Devising the strategic planning, development and implementation for the global expansion of Nucor Co

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Global Strategy Development & Implementation

Table of Contents Introduction.................................................................................................................................................2 Global Strategy............................................................................................................................................2 Reasons for Global Expansion......................................................................................................................3 Strategic Management Process...................................................................................................................5 Environmental Scanning..........................................................................................................................6 Analysis of the External Environment..................................................................................................6 Analysis of the Internal Environment...................................................................................................7 Strategy Formulation...............................................................................................................................8 Industry Analysis..................................................................................................................................8 Strategic Positioning..........................................................................................................................12 Strategy Implementation.......................................................................................................................14 Problems with International Strategy Implementation......................................................................14 Evaluation & Control..............................................................................................................................15 Strategic Advice.................................................................................................................................15 Conclusion.................................................................................................................................................15 References.................................................................................................................................................16

List of Figures Figure 1: Diversified Portfolio of Nucor Corporation....................................................................................3 Figure 2: Global Market Share of Steel Manufacturer Companies...............................................................4 Figure 3: Strategic Management Process.....................................................................................................5 Figure 4: PEST Analysis of Nucor in the UK Context.....................................................................................6 Figure 5: Major Market Segments for Nucor Corporation in the UK............................................................9 Figure 6: Porter's Five Forces Analysis of Nucor in the UK.........................................................................11 Figure 7: Ansoff Matrix of Nucor...............................................................................................................12

List of Tables Table 1: SWOT Analysis of Nucor in the UK Context....................................................................................8 Table 2: Current & Future Demand of Finished Steel in the UK.................................................................10

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Introduction In order to expand business outside home country, ensuring effective strategic management is must. This report aims at devising strategic planning, development and implementation for the global expansion of Nucor Corporation. Nucor is the largest steel manufacturing company operating in the steel industry of the United States. This company was founded in 1940 by Leon J. Topalian. It is headquartered in Charlotte, North Carolina, US and has its operations in different countries of the world including Colombia, Mexico, Switzerland, and the United Arab Emirates. Nucor Corporation is a listed company of Fortune 500 companies ranked at 139 th position (Staff, 2021). The current turnover ratio of Nucor as of 31 December 2020 fourth quarter is 5.09 which is a very good indicator of company’s performance. At present, on around 26,800 employees are working for the company worldwide. However, Nucor serves in many countries but it does not have its operation in the United Kingdom. Since the UK is a very good platform for operating the multinational companies, in this report, the strategic plan to take Nucor to the UK will be discussed. Besides, proper strategic development and implementation in terms of different rules and legislations will be provided to ensure a smooth entry and operation of Nucor Corporation in the United Kingdom.

Global Strategy Zou & Tamer Cavusgil (2017) define Global strategy as the strategic approach an organization takes for expanding its presence to the global market. On the other hand, Hout et al. (2018) argue that global strategy is not a single approach; rather it is a combination of strategic approaches for going global. Hence, global strategy can be defined as a well-devised strategic plan an organization pursues to expand in the international market. This strategy covers the aspects of standardization approach, international approach and multinational approach. In order to expand successfully in the global market, it is important to adopt a clear strategy based on adaptation, aggregation and arbitrage. When the proposed market expansion has similar attributes as of the home country, aggregation can be done. If the markets are not similar, adaptation may be required as one size does not fit all. However, arbitrage policy can be adopted if there are possible advantages for differences across markets.

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Reasons for Global Expansion Nucor Corporation was not a steel company from the beginning. It started its journey as an auto manufacturer parts but it went to bankruptcy. After the bankruptcy, Nucor Corp renewed its operation with diversified product range and has become one of the leading steel producer companies in the world. Nucor is known as the most diversified steel producer in the US. Nucor is running its operation under three major segments including Steel Mills, Steel Products and Raw Materials. The diversified product mix of Nucor is shown in the Figure 1.

