Nucor Case
NUCOR MEMORANDUM To: F. Kenneth Iverson and Management Team of Nucor Corporation CC: AGSM Faculty Teams Subject: Investment Decision Date: 04/22/2009 From: 1713898
The Situation In 1986, flat sheet segment contained 52% of US total steel market1. Nucor Corporation, which is a steel minimill well-known for its leadership, efficient operation and well-structured compensation, is showing the interest in the flat sheet segment. At the same time, there are many new thin-slab casting technologies to help minimills enter the new market quickly and cost-efficiently. One of them is from German firm, SMS Schloemann-Siemag, who has consistently introduced its unique technology, Compact Strip Production (CSP), to Nucor. As the chairman and chief executive officer (CEO) of Nucor, F. Kenneth Iverson has to make a decision on whether Nucor should go for CSP plant developed by SMS. The Issue The most salient issue than concerns Nucor and its management team right now is –
What is the best strategy for Nucor to target the flat sheet segment?
Alternatives 1. Go for CSP plant: Obviously, the most important reason for Nucor to buy CSP technology is that Nucor could take advantage of the huge opportunity of entering flat-sheet market. As the pioneer of CSP application, Nucor would have 2 to 3 years head start to utilize its technology advantage in order to secure a desired market share. Consequently, CSP will help Nucor to achieve its long-term vision: to target the high end of flat-sheet market. The competition of the low end of flatsheet market is increasing due to the interest of many minimills and the low price products of overseas competitors. Aiming at the high end segment is a wise strategy because the high end segment is expected to bring more profits and help Nucor to grow consistently in future.
1
Exhibit 2 – Steel Mill Product Segments: 1986, page 15 of the case
1
However, going for CSP plant option exposes many disadvantages as well. First of all, without
The Situation In 1986, flat sheet segment contained 52% of US total steel market1. Nucor Corporation, which is a steel minimill well-known for its leadership, efficient operation and well-structured compensation, is showing the interest in the flat sheet segment. At the same time, there are many new thin-slab casting technologies to help minimills enter the new market quickly and cost-efficiently. One of them is from German firm, SMS Schloemann-Siemag, who has consistently introduced its unique technology, Compact Strip Production (CSP), to Nucor. As the chairman and chief executive officer (CEO) of Nucor, F. Kenneth Iverson has to make a decision on whether Nucor should go for CSP plant developed by SMS. The Issue The most salient issue than concerns Nucor and its management team right now is –
What is the best strategy for Nucor to target the flat sheet segment?
Alternatives 1. Go for CSP plant: Obviously, the most important reason for Nucor to buy CSP technology is that Nucor could take advantage of the huge opportunity of entering flat-sheet market. As the pioneer of CSP application, Nucor would have 2 to 3 years head start to utilize its technology advantage in order to secure a desired market share. Consequently, CSP will help Nucor to achieve its long-term vision: to target the high end of flat-sheet market. The competition of the low end of flatsheet market is increasing due to the interest of many minimills and the low price products of overseas competitors. Aiming at the high end segment is a wise strategy because the high end segment is expected to bring more profits and help Nucor to grow consistently in future.
1
Exhibit 2 – Steel Mill Product Segments: 1986, page 15 of the case
1
However, going for CSP plant option exposes many disadvantages as well. First of all, without