guaranteed that union involvement will be not necessary. With localization selection, comes the problem of factors that determines the choice. I.e. place could be full of ready-to-be employees and have business friendly law regulations but be in a wrong place from distribution point of view.

h.

Is it the result of an entrenched brand name?

Yes.

Nucor is a very well entrenched brand. It has the largest number of steel products sold and it gained positive reputation for their innovativeness and great attitude towards employees. They have also proven that they have stable finances as their debt cannot sur 30% of their capital. i.

Is it Nucor's choice of a unique strategy? Yes. It is unique because there wasn’t before such a company that builds on low costs and achieves such a success. Worth mentioning is also the structure of the company which allows much clearer flow of the information as well as autonomy for plant supervisors. Another unique part of the strategy is that they were continuously introducing new innovations, which was unique in the industry.

j.

Is it Nucor's ability to execute its strategy?

Thanks to the well-executed strategy, Nucor was able to build 25 plants and introduce a wide range of steel products to the market – so, to maintain their current position in the market. Yes.

2.

What are the most important aspects of Nucor's overall approach to organization and control that help explain why this company is so successful? How well do Nucor's organization and control mechanisms fit the company's strategic requirements?

There are many ways, techniques and solutions that Nucor has implemented and developed on their successful business path. Choices like: the mini mill method, detailed way of location selection or innovation incorporation has brought strong market position for the company and ensured overall control. All the planning and plan implementation have been done according to strictly set rules which highly improved decision making process and byed some of the errors. Nucor has facilitated its success and balanced growth by stable financial position, great way of dealing with new products/services and branch

shifts adaptation. Even the fact that the operational control was given to plant management, Nucor’s board collected and analyzed all the data needed by information system that they have applied. By giving this high level of freewill to each of the mills, they flattened the company structure but still checked if specific plant is fulfilling company overall vision.

3.

A crucial element of Nucor's success is its ability to mobilize two types of knowledge: plant construction and start-up know-how: and manufacturing process know-how. What mechanisms does Nucor employ to manage knowledge effectively?

a. What mechanisms help the company accumulate these two types of knowledge in individual plants? These two types of knowledge derive from different sources. As far as the know-how of plant construction is concerned, we can find out that Nucor looked up to another companies, for example, competition or even their own suppliers. They copied things that were already working well in another companies. On the other hand, processes were developed on their own. Nucor’s management teams came up with solutions that turned out to be proper for their company without looking up to others. Knowledge accumulation contributes to increasing competitive advantage. In Nucor’s case it can be easily noticed how they managed and accumulated the knowledge. They gathered data form other companies and implemented it in their own plants and also they had a highly developed system of knowledge exchange within the company. With such a system they were able to constantly enhance their processes. b. What mechanisms exist within the company to facilitate sharing this knowledge among its 25 plants? In case of mechanisms that exist within the company we can distinguish two types. One of them is knowledge sharing among all plants. The data concerning performance of each site is provided to managers of each plant, so that they can compare results. In Nucor general managers and machine operators are obliged to go to the other plans in order to how are their colleagues working. c. How does Nucor transfer knowledge to a greenfield, start-up operation? We can call a start-up operation a t venture of Nucor and Yamato. Together they created an international corporation; in such enterprise knowledge transfer is a key to success. They came up with new processes based on combined experiences of both companies.

4.

Nucor repeatedly has demonstrated the ability to be a successful first mover

in the adoption of new technology. How does the company's approach to organization and control contribute to this first-mover advantage?

Nucor has demonstrated the ability to be a successful first move in the adaption of new technology. The company has an experienced team and it knows exactly what approach to the adoption of technology will work the best. Nucor knows that half of the investment in new ideas will not yield usable results, so there is equipment that was bought used and discarded. Nucor has been successful in first move advantage because it has developed a team of engineers that design and construct new facilities. This internal group that coordinates the design and construction of the melt shop puts responsibility on internal employees and helps gain first mover advantage. This also applies a powerful control over the behavior of employees in the organization. This practice is also a strong motivator for employees entrusted with the task. The company's policy of exercising control over factories through information technology and periodic reports also help it in gaining first-mover advantage.

5. Would you like to work for Nucor? Piotr: Yes, I would. Nucor has proven that it is a very reliable and fair employer. They are also well managed and employees are given quite a big dose of freedom, so there is place for creativity. Also their approach to the compensations is very unique and makes you feel more rewarded for the job you have done. Victor: I think yes, because it looks that what they want is said straight, everything is clear , there are jobs that are need to be done but at the same time I know what I will receive for my work, what benefits that I deserve, plus the friendly environment. Overall it is a very good place to work. Bartłomiej: Yes, I would definitely like to work for Nucor because I find their way of handling business very organized and thought through. Starting from innovation area up to human resources they present solutions that connect all the company making it stronger and highly competitive towards rivals. Dominik: Yes, because it is a company, which is organized and managed in an attractive way. They are fair and give people an opportunity to develop. Also the industry carries a great potential. The last but not least are salary and motivational system. Disadvantages: Even though, Nucor as an employer seems to be very attractive, the continuous changes may be tiring. It is good when company introduces new things but too much change is not that good. Another disadvantage might be also the industry as it requires a lot of knowledge and experience to be able to work efficiently.

6. Why have competitors not been able to imitate Nucor's performance so far?

Nucor’s performance is a summary of their business strategy they are adapting to the environment all the time, there is not such a thing like „no need to develop or upgrade” they use very simple but for some companies may be risky management, they have a structure that gives the most of the benefits to the factory workers not the management and that is not a popular or maybe even rare trend in big corporations similar to Nucor’s. There are two main points that gives them such an advantage to others: 1st as I sad is the company board and running structure that motivates workers and give them a sense of being an important brick in the machine. And the 2nd is the never ending development that shows what a confidence in action this company has, not many companies are willing to change so quick things that “works” and as we know not many like to invest all the time cause we know that investment not always gives desired s. So the futuristic movements connected with “never ending raising the bar of quality and quantity” can be the reason that other cannot keep up with this company.

7. Lessons learned From Nucor’s success story we can draw a couple of useful conclusions. Based on the information provided, the company seems to always make the proper decision, therefore, usually everything they have done gave them expected or even better results. It can be achieved only by following the strategy, constant strive for process enhancement, rational cost cutting and dedicated employees. Nucor managed to do so, but it does not mean that another company can also be so successful. Every case is different, in each company different people work, just because in Nucor everything worked out well it does not mean that somewhere else the same success can be repeated. Also Nucor’s horizontal management structure enabled them to more effectively manage their plants and overall activity. Another fact that helped Nucor and is worth spreading is their excellent approach towards employees. Very well thought through reward system with a dose of freedom and time for self-development makes employees more engaged in the company’s activities and makes them work harder and efficient as they can see results of their work.