5 Forces

1
5 Forces

• Entry barriers high for integrated steel mills,
  low for mini mills, low switching costs for
  buyers (commodity product), some opportunities
  for differentiation with joists (engineering
  support), foreign entrants, new technologies have
  reduced scale economies
• Substitutes Few, Limited substitution by
  aluminum, plastics, glass and synthetics
• Buyers Large buyers (auto companies), low
  switching costs
• Suppliers Iron ore and scrap producers
• Rivalry Fragmented industry, mature stage,
  excess capacity, high exit barriers

2
Resources and capabilities

• Resources
• Tangible Various plants
• Intangible - Mini mill technology, Organizational
  culture
• Human Motivated, non union work force,
  Exemplary leaders
• Capabilities
• Ability to manage integrated operations (steel,
  joists, fasteners)
• Expertise in managing organizational structure
• Ability to innovate

3
Organizational culture

• Adaptive culture encourages employee
  involvement
• Iverson and top management adopt thriftiness no
  frills approach applies to everyone Leading by
  example
• Treating employees right fairness, honesty,
  avoiding lay-offs
• Creates a feeling of community
• Culture supports strategy of cost leadership.

4
Nucor

• Reports 59 drop in third quarter net income
• Demand for steel product down due to economic
  downturn
• Prices of scrap steel (Nucors raw material) have
  risen, rising energy costs
• New facility in Indiana, smaller than typical
  steel mills, more efficient (Micro mills)
• Prospect of losing steel tariffs that protect
  steel manufacturers

Source Wall Street Journal