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TEACHING NOTE
CASE 16
Nucor Corporation in 2014
Overview
In 2014, Nucor Corp., with a production capacity approaching 27 million tons, was the largest manufacturer
of steel and steel products in North America and ranked as the 13th largest steel company in the world
based on tons shipped in 2012. It was regarded as a low-cost producer, and it had a sterling reputation for
being a global leader in introducing innovative steel-making technologies throughout its operations. Nucor
began its journey from obscurity to a steel industry leader in the 1960s. Operating under the name of Nuclear
Corporation of America in the 1950s and early 1960s, the company was a maker of nuclear instruments and
electronics products. After suffering through several money-losing years and facing bankruptcy in 1964, Nuclear
Corporation of America’s board of directors opted for new leadership and appointed F. Kenneth Iverson as
president and CEO. Shortly thereafter, Iverson concluded that the best way to put the company on sound footing
was to exit the nuclear instrument and electronics business and rebuild the company around its profitable South
Carolina-based Vulcraft subsidiary that was in the steel joist business—Iverson had been the head of Vulcraft
prior to being named president. Iverson moved the company’s headquarters from Phoenix, Arizona, to Charlotte,
North Carolina, in 1966, and proceeded to expand the joist business with new operations in Texas and Alabama.
Then, in 1968, top management decided to integrate backwards into steelmaking, partly because of the benefits
of supplying its own steel requirements for producing steel joists and partly because Iverson saw opportunities
to capitalize on newly-emerging technologies to produce steel more cheaply. In 1972 the company adopted the
name Nucor Corporation, and Iverson initiated a long-term strategy to grow Nucor into a major player in the
U.S. steel industry.
By 1985 Nucor had become the seventh largest steel company in North America, with revenues of $758 million,
six joist plants, and four state-of-the-art steel mills that used electric arc furnaces to produce new steel products
from recycled scrap steel. Nucor was regarded as an excellently managed company, an accomplished low-cost
producer, and one of the most competitively successful manufacturing companies in the country. A series of
articles in The New Yorker related how Nucor, a relatively small American steel company, had built an enterprise
that led the whole world into a new era of making steel with recycled scrap steel. NBC did a business documentary
that used Nucor to make the point that American manufacturers could be successful in competing against low-
cost foreign manufacturers.
During the 1985–2000 period, Nucor continued to construct additional steel-making capacity, adopt trailblazing
production methods, and expand its line-up of steel products. By 2000, Nucor was the second largest steel
producer in the U.S. and charging to overtake long-time leader United States Steel. Nucor continued its long-
term growth strategy during 2006–2013, constructing additional plants and acquiring other (mostly troubled)
steel facilities at bargain basement prices, enabling it to enter new product segments and offer customers a
diverse variety of steel shapes and steel products. Heading into 2014, Nucor was solidly entrenched as the largest
steel producer in North America (based on production capacity) with 23 plants having the capacity to produce 27
million tons of assorted steel shapes (steel bars, sheet steel, steel plate, and structural steel) and additional steel
manufacturing facilities with the capacity to make 4.6 million tons of steel joists, steel decking, cold finish bars,
steel buildings, steel mesh, steel grating, steel fasteners, and fabricated steel reinforcing products. The company
had 2013 revenues of $19.1 billion and net profits of $488.0 million, well below its pre-recession peak in 2008
of $23.7 billion in revenues and $1.8 billion in net profits.
: Combating
Low-Cost Foreign Imports and Depressed
Market Demand for Steel Products
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Heading into 2014, Nucor was solidly entrenched as the largest steel producer in North America (based on
production capacity) with 23 plants having the capacity to produce 27 million tons of assorted steel shapes (steel
bars, sheet steel, steel plate, and structural steel) and additional steel manufacturing facilities with the capacity
to make 4.7 million tons of steel joists, steel decking, cold finish bars, steel buildings, steel mesh, steel grating,
steel fasteners, and fabricated steel reinforcing products. The breadth of Nucor’s product line made it the most
diversified steel producer in North America. The company had 2011 revenues of $20.0 billion and net profits
of $778.2 million, well below its pre-recession peak in 2008 of $23.7 billion in revenues and $1.8 billion in net
profits.