Diversified Product Mix 12.00%

11.00%

36.00%

14.00%

27.00% Sheet Plate

Bar Downstream Steel Products

Structural

Figure 1: Diversified Portfolio of Nucor Corporation

Source: (Swank, 2018)

Nucor is the leading steel manufacturer beating all its competitors in the US. Within US, Nucor’s major competitors are S Steel, Steel Dynamics, Commercial Metal Company and AK Steel.

However, from the global context, Nucor’s major competitors are ArcelorMittal, POSCO, Worthington Industries, Freeport-McMoRan and Bekaert. At present, Nucor’s market share in the world is 8.90%. Nucor is ranked 14th among the global steel manufacturers as per the data

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sources from World Steel Association 2020 (Staff, 2021). The competitive market share of Nucor and its competitors are shown in Figure 2.

Market Share 11.00%

9.00% 6.00%

60.00%

ArcelorMittal Worthington Industries

5.00% 3.00%

Nucor Corporation Bekaert

6.00%

Freeport-McMoRan Others

POSCO

Figure 2: Global Market Share of Steel Manufacturer Companies

Source: (Statista, 2020)

Although Nucor has already stepped in the international area, it has not made its presence in the UK. For this reason, Nucor Corporation is planning to expand globally in the markets of the UK. Besides, doing business in the UK leverages several benefits to Nucor Corporation. All these benefits are discussed below.

One of the largest benefits of doing business in the UK is that it provides very easy access to do business. As per the information from World Bank, the UK provides the highest easy comparative to all other countries in doing business. The restrictions of doing business in the UK is relatively low. Besides, the UK provides free and liberalized policies which makes the UK an attractive place for global business. Hence Nucor can utilize the benefit of modern liberalized economy (Hout et al., 2021).

Comparative to other foreign markets, the UK has manageable taxation system. At present the corporate tax rate in the UK is 19%. However, the UK has double taxation agreement with other 5|Page

countries in the world. For this reason, the UK based corporations need not to pay tax on foreign dividends. Besides, the payable VAT on products and services is 19% which can leverage additional benefits to the companies. Nucor can thus avail the benefit.

The UK has vast and expanding population with mix cultures. This can provide benefits to Nucor Corporation from multiculturalism. The UK is known for having the second largest workforce in the world. Besides, the overall cost of labor in the UK is comparatively low in terms of other countries.

The UK provides the gateway to do business in Europe. As a trading partner, the UK has gained the advantage of the links to get the entry point to the Europe. It can pave the way for Nucor to do business in the European countries and get a diversified customer base (Gordin, 2017).

Nucor is considering its global expansion in the markets of the United Kingdom. Doing business in the UK can leverage the above benefits to the Nucor Corporation.

Strategic Management Process Richard Lynch (2021) defines strategic management as an emerging discipline that focuses on setting up organization’s missions and goals, evaluating the internal and external environment and making strategic decisions accordingly. Strategic management process consists of four major stages that helps the managers to systematically proceed towards the achievement of company objectives. The stages are depicted in Figure 3.

Figure 3: Strategic Management Process

Source: (Lynch, 2021)

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In order to go with global expansion in the UK, the management of Nucor corporation should conduct a strategic management analysis to understand the strategic positioning of the company.

Environmental Scanning Environmental scanning is the first phase of strategic management process. It is the process of collecting, evaluating and transferring information to the key people of management for strategic purpose. Nucor management, therefore should conduct internal and external analysis before considering their expansion in the UK. Analysis of the External Environment Since Nucor is planning its expansion to the UK, a detailed analysis of the UK’s business environment can provide greater insights for Nucor. The PEST analysis for Nucor’s global expansion within the context of the UK is depicted in Figure 4.

Figure 4: PEST Analysis of Nucor in the UK Context

Source: (Fort, 2020)

Political Factors The UK is known as a fair trade and proactive governmental country. It has good relations with the US and other countries. Political stability is the greatest strength for the country. However,

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due to Brexit, many criticism and debate have grown. Nucor, in this case, can better analyze the relationship and other stabilities to expand business in the UK.

