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Nucor at crossroads
case