Nucor - Porter's 5 Forces Essay

2132 Words Nov 21st, 2010 9 Pages
NUCOR AT A CROSSROADS
CASE ANALYSIS

NUCOR’S SUSTAINED PERFORMANCE RECORD

PORTER’S 5 FORCES ANALYSIS • Supplier Power: With the eventual exit of integrated steel companies from buying scrap, the options available with suppliers to sell, reduced. Nucor started several small plants that were close to suppliers & customers, thereby reducing transportation costs. Also, the sites chosen had inexpensive electricity. Their employee-centric policies resulted in them having lowest attrition levels & a steady supply of new employees. Thus the supplier power was moderate-low.

• Buyer Power: Although Nucor employed the latest technology & competitive prices, with imported steel available, the buyers had more options to choose from.
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• Nucor constantly innovated & used latest technology. Hence, even though a competitor copied its technology, it would take time for it to implement it & in that while, Nucor would have moved on to a newer technology. • Costs of imitation in this case are the capital investments that would have to be made & the economies of scale that will have to be achieved.

Threat of Substitution: • The internal threat of substitution by means of resource substitution is very little, as the employee attrition rate is very low compared to industry level & the services offered to customers is of high value for the customers. • External threat of substitution is high due to emergence of aluminum, plastics, etc as cheaper substitutes for steel. But as Nucor is focused on innovation, it can counter this by itself moving towards these substitutes or coming up with further innovative ways to make steel which can compete with the substitutes. However this would mean further investments in technology & infrastructure & training of employees.

Threat of Holdup: • Nucor has a strong vertical integration & the market for the suppliers is limited as the integrated steel makers are no longer in its market. So threat of holdup from suppliers is low. • It also adds value with superior customer service, which

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