Capital investments in this industry have long payback periods, but technological advantage can offer strong price advantages which means that competitors are striving to maintain their competitive edge against others in the industry. Because of this, competition among minimills and between integrated companies and minimills can sometimes focus on new technology and the ability to invest in capital improvements.
2. Nucor has focused on keeping its costs down, its productivity up, and its ability to produce high quality products strong. Although the company was a pioneer in minimills, it embraced that technology because of the productivity gains and opportunity it offered for a niche market, not because the minimill concept fit in a larger strategic plan of the organization. Nucor has a strong incentive program for employees which is self-funding, meaning that employees only receive bonuses when production and costs exceed predetermined levels. At the same time, the company is willing to invest in new capital projects on a case-by-case basis, but its emphasis on short-term returns may preclude its taking on some longer-term projects. Currently, this problem is illustrated by the company's high level of short-term assets.
The strategy that Nucor has followed has been successful in terms of dealing with the competition since Nucor has one of the highest productivity levels and lowest cost structures in the industry. At the same time, the dominance of Nucor in the industry and the cost savings that it has been able to achieve helps make entry for new companies even more difficult. The cost structure which Nucor has established also means that there is less incentive for companies in rival industries (such as aluminum) to pursue substitution strategies since the required rate of return will be harder to achieve so long as Nucor and other companies in the steel industry are able to keep their costs low. Nucor has also made the m...
Nucor Case. (1969, December 31). In LotsofEssays.com. Retrieved 16:11, November 22, 2014, from http://www.collegetermpapers.com/viewpaper/1304254393.html