2. Agenda
• Nucor Corporation
• Mr. Iverson’s Concern
• S.W. Analysis of Nucor
• O.T. in U.S Steel Market
• Decision
3. Nucor Corporation
• Founded in 1904 – by Ransom Eli Olds
• Started as a motor car manufacturer under the name
“REO”
• Changed its name to Nuclear Corporation of America Inc.
after selling its Car business to Bohl Alluminium & Brass
company and subsequently buying a nuclear services
company.
• The company then transformed itself into a conglomerate
acquiring semiconductor, steel joists (Vulcraft
Corporation), air-conditioning ducts etc. units.
• Then ultimately becoming NUCOR – largest operator of
mini mills.
4. Mr. Iverson’s Concern
• Commit to a new steel mill
• Viability of CSP technology in long run
• To be a leader or a follower
• Resource Constraint
5. Strengths of Nucor
• Administration
Flat hierarchy
Knowledge to set up steel plants economically and operate
them efficiently
• Employee Relations
Equality
Empowerment
Performance based compensation
Lower attrition rates
6. Strengths of Nucor
• Operations
Commendable and highly trained work force
Strategically Located Plants
Continuous adoption of new technology
Low ordering costs for buyer
• Financial
Debt to equity ratio is 0.18
Market to book ratio is 2.05
Assured sales of 33% internally
Lower attrition rates
Tight Cost Control
7. Weaknesses of Nucor
• Plants were not able to fulfil orders at times
• Low end products
• Limited openings for growth due to impossibility to diversify
• Non providence of discounts for preferred customers- loss of a
differentiating platform against competitors and imports
• Environmental issues
• Too much dependence on the US Economy
• They don’t do their own R&D
8. Opportunities and Threats in
US Steel Market
• Opportunities
Adoption of continuous casting technologies by the price followers can drive
down costs by 15 %.
Reduce premium to compete with mini mills and imports.
Presence of many players can give opportunity for inorganic growth.
• Threats
Fast Growing Imports
Increasing Labour Costs
Rising Debt to Equity Ratios
Some sectors which are dependent on steel have a slow growth rate like steel
9. Decision
• Criteria as per Company policy to decide on capital
project
– Previous Capital Expenditure allow 100% commitment to
the project under evaluation
– 25% ROA required within five year of plant start up
– Investments on equipments with longer paybacks will be
accepted if capacity increases than for those that
reduced costs
– Restricting debt equity ratio to less than 30% and not
issuing new stock