In 2000, Daniel R. DiMicco, who had joined Nucor in 1982 and risen up through the ranks to executive vice
president, was named president and CEO. DiMicco was Nucor’s Chairman and CEO through 2012.In the 12 years
of Dan DiMicco’s leadership, Nucor was quite opportunistic in initiating actions to strengthen its competitive
position during periods when the demand for steel was weak and then to capitalize on these added strengths in
periods of strong market demand for steel products and significantly boost financial performance. According to
Dan DiMicco:
Our objective is to deliver improved returns at every point in the economic cycle. We call it delivering
higher highs and higher lows. In the last major economic slump, from 2001 through 2003, Nucor had total
net earnings of $339.8 million. During the even deeper slump of 2009 through 2011, Nucor earned $618.7
million, an increase of 82 percent. The most recent peak to peak earnings grew from $310.9 million in 2000
to $1.83 billion in 2008, an increase of 489 percent.
Nucor uses each economic downturn as an opportunity to grow stronger. We use the good times to prepare
for the bad, and we use the bad times to prepare for the good. Emerging from downturns stronger than
we enter them is how we build long-term value for our stockholders. We get stronger because our team is
focused on continual improvement and because our financial strength allows us to invest in attractive growth
opportunities throughout the economic cycle.
During DiMicco’s tenure, Nucor completed more than 50 acquisitions from 2000–2012, expanding from 18
facilities to more than 200 and boosting revenues from $4.8 billion in 2000 to $19.4 billion at the end of 2012.
DiMicco retired as Nucor’s CEO at the end of 2012 and was succeeded by John J. Ferriola, who had previously
served as Nucor’s President and COO since 2011. DiMicco continued on as Chairman of Nucor’s Board of
Directors during 2013, then relinquished that role to John Ferriola at the beginning of 2014.
In his first year as Nucor’s CEO, Ferriola continued to pursue Nucor’s core strategy of investing in down markets
to better position Nucor for success when the economy strengthened and market demand for steel products
became more robust. In the company’s 2013 Annual Report, Ferriola said:
We are finding ways to grow our company and be successful despite the lackluster economy by continually
looking for ways to improve our performance and lower our costs, investing in projects that will move us up
the value chain and providing superior customer service.
Suggestions for Using the Case
We strongly recommend use of this case in your group of case assignments relating to the material covered in
Chapters 3–7. The case is versatile enough to convey a number of strategic management lessons. We’ve not
seen a better case for illustrating how to craft and implement a low-cost leadership strategy successfully and
why such a strategy can be very powerful from a competitive standpoint. Nucor is a fascinating success story
and one of the world’s most adept manufacturers in crafting and executing a low-cost leadership strategy. The
case also illustrates the role of technological innovation in driving down costs and transforming a company into
a low-cost provider. Nucor’s growth forcefully makes the point that a company can grow and prosper despite
highly adverse industry conditions—if the company has a well-conceived and competitively astute strategy.
Even though Nucor is a Fortune 500 company, it behaves like a small entrepreneurial enterprise that is trying to
carve out a stronger competitive position for itself against industry giants. Nucor is very much a company that
is aggressive, opportunistic, and skilled in employing some very shrewd operating practices to achieve low-cost
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leadership. The company has an innovative and successful incentive compensation program that helps it achieve
low labor costs. It also has an exceptionally lean organizational structure and a distinctive, deeply-embedded
corporate culture.
The “comprehensive” nature of the case and the rich data it contains on both the steel industry and on Nucor
make the case best-suited for use in the middle or second half of your business strategy module and for testing
student capabilities to correctly apply the tools of strategic analysis covered in Chapters 3–7. Because of the
somewhat global nature of the steel industry and Nucor’s scope of operations, it makes sense for students to
have been exposed to the material in Chapter 7 (Competing in Foreign Markets) prior to being assigned the case.
The Nucor case is a particularly good vehicle for illustrating the power of a low-cost leadership strategy, for
drilling the class in industry and competitive analysis and company situation analysis, and for demonstrating to
class members how a U.S. manufacturer can compete successfully against low-cost foreign importers. There’s
scarcely a better case for drilling students in sizing up a company’s overall competitive position and evaluating
its strategic direction and strategy.
We like to ask the class what Nucor does well that accounts for its success and industry standing. After the drivers
of its success have been thoroughly explored, then you can probe for where Nucor’s best strategic opportunities
lie and what the company should do next.
We suggest teaching the case in straightforward, analytical fashion—using the tools of industry and competitive
analysis to diagnose the industry situation, identifying the key elements of Nucor’s low-cost provider strategy,
doing a first-rate SWOT analysis, comparing the value chains of integrated producers versus scrap recyclers,
identifying the strategic issues that Nucor management needs to address, and having students recommend what
Nucor needs to do to remain competitively and financially successful.
