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Case Analyses ASBE 35th: Proceedings Page -400- Association for Small Business & Entrepreneurship 35th Annual Conference
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1 NUCOR CORPORATION 2008-2009 Thomas M. Box Pittsburg State University Pittsburg, KS 66762 Phone: 620-235-4582 Email: [email protected] Warren D. Miller Beckmill Research, LLC Drawer 1158 Lexington, VA 24450-1158 Phone: 540-463-6200 Email: [email protected] ASBE 35th: Proceedings Page -401- Association for Small Business & Entrepreneurship 35th Annual Conference
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3 ABSTRACT Nucor Corporation 2008-2009 is a strategic management case appropriate for first-year MBAs or seniors in an undergraduate capstone course. The focus of this case is the strategy of the most successful steel-maker in the United States as of 2008/2009. It has a difficulty level of five. Secondary issues include Porter’s Five-Forces Framework of industry analysis and the effects of the global economic slowdown in the last quarter of 2008 and the first quarter of 2009 on Nucor’s business. The case is designed to be taught in a single 75-minute class and is expected to require two to three hours of outside preparation by students. In order to facilitate students’ understanding of the economics of accounting figures, we have rearranged the balance sheet so that “earning assets” equal “permanent funding sources.” For real wealth to be created, the average return on earning assets must equal or exceed the weighted average cost of capital demanded by permanent funding sources. Nucor has been the most successful American steel maker for more than 35 years. It has a unique company culture and is recognized as the technology leader in its field. In an industry that is heavily unionized, Nucor’s work force is non-union. The company is also a textbook example of Porter’s Cost Leadership generic competitive strategy. By the end of 2007 the company had 20 plants in its steel mill segment, 32 in the steel products segment, and one reduced iron ore plant in Trinidad. The organizational structure is flat and decentralized with only four levels of management. Despite its long track record of growth and financial success, Nucor’s business sank like a stone in the fourth quarter of 2008. ASBE 35th: Proceedings Page -402- Association for Small Business & Entrepreneurship 35th Annual Conference
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4 NUCOR HISTORY Nucor’s history falls into three eras (Preston, 1992). The first was the Reo Era and it began in 1897 when Ransom E. Olds founded the Olds Motor Vehicle Company which was later sold to General Motors. In 1905 Olds launched the Reo Motor Car Company in Lansing, Michigan. This company filed for bankruptcy in 1938 and was reorganized to focus on building trucks during WW II and lawn mowers in the post-war era. The firm was sold at a $ 3miilion loss to Bohn Aluminum and Brass Company and was left with no viable businesses primarily because of the intense completion in the lawn mower industry.
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