Nucor Case

Steel industry since 1950

        Major decline

Less demand because there are substitues and less construction projects

Foreign competition

                There used to be “the big 8 steel firms” now theres only 2

US steel, the biggest ones, was removed from the index in 2014 and has been cutting its employee since 1960

So how good is Nucor? What could prevent effective control?

        - Too decentralized

        - Too little information from IS

        - R&D is outsourced

        - If bonuses need to be reduced, might hinder employee productivity

        - Little debt→ little monitoring and disclipine from debt market

        - No shares: no institutional investors to monitor

- Internal monitoring: Same mgmt team for 30 year (mgmt. entrenchment) and Iverson is largest shareholder and directors have little independence

                thus, there could be a serious problem

Could these factors challenge nucor’s control?

Porters Five Forces

• Substitute Products

• High: Because of alternatives to steel, the demand for steel has decreased.

• Barrier to entry

• High: market can only tolerate one mini mill

• Competition

• High: strong foreign competition

• Buyer power

• High: can buy from different countries or different substitutes

• Supplier power

• Low:

What are the Key Success Factors?

• Cost: since market determines price, they can only control margin by manageing costs. It keeps their customers loyal
• Capital: no debt→ less interest expense
• First mover advantage: always first to adopt new technology

What are the Key Elements of MCS?