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Grp3 SM2

Nucor Corporation is a major American steel producer that was founded in the 1950s. The document discusses Nucor's history and operations. It presents a decision problem about whether Nucor should commit to a new steel mill using thin slab casting technology. The framework analyzes the arenas, vehicles, differentiation, and staging considerations. It estimates the investment would be $499.25 million, requiring a $314.25 million loan. The conclusion is that thin slab mills provide cost savings and profits, giving Nucor an advantage, so the investment is recommended.

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81 views

Grp3 SM2

Nucor Corporation is a major American steel producer that was founded in the 1950s. The document discusses Nucor's history and operations. It presents a decision problem about whether Nucor should commit to a new steel mill using thin slab casting technology. The framework analyzes the arenas, vehicles, differentiation, and staging considerations. It estimates the investment would be $499.25 million, requiring a $314.25 million loan. The conclusion is that thin slab mills provide cost savings and profits, giving Nucor an advantage, so the investment is recommended.

Uploaded by

Kapil borat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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NUCOR AT A CROSSROADS

ARYA KARAN - 07
CHINMAYI TIDKE - 14
SHUBHAM JAIN - 28
MAHIMA JAIN - 34
SHRUSTIJEET PANDA - 63
COMPANY OVERVIEW

 Founded by Ransom Eli Olds in 1904 as Reo Motor Car Company and introduced products truck and luxury
lawnmowers
 Reorganised as “Reo Motors” and started manufacturing trucks and luxury lawmowers.
 In 1955, TelAutograph Corporation acquired Reo Motor and formed nuclear Corporation of America
 After 1960, company diversified into semiconductors, steel joists, air-conditioning ducts , aerospace, tin cans
and plain copiers.
 Acquisition of Vulcraft in 1962 and later he extended company into minimill to make cheap steel from scrap
 Currently Nucor Corporation is a producer of steel and related products headquartered in Charlotte, North
Carolina. It is the largest steel producer in the United States of America and is the largest "mini-mill"
steelmaker (i.e. it uses electric arc furnaces to melt scrap steel as opposed to blast furnaces to melt iron).
 Nucor is North America's largest recycler of any material and recycled 16.9 million tons of scrap in 2015.
CASE OVERVIEW
 90 million tons of Domestic consumption of steel in 1986. Decline in demand due to
stagnation of steel intensive companies, emergence of substitute materials.
 Market for steel was segmented based on product type and customer groups.
 Three groups of steel makers in USA: Integrated Steelmakers, Minimills and speciality
steelmakers.
 Competitors: North Star, North Western Steel and wire, Florida steel and chaparral
 Nucor: Flat hierarchy, decentralized, incentive based compensation, egalitarian benefits
 Nucor invested heavily in upgrading capacity. Monitored technological advancements.
 Decision Criteria: 1. Perform technically as advertised, 2. ROA, 3. Payback period.
 Thin-Slab Casting: Casting molten steel directly into a thin, continuous ribbon
 Invested $6 million on Hazelett caster. Impressive performance data from SMS’s CSP plant.
Decision Problem and Framework

Decision Problem: Whether to commit Nucor to a new steel mill that would commercialise thin slab
casting technology developed by SMS.

Diamond Framework:
Framework Analysis

Arenas Vehicles
 Product : Steel bars, angles, light structural  Joint ventures- Yamato Kogya, Japanese
shapes , wide-flange beams & alloys steelmaker
 Market Segments : Service centres and  Internal Development: Flat hierarchy,
distributors, automotive sector and the decentralized, incentive based
appliance and equipment industry compensation, egalitarian benefits
 Core Technologies: thin slab casting by
Hazelett caster
Analysis Contd..

Differentiation Staging
 Prices were set centrally on an F.O.B (  Investment in sticky factors ; physical
Freight on board) basis unlike the assets, resources and capacities that are
delivered cost prices quoted by durable , specialized to the particular
integrated steel makers and some strategy that the firm follows and
minimills untradeable
 Temporary discounts upto 20 dollar per  It is the first American firm to adopt thin
ton slab casting
Estimations

 Nucor has agreed to form a Joint Venture with Yamato Kogyoa Japanese Steel maker-
cost of the plant 175million- 51%stake- Investment is $89.25million
 Total investment- 89.25+ (100+250+60)= $499.25million
 We have $185 million in Cash and we need $314.25million loan to satisfy the investment
Conclusion

 From the exhibits, Thin Slab mini mills have significant Entry and Operating cost savings and
a improved profit margin.
 This would give Nucor a significant advantage over Integrated mills competitors
 As Nucor will also gain a first mover advantage, it will also enjoy a stronger bargaining
power
 So we recommend to proceed with the investment in this project

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