Steep Analysis

1. Perform a STEEP analysis to understand the general environment facing Nucor. How will Nucor be affected by external factors?

Although a traditional STEEP analysis would include an examination of social, technological, economic, environmental, and political factors, our text refers to seven factors in the general environment. These factors include the sociocultural, technological, economic, physical (which includes environmental) political/legal as well as global and demographic.

The sociocultural segment is primarily concerned with a given society's attitudes and cultural values. This segment is often responsible for the condition of other segments to include demographic, economic, and other conditions and changes. From reading the case it does not appear that many of the Nucor workers are contingency workers. Additionally the increasing diversity of the United States labor force does not appear to have had any negative effect on Nucor. Although healthcare expenses were not discussed in the case, the new federal regulations regarding health care coverage for employees may have a detrimental effect on Nucor's operations. New Coors employment policy and positioning within the communities in which it operates are key to its success. The company targets rural communities and subsequently has a very loyal community base.

The technological segment is one in which Nucor has traditionally been at the forefront of. Over the past few decades the United States steel industry has been influenced greatly by development of technology on a global scale. Nucor has done well at adopting newer technologies and has been a first mover in the United States market in these technologies. As an example new core was the first in the United States to use the mini-mill method for steel production. New core was also the first company in the industry to use computers in the production process.

With respect to the economic segment, Nucor has experience the cyclical nature of the steel industry. Several times in recent decades, reduced demand during economic recessions have directly impacted new Coors bottom line. Although the week United States dollar may provide a profitable opportunity for export, global competition limits the possibility that Nucor would be able to export to international destinations. Unfortunately, the same weak dollar has resulted in more foreign investment in the United States steel market, resulting in a direct threat to the United States steel industry. As an example, Mittal steel purchased ISG, as well as shares in a Chinese steel company.

In the physical environment segment, Nucor has again led the pack in the United States industry. Although Nucor has run afoul with the Environmental Protection Agency in the past, the two entities have worked well together in recent years. The EPA cited Nucor for Sawyer to curb pollution and four improper disposal of hazardous waste, assessing a $9 million fine. Since then Nucor added pollution controls to its plants, using new technology, and the EPA enthusiastically endorsed the new technology. The increasing push on a global scale to recycle scrap steel in the production process has driven up the price per ton of scrap steel and has prompted Nucor to move up in the vertical chain to help keep costs of scrap steel down.

Within the political and legal segment, Nucor has struggled to combat the effects of dumping. Although Nucor benefited briefly from a duty imposition by President Bush in response to dumping by several countries, the World Trade Organization determined that this action was not legal in the imposition was removed. The Sarbanes-Oxley Act, enacted to increase transparency of accounting standards in the United States and to increase the accountability of corporate officials, has resulted in a relatively high cost for US companies that has also heightened barriers to entry in the United States and has increased investor confidence in the United States financial markets.

The demographic segment is primarily concerned with the size, age, geographic distribution, ethnic factors, and income data for a given population. Given the information that should be analyzed within this segment, Nucor will likely not face any threats from the segment nor does the segment provide any significant opportunities (Hitt, Ireland, & Hoskisson 2012).

2. Use Porter's Five Forces Model to analyze the steel industry in the US. Given this analysis, is the industry attractive or unattractive?

With respect to the threat of new entrants, there is a very limited access to raw materials. These raw materials include scrap steel from recycling as well as pellets to make new steel. Given the huge capital requirements to either build a steel manufacturing plant or to purchase an existing plant, it is difficult for a new entrant to achieve any economy of scale. Since Nucor charges actual delivery costs, customers furthest from the manufacturing facilities may find purchasing steel from a competitor cheaper, however new Coors lower cost structure may make this unlikely. This combination of factors may make it difficult for a domestic company to enter the industry however there is significant opportunity for international steel companies to enter, as evidenced by the Mittal purchase of ISG.

The bargaining power of suppliers presents a strong threat to Nucor. The shortage of raw materials to include both scrap steel and iron ore pellets combined with the fact that there are a few suppliers of raw materials in the United States has presented a challenge for Nucor. Although scrap steel is still available, and Nucor recently purchased their longtime supplier of scrap steel, the majority of raw materials must be imported.

The bargaining power of buyers also presents a threat to Nucor. There is a lack of product differentiation and switching costs are relatively low. Although Nucor does not charge a fee for buyers of smaller quantities, buyers purchasing large quantities may possess greater negotiation power. With the influx of foreign competitors importing steel into the United States combined with a recent underutilization of capacity, options for buyers are increasing.

There are no primary substitutes for steel. Some potential secondary substitutes may include aluminum or wood, but the structural integrity of these makes them unlikely substitutes for steel. Although demand in the steel industry is cyclical, there continues to be a relatively high demand for steel.

With respect to the intensity of rivalry among competitors, there are numerous competitors within this industry. Within the industry there are more than 20 major competitors. Due to the fact that there is no product differentiation, there is intense rivalry within the industry. Within the past few years, numerous