Nucor Corporation - Structuring for Efficiency and Effectiveness
Introduction
Nucor achieved its position as one of the largest steel producers in the United States by carefully monitoring costs and paying attention to the needs of its markets. This strategy of providing its customers with a competitive product at competitive prices has brought success and growth to Nucor, in sales, income, and stock price. Recently, however, the control of the organization has been brought into question. The recent announcement of a joint venture between Nucor and U.S. Steel to develop, test, and bring on line a new method for turning iron ore into steel added to the concern over the ability of company management to maintain the entrepreneurial spirit for which the company is famous.
Background
Nucor is the second largest steel producer (2nd in assets, 1st in profits) in the United States. Its profits of $123 million have made it one of the most efficient firms in the steel industry. Nucor achieved that position by focusing on the manufacturing segment known as mini-mills - the relatively small, electrically-powered mills that melt down scrap steel to manufacture products. This process saves on costly labor, raw materials, and the capital-intensive machinery necessary to produce steel from iron ore. A major concern of mini-mill steel manufacturers is maintaining quality, since their raw material consists of scrap steel of varying quality, containing a variety of alloys and impurities. Another concern it the recent rising price of scrap steel.
Nucor started out by manufacturing steel for the beams and posts produced in company-owned structural steel manufacturing plants and then expanded by selling its low-cost steel to other firms. Outside customers gra ...