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Nucor SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Nucor managers to do a situational analysis of the firm . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Nucor is facing in its current business environment.
The Nucor is one of the leading companies in its industry. Nucor maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Nucor to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Nucor strengths, and eradicate its weaknesses.
Step by Step Guide to Nucor SWOT Analysis
Strengths of Nucor – Internal Strategic Factors
As one of the leading organizations in its industry, Nucor has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Nucor are –
- Successful track record of developing new products – product innovation.
- Strong Free Cash Flow – Nucor has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Highly skilled workforce through successful training and learning programs. Nucor is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Superb Performance in New Markets – Nucor has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong Brand Portfolio – Over the years Nucor has invested in building a strong brand portfolio. The SWOT analysis of Nucor just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong distribution network – Over the years Nucor has built a reliable distribution network that can reach majority of its potential market.
Weakness of Nucor – Internal Strategic Factors
Weakness are the areas where Nucor can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Nucor needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- High attrition rate in work force – compare to other organizations in the industry Nucor has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Nucor has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Nucor is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Limited success outside core business – Even though Nucor is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- The profitability ratio and Net Contribution % of Nucor are below the industry average.
Opportunities for Nucor – External Strategic Factors
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Nucor an opportunity to enter a new emerging market.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Nucor. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- New trends in the consumer behavior can open up new market for the Nucor . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Government green drive also opens an opportunity for procurement of Nucor products by the state as well as federal government contractors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Nucor to capture new customers and increase its market share.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Nucor to increase its profitability.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Nucor to drive home its advantage in new technology and gain market share in the new product category.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Nucor’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Threats Nucor Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Nucor’s product especially in the emerging markets and low income markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Nucor
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Nucor in those markets.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Liability laws in different countries are different and Nucor may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Limitations of SWOT Analysis for Nucor
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Nucor
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Nucor
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Nucor managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Nucor
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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