However, the Nucor case contains some good detail on how Nucor has gone about implementing and executing
its strategy—its use of decentralized decision-making, its incentive compensation systems for both workers and
managers, and its corporate culture. Hence, we think the Nucor case can also be assigned as part of a module
on strategy implementation or as a “comprehensive case” following your coverage of Chapters 10–12. The
comprehensive nature of this case makes it ideal for use as a final exam” case or a comprehensive written
case (or oral team presentation) assigned near the end of the course.
Videos for Use with the Nucor Case. There are 3 videos available for use with the Nucor case:
nA 4:56-minute March 21, 2013 video titled “Nucor’s CEO Ferriola on Steel Imports, Trade Laws” that
can be accessed at http://www.businessweek.com/videos/2013-03-21/nucor-ceo-ferriola-on-steel-imports-
trade-laws.
nA 6:24-minute March 13, 2014 YouTube video titled “Exclusive: Tata Steel ED on Global Steel Market” that
can be accessed at http://www.youtube.com/watch?v=K7b9N6pISdU.
nA 2:10-minute March 30, 2014 YouTube video titled “Senator Schumer at Nucor Steel in Auburn to Fight
for Local Steel Companies” that can be accessed at http://www.youtube.com/watch?v=-sg08Zxp9x4.
All three should be shown at the beginning of your discussion concerning the impact of foreign imports on the
steel industry in the United States and on Nucor’s business performance. If time is too short to show all three
videos, then those you opt not to show in class can be viewed by students on their own—preferably before class.
Just provide them with the link(s).
The Connect-based Exercise for the Nucor Case. We developed an exercise for Nucor for inclusion in
the publisher’s Connect™ Management web-based assignment and assessment platform because:
nThe content of the Nucor case ties tightly to many of the topics covered in Chapters 3 through 7.
nOne of the purposes of the case exercises is to drill students in applying the concepts and analytical tools
discussed in the chapters to the circumstances posed in the cases.
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This particular Connect-based exercise focuses on the following five questions:
1. Nucor is regarded as an accomplished low-cost provider, but what specific actions has Nucor taken to drive
costs out of its business and achieve low-costs vis-à-vis many other steel producers?
2. What does a SWOT analysis reveal about the attractiveness of Nucor’s situation and future prospects?
Which, if any, of Nucor’s resource strengths and capabilities qualify as a core competence?
3. What does an analysis of the data in case Exhibit 2 reveal about Nucor’s financial and operating performance?
4. What factors are most responsible for Nucor’s weak financial performance in 2009–2013 in comparison to
its performance in 2004–2008 (shown in case Exhibit 1)?
5. What issues does Nucor management need to address?
It should take class members roughly 35–45 minutes to complete the exercise, assuming they have done a
conscientious job of reading the case and absorbing the information it contains. All five questions in the Nucor
case exercise on Connect are automatically graded and entered in your electronic grade book that is part of the
Connect platform, which makes it easy for you to evaluate each class member’s ability to utilize the associated
analytical methods.
What to Tell Students in Preparing the Nucor Case for Class. To give students guidance in what to
do and think about in preparing the Nucor case for class discussion, we strongly recommend two things:
1. Have class members complete the Connect-based exercise for the Nucor case in the event you have
adopted the Connect software for your course.
OR
2. Provide class members with assignment questions and insist that they prepare good notes/answers to
these questions before coming to class. Our recommended assignment questions for the Nucor case are
presented in the next section of this TN. Since there are 10 assignment questions, you may want to have
To facilitate your use of assignment questions and making them available to students, we have posted a file of
the Assignment Questions contained in this teaching note on the instructor resources section of the Connect
Library. In all instances, these assignment questions correspond to the assignment questions in the teaching
note for the case.
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned
case unless students have conscientiously have made use of pertinent core concepts and analytical tools
in preparing substantive answers to a set of well-conceived study questions before they come to class. In
our classes, we expect students to bring their notes to the study questions to use/refer to in responding to
Utilizing the Guide to Case Analysis. Should this be your first assigned case, you may find it beneficial
to have class members read the Guide to Case Analysis that immediately follows Case 31 in the tex. The
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Suggested Assignment Questions for an Oral Team Presentation or Written Case Analysis.