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Economic Factors The UK has the 5th largest economy in the world. It has the highest GDP and the most diversified economy for doing business. Besides, the UK has a free market opportunity and it is a popular destination for the FDIs. At present, the corporate tax rate is 19% which is to be reduced soon as per the announcement given by the government. Nucor can avail these benefits and tax reduction while doing business in the UK. Social Factors The UK has one of the largest populations in the world. Besides, it has a mixed culture population with high standards of living. The people of the UK are also highly educated. These factors can provide Nucor to have benefits from multiculturalism and a highly eligible diversified workforce.

Technological Factors Technology sector is one of the greatest contributors in the UK’s economy. The UK has a great access to the technology and high expertise in IT skills. However, in comparison to the US, the UK is falling behind. Hence, Nucor corporation can also bring the latest technology to the UK and utilize the innovation skills of the UK to contribute for mutual benefits.

Analysis of the Internal Environment Before expanding into the markets of the UK, Nucor should focus on its internal strengths and weaknesses to devise strategic plans that makes the way easy to get into the UK. The SWOT analysis of Nucor Corporation is portrayed in the Table 1.

SWOT Analysis Internal Strengths Unique Management Philosophy

Internal Weaknesses High dependency on the US market

One of the leading producers in the industry

Lack of market diversification

Calculated risk-taking culture

Frequent cost cutting

Low cost advantage Multiple economies of scale Highly skilled workforce 9|Page

Key acquisitions and strategic alliances External Opportunities Market entry opportunities in the UK

External Threats Increasing foreign competition

Strategic acquisitions for market positioning

Increasing labor costs

New taxation policy

Cybersecurity threats

New technological adoption Opportunity for diversified business Table 1: SWOT Analysis of Nucor in the UK Context

Source: (Fort, 2020)

Strategy Formulation Strategy formulation is the second phase of the strategic management process. Strategy formulation involves the development of strategic plans to formulate effective strategies to manage the external opportunities and threats to maximize internal strengths and minimize the weaknesses. Nucor has set their visions and missions to achieve the long-term strategic goals.

Vision & Mission Nucor Corporation has a very clear and concise vision and mission statements that directs their efforts towards the achievement of the goal of the company. Nucor’s main goal is to “Take Care of Our Customers” (Nucor, 2021). Nucor has always been dedicated to their customers’ satisfaction. Their vision is therefore to satisfy every customer by “being the safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the world”. How Nucor will design their activities to achieve the goal is reflected in their mission statement. Their mission states that “we are committed to doing this while being cultural and environmental stewards in our communities where we live and work.” (Nucor, 2021). Nucor believes that they can succeed only when they work together with all their stakeholders.

Industry Analysis In order to expand in the UK market, Nucor has to conduct a proper industry analysis of the UK market. Nucor operates in both the iron and steel industry. Initially Nucor operated as mini mills but now it operates as the integrated steel producer company. Hence, it is important to learn how Nucor can contribute to the major market segments of the UK. The major market segments that can be served by Nucor in the UK is portrayed in Figure 5.

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Major Market Segments

23.00%

23.00%

2.00% 3.00%

3.00%

15.00%

4.00% 14.00% Downstream Steel Processors 13.00% Automative Industry Construction

Exports

Machine Manufacturers

Appliance Manufacturers

Packaging Industry

Oil & Gas Industry

Steel Service & Distribution Centers

Figure 5: Major Market Segments for Nucor Corporation in the UK

Source: (Nucor, 2021)

As stated earlier, Nucor serves in three major segments including Steel Mills, Steel Products and Raw Materials. These three segments accounts for 75% of the total production of Nucor.

Although many segments have potentials for Nucor’s target market, the automotive and the construction industries showed the highest potentials as these segments account for 15% and 14% of demand respectively (Cele et al., 2019). The current and future demand for the finished steel in the UK is illustrated in the following Table 2.

