Copyright (c) 2012 Morgan D
In a liberal plaza economy where the forces of demand and supply are the major determinants of appraisal and conditions of trade, businesses have to formulate strategies that are aimed at positioning it for competitive advantage. Competition exists in the steel industry both in the US market and globally. The competitive forces affect all the businesses in the industry and how best a firm’s strategies command influence its success. In the US steel industries, players quasi Nucor are faced with various elements of competition.
To begin with, there is competition for the inputs that are required in the production of steel. The industry core input is from recycling of scrap metal. The many firms in the industry hence compete for these metals used in production. There is also competition for market share between the players. Market share determines the level and volume of sales that a firm makes and therefore prominent e the profits to a firm (Porter, 1998). The foreign suppliers foster tighten competition for wholesale share in the steel industry. Firms in this industry as well are faced by the threat of entry by new companies as this may influence negatively on the performance of the already existing firms. Michael Porter cinquefoil forces model can nvloeden applied to explain the competitive forces in this market. According to porter, the five factors that influence the completion of firms are the threat of entry of new firms, threat of imitation products, bargaining power of suppliers, bargaining power of customers, and the rivalry among firms (Porter, 1998). These five forces decree affect operations and determine the policies to be adopted per firms to clinch that the competitive edge against competitors is attained. In this market for instance, there is steep bargaining power of customers. Consumers in the steel industry are very sensitive to price changes and are interested about the quality like the products. This therefore makes the firms in this industry to produce at the lowest defray possible without compromising on the quality.
The second element of the porter’s model is the threat of new entrants. New entrants will compete for the same customers also will fight for a control on the market share (Nilsson & Rapp, 2005). The fight for market share is a zero sum game where whether one firm increases its market share then the others will lose their share. In the US industry, there is minacious of entry of very new firms or parade of partnership, alliances, or mergers that will make the tournament stiffer. Nucor Corporation has therefore increased its acquisition of new firms and reduced the bureaucracy to ensure flexibility and win performance. The industry is thus highly competitive.
The bargaining power of suppliers also exists in the industry because of the many firms in the industry. In this industry, firms have to look for scrap metals that are molted and used in producing steel products. The companies must therefore attempt good prices for input for them to have continued supply of raw materials and reliable suppliers. The tertiary force is the threat of substitute products. Substitute products have homogeneous uses also satisfy the same need, therefore becoming important for competition. Industries that are characterized by the existence of closer substitutes are highly competitive and must ensure quality production and good pricing. Relentless restructuring and strategies are also critical for the success of the firms. Presence concerning substitute products in the steel industry, consecutively with the imports from china, turkey and opposite foreign countries have made competition stiff in this industry (Thompson, 2010). The four forces together with the rivalry among firms are the component of the five forces model. The rivalry among firms is determined by the ease concerning exit, branding, product identity, product difference and switching cost. The low cost of switching and the ease of gate makes the steel industry in US and globally be highly competitive.
Future profitability of steelmakers the increase in the demand for steel products for the development projects makes the industry to be profitable. The competitive forces choose also be on the rise given the adit of new firms and the attractiveness of the industry. A trend analysis into the company’s financial performance shows an increase in the earnings posted by the firms in the industry. For example, the profit of Nucor increased from $ 310.9 million in 2000 to $1757.7 in 2006 (Thompson, 2010). This increase in the net earnings has been propelled by the high demand for steel and the strategies formulated to achieve market growth.
Nucor necessity therefore expanded in the market if it has to reap better performance. Through acquiring more firms and expanding in new markets, the flock will increase the sales turnover and merrymaking economy of scale production. It instructions also challenge favorably with other firms in the steel industry from within and outside the US economy. Expansion will also assist in the increase of their mart share and help in reducing the variations in the returns to the firm. Nucor is also likely to increase their supply base and desipience better technology that testament enhance efficiency in production. Expanding their operations is therefore called for if the company has to benefit from the better result. Nucor strategy
Nucor has adopted the swell orientation artifice where the company aims at increasing their advertise share through acquisition of renovated firms and the expansion of the existing ones. A growth strategy increases the share in the market and decision into the aggrandize in sales et alii profits (Nilsson & Rapp, 2005). The strategy is evident from the company’s increased acquisition, upgrading of the surviving plants et alii the formation of joint ventures. Joint ventures enable the band to enter into untested markets quickly and to reduce the cost of entrance. New plant version and the use of better methods from performance are all elements that Nucor has adopted a growth strategy. The strategy has made the company realize increase in profits and a corresponding surge in the number of their customers.
The generic strategy that has been adopted by Nucor is the cost leadership strategy. This strategy targets a broader market and promotes low cost of production (Porter, 1998). To gain a competitive advantage in an industry, the firm must show to its customers that they will get value for their money. The cost leadership strategy is adopted in cases where there are many competitor and the customers are very sensitive to prices. Nucor has achieved this strategy by keeping their cost of production low and at the same time producing a wide range of products. Through this, the company has become unit of the largest steel businesses and was at one time the biggest in US firm market.
The strategy has also seen the company compete favorably with the foreign firms that imports brace at a lower cost in the US market. The company need to dilate their operation should be carried out while taking interested account the economic factors and the demand of brace in the targeted countries. Foreign operations should only be made in areas where there are prospects for having good returns. The operations be in countries where the regulations support the growth of industries and are not discriminatory. To ensure that the acquisitions and the mergers are beneficial to the company, they should be evaluated and only viable mergers should be pursued. The management should also strive to improve the relation among the employees and their grievances should be addressed in ways that result condition brotherly solutions. Employees whose interest and plight are satisfied choose work towards achieving the overall organizational objectives. The organizational structure of the company should remain simpler and one that promotes change and instantaneous decision-making