The Nucor case merits very strong consideration for a written case assignment or oral team presentation. Our
suggested assignment questions, in the event you opt to use the case for a written assignment or an oral team
presentation, are as follows:
1. John Ferriola, aware of your emerging expertise in strategic analysis, has employed you as an intern to
assist him in evaluating Nucor’s situation and future prospects. Mr. Ferriola has asked you to provide him
with a 4–6 page report detailing (1) the strength of competitive forces in the steel industry as of 2012,
(2) industry key success factors, (3) the pros and cons of Nucor’s competitive strategy, (4) a SWOT analysis—
2. John Ferriola, impressed with your knowledge of strategic analysis, has employed you to assist him and
Nucor’s senior executive team in evaluating the company’s growth prospects and determining the wisdom of
pursuing a rapid growth strategy via both additional acquisitions and new plant construction. Prepare a 2–3
Assignment Questions
1. What are the primary competitive forces impacting U.S. steel producers in general and the producers like
Nucor that make new steel products via recycling scrap steel in particular? Please do a five-forces analysis
to support your answer.
2. What driving forces do you see at work in this industry? Are they likely to impact the industry’s competitive
structure favorably or unfavorably?
3. How attractive are the prospects for future profitability of U.S. steelmakers? Should Nucor consider
expanding in this type of industry environment? Why or why not?
4. What type of strategy has Nucor followed? Which of the five generic strategies discussed in Chapter 5 is
Nucor employing? Is there any reason to believe that Nucor has achieved a sustainable competitive advantage
over many of its steel industry rivals? If so, what type of competitive advantage does Nucor enjoy?
5. What are the specific policies and operating practices that Nucor has employed to implement and execute its
chosen strategy?
6. What specific factors account for why Nucor has been so successful over the past several decades? Do these
factors have more to do with great strategy, great strategy execution, or great leadership?
7. What does a SWOT analysis reveal about Nucor’s situation? Does Nucor have any core or distinctive
competencies?
8. What is your assessment of Nucor’s financial performance the past several years? How strong is the
company’s financial condition?
9. What issues does Nucor management need to address?
10. What recommendations would you make to John Ferriola?
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Teaching Outline and Analysis
1. What are the primary competitive forces impacting U.S. steel producers in general and
the producers like Nucor that make new steel products via recycling scrap steel in
particular? What does a five-forces analysis reveal about competition in the U.S. steel
industry?
It is worth spending 5–10 minutes of class time establishing just why competitive conditions in the steel
Suppliers
Rivalry among
Competing
Producers of
Steel
Competitive
pressures
stemming
Competitive pressures coming
Competitive pressures coming
Competitive
pressures
Substitutes for
Steel
Threat of New
Entrants into
Buyers of
Rivalry among Steel Producers—a fierce competitive force
Rivalry revolves heavily around price competition because most steel products are commodities. Producing
steel of satisfactory quality is something most producers have mastered. In a commodity market like steel
where it is hard to tell the steel products of one steel-maker from those of another, buyers shop heavily for the
Another competitive factor of significance is that producers like Nucor are figuring out how use low-
cost scrap steel recycling technology to make a wider and wider range of steel products. They are using
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While it is quite unlikely that new start-up firms will enter the steel industry, it is clear from information in
the case that existing steel producers anxious to operate their plants at or very near full capacity will seek
out customers in geographic markets where they do not currently have a presence. This accounts for why
A number of Nucor’s recent acquisitions, for example, represent entry of a potent and competitively
successful steel company into either new product categories or new geographic areas where its
presence heretofore may have been fairly minimal.
Bargaining Power of Suppliers—a moderate competitive force in the case of scrap steel suppliers and union
labor (in the case of unionized steel companies) but a weak competitive force otherwise
There’s little in the case to indicate that suppliers (other than the suppliers of scrap steel) are a major
However, class members ought to recognize that Nucor’s recent acquisition of the David J. Joseph
Company and its investments in DRI production have probably mitigated to some degree the
competitive pressures that Nucor encounters from the suppliers of steel scrap.
The power of unions could be a factor in affecting labor costs for steel producers having unionized labor
Bargaining Power of Customers—a moderate to weak competitive force when demand is strong and in
Slack demand conditions allow customers, especially those who buy in large quantities, to bargain for price
Conversely, if strong demand creates a “sellers” market, then the bargaining power of all but the largest
Conclusions: Students should have little difficulty concluding that (1) competitive conditions can be
tough in steel (especially when the available supply outstrips market demand, as it has in recent years) and
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2. What driving forces do you see at work in this industry? Are they likely to impact the
industry’s competitive intensity and profitability favorably or unfavorably?
Class members should be expected to identify the following as being driving forces:
nThe oldest driving force whose influence is now waning is technological innovation in steel-making
via electric arc furnace technology, thin-slab casting, and direct casting of carbon steel (Nucor’s Castrip
technology) that has allowed companies (like Nucor) to enter product segments formerly dominated
by the integrated mills of producers using older, more traditional steel-making technology at capital-
nSteel-making capacity worldwide exceeds the demand for steel, such that companies anxious to operate
their plants at full capacity are seeking to find foreign customers for their output. Thus a number
nIndustry consolidation to a smaller number of larger and more competitively successful steel companies
(led in part by the acquisitions of ArcelorMittal and Nucor) is acting to heighten competitive pressures.
The important point for students to grasp at this point is that weak demand (relative to supply) coupled with
strong price competition seem virtually certain to make it tough to earn attractive profits near-term. While
the profit prospects are brighter for low-cost producers like Nucor that are also in good financial shape and
3. How attractive are the prospects for the future profitability of U.S. steelmakers? Should
Nucor consider expanding in this type of industry environment? Why or why not?
The point of this line of questioning is to get students to recognize that all U.S. steelmakers are not necessarily
in the same boat, despite the tough market environment and the grim profit outlook industrywide. A low-cost
steel producer that is also financially strong (like Nucor) may well be able to strengthen its overall long-term
Hence, we think Nucor should certainly continue to look for opportunities to expand its capacity and its
Our objective is to deliver improved returns at every point in the economic cycle. We call it delivering
higher highs and higher lows. In the last major economic slump, from 2001 through 2003, Nucor had
Case 16 Teaching Note Nucor Corporation in 2014
494
Nucor uses each economic downturn as an opportunity to grow stronger. We use the good times to
prepare for the bad, and we use the bad times to prepare for the good. Emerging from downturns
John Ferriola is following the same strategic course as his predecessor; as he said in Nucor’s 2013 annual
report:
We are finding ways to grow our company and be successful despite the lackluster economy by
There is reason to be very impressed with the long-term strategy that Nucor is employing to build
4. What type of strategy has Nucor followed? Which of the five generic strategies
discussed in Chapter 5 is Nucor employing? Is there any reason to believe that Nucor
has achieved a sustainable competitive advantage over many of its steel industry
rivals? If so, what type of competitive advantage does Nucor enjoy?
Very clearly, Nucor is pursuing a low-cost provider strategy. Such a competitive approach often is the best
The information in the case clearly indicates that Nucor is widely regarded as one of the low-cost producers
in the industry, which certainly results in a low-cost competitive advantage over higher-cost producers,
5. What are the specific policies and operating practices that Nucor has employed to
implement and execute its low-cost provider strategy?
The class will undoubtedly have no trouble identifying Nucor’s low-cost provider strategy, but they may not
have as strong a grip on all the things that Nucor has done to achieve its low-cost status. It is one thing for
Some of the key operating practices, policies, and approaches that Nucor has employed in pursuit of its low-
cost leadership status include:
nThe aggressive pursuit and implementation of cost-saving technological improvements at its plants.
Using electric arc furnace technology to melt scrap steel and cast molten metal into various shapes—
oxygen, scrap steel, and other ingredients.
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n Being a first-mover or an early-mover in employing revolutionary and highly-automated steel-making
n The company’s strategic success in acquiring seemingly very attractive and cost-efficient steel-making
assets from distressed rivals at bargain prices—which lowers the capital costs of Nucor’s production
assets (and acts to reduce fixed costs per ton produced). In other words, the capital costs of acquiring
n The actions the company has taken in recent years to shift more of its production tonnage at its steel
n Employing incentive compensation practices that generously rewarded workers, greatly boosted labor
n Developing and utilizing a value chain (anchored in using electric arc furnace technology to recycle
n Nucor’s HR practices and policies (apart from its incentive compensation)—such as its no-layoff policy
n The company’s low-cost culture and cost-conscious operating practices
n The company’s pursuit of innovative technologies to enable low costs and Nucor’s profitable entry into
n The company’s pursuit of actions to promote greater environmental sustainability. Measurable objectives
and targets relating to such outcomes as reduced use of oil and grease, more efficient use of electricity,
and site-wide recycling were in place at each plant. Computerized controls on large electric motors and
nThe emphasis on decentralized decision-making and a very lean corporate staff. Nucor had a simple,
streamlined organizational structure to allow employees to innovate and make quick decisions. The
Vulcraft division, Nucor Cold Finish, and Nucor Buildings Group were each headed by a group manager,
• General Manager
• Department Manager