Product

Current

Forecasted

Value of

Future Opportunity (£m) &

Demand

Demand

Current

Breakdown (%)

(£m)

(£m)

UK Sales

Coated Products

856

1471

(£m) 332

958

25.3

Stainless Steel

342

573

0

573

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HRC

528

921

313

440

11.6

Rebar

248

468

118

315

8.3

Heavy Section

348

433

150

279

7.4

Plates CRC

194 234

338 370

59 99

253 223

6.7 5.9

Medium Sections

129

181

43

131

3.5

Seamless Tubes

136

128

0

128

3.4

Engineering Steels

139

189

50

127

3.4

Wire Rods

184

305

131

126

3.3

Tinplate

182

264

104

114

3.0

Bars ODF

83 52

118 66

61 27

49 37

1.3 1.0

Light Sections

37

51

27

20

0.5

Ralls

84

94

81

12

0.3

3775

5969

1594

3785

100

Total

Table 2: Current & Future Demand of Finished Steel in the UK Source: (Price, 2017)

The growing demand of steel in the UK will provide future opportunities for Nucor Corporation.

Nucor can conduct a detailed industry analysis through Porter’s Five Forces Model to have a broader view of the industry. A brief overview of porter’s five forces analysis for Nucor is depicted in Figure 6.

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Figure 6: Porter's Five Forces Analysis of Nucor in the UK

Source: (Fort, 2020)

Bargaining Power of Buyers Steel is the key raw material used in several industries. Besides, there are few suppliers in the UK steel industry which makes the bargaining power of buyers less. However, product differentiation in the iron and steel industry is low. Hence the bargaining power of buyers for Nucor in the UK is moderate (Arthur, 2018).

Bargaining Power of Suppliers Although Nucor has key strong suppliers, the number of suppliers in the industry is low. Besides, there are strict rules and regulations from the government regarding the iron ore reserves. In addition, most of the raw materials are imported and the cost is high. Hence, it makes the bargaining power of suppliers high.

Threats of Substitutes Since there are very few substitutes of steel, the threat is low here in the industry. Other substitutes like bricks, stone or aluminum lack strength and durability comparative to Steel and iron. Besides, the switching cost is very high which makes the threat of substitutes low.

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Threats of New Entry Although the UK has quite flexible regulations regarding entry into the market, in the steel industry the entry requires huge capital investments. Besides, achieving economies of scale is a great challenge. Hence, the threats of new entrants in the UK’s steel industry is moderate.

Competitive Rivalry The competition in the steel industry in the UK is very high. There is a growing demand of steel in the UK and many players worldwide pose the challenges for Nucor in the international platform. Low differentiation in the steel products and cheaper product availability from China and other competitors make the industry rivalry very high (Kevin, 2020).

Strategic Positioning In order to develop strategic positioning, Nucor has to analyze the factors present in the competitive environment. The choice of strategic positioning depends on two key factors which include the resources and capabilities of the firm. Nucor’s unique resources and capabilities can help in devising the strategic positioning in the UK markets. The strategic choices can be devised through the strategic positioning analysis utilizing the model prescribed by H. Igor Ansoff.

Figure 7: Ansoff Matrix of Nucor

Source: (Cordell & Thompson, 2019)

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Market Development Strategy states that Nucor can bring its existing products or services to the new markets. This works as a market extension technique for Nucor.

Market Penetration Strategy states that Nucor can increase the selling of their existing products to the existing market through various promotion techniques.

Product Development Strategy states that Nucor can introduce new products or services to the existing markets. This can involve the modification of the existing product or service (Cordell & Thompson, 2019).

Diversification Strategy states that Nucor can introduce new products or services to the new markets. This is totally a new way of growing into the market through related or unrelated diversification.

Strategic Choice From the Figure 7, a succinct idea can be gained regarding possible strategic choices available for Nucor’s strategic positioning in the UK market. Among the four strategic choices proposed by the Ansoff Matrix Model, merely two choices have feasibility in global expansion such as Market Development and Diversification. Although diversification offers potential opportunities, considering the resources and capabilities of Nucor, developing new competency is a must for the diversification strategy. Hence, the market development strategy is the best strategic choice for expanding in the new markets of the UK. Choice of Location Nucor Corporation has planned its market development in the markets of the UK. In order to exploit the best benefits, Nucor has chosen South Wales UK for establishing its company. The prime reason for choosing this location as the subsidiary is that South Wales is known for its proud heritage of the steel industry. There are several iron and steel plants that can provide Nucor with low cost advantage. Besides, South Wales has a wide variety of population that can be useful for getting eligible workers (Coast & Country, 2020). Moreover, Tata Steel UK is also situated in the south wales which can help in getting competitive advantage as Nucor will be bringing its technological skills and resources for operating the company. It will also foster the relationship with the competitors in a positive way for mutual growth (Peck, 2017).

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Method of Entry Earlier Nucor has ensured its global expansion mostly through joint ventures as it incorporates and leverages new technologies. For expanding in the UK’s market, Nucor will be utilizing the same. Nucor can consider initiating joint ventures with the steel companies in the UK. Tata Steel UK is the first choice for initiating the joint venture for international expansion in the UK. This will help Nucor to get easy access to the new markets of the UK. Besides, the risks aroused from US’s cyclical characteristics can be spread to the larger market of the UK. Moreover, Nucor can utilize the expertise and resources of the UK’s steel industry to gain the low-cost advantage and maintain its cost leadership in the industry.

Strategy Implementation Strategy Implementation is the third phase of the strategic management process. It is the process of interpreting the strategies and executing it to the action for achieving the strategic goals of the company. Nucor can implement its strategy of creating joint ventures with the steel companies in the UK for having greater local access and knowledge in expanding globally. For this reason, South Wales have been chosen as the subsidiary location.

Problems with International Strategy Implementation Implementing international strategy is a lengthy process. Besides, it involves many people which makes the strategy implementation a very challenging task. As the South Wales of the UK has been chosen as a subsidiary for Nucor’s expansion in the UK, there are some possible unfavorable consequences that can create potential organizational & managerial problems.

Firstly, the effect of Brexit. The UK’ planned exit from EU can pose challenges for Nucor’s operation and gaining benefits from the EU relations (Lewis, 2021).

Secondly, joint ventures can possibly add additional bureaucracy. It implies that decisions will be taken by the BOD’s of the Subsidiary.

Thirdly, the existing local company can have latent issues which can be integrated to Nucor’s corporate governance structure.

Finally, the subsidiary will be subjected to the UK Laws which can pose challenges in disputing business and management issues (UK Law, 2020).

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Evaluation & Control Strategic evaluation and control are the fourth phase of the strategic management process. It is the process of evaluating the validity of the strategic choices and taking required measures if necessary. Nucor’s strategic decision of creating joint ventures with the steel companies in the UK have both favorable and unfavorable consequences. However, in order to minimize the unfavorable consequences, Nucor can fix benchmark, measure performance and take corrective actions as part of the evaluation and control phase.

Strategic Advice For Nucor’s global expansion in the UK’s market, there are some challenges and issues.

However, Nucor can overcome these issues if it constantly evaluates and regulates its strategic performances. One key strategic advice for Nucor’s subsidiary challenge is that Nucor can use its IT skills and innovation technology to accelerate document intelligence which is one of the core problems of Brexit (Jamie, 2020). Besides, it can design automated workflows to streamline the process. Again, bureaucracy in the firm can be overcome by empowering the people at workplace and making the process as simple as possible. Another strategic advice for Nucor to deal with the legal issues is to have standard due diligence clearly mentioned in the contract.

Nucor can produce a well drafted contract for bridging the gap and bringing all the parties together (Sharma, 2017).

Conclusion The steel industry is a very competitive industry. For any organization, it is very difficult and challenging task to get into the industry. Nucor, in this case, has gained the competitive advantage due to its easy access to the resources and capabilities. Nucor has maintained its leading position in the US for several years. Now it is planning its expansion to the markets of the UK. Although entry to the UK’s market is flexible, there are other challenges associated with global expansion. Especially the challenge of local and international competition makes it difficult for Nucor to operate internationally. Hence, Nucor plans to create joint venture for international expansion in the UK and utilize its knowledge and resources for successfully operating globally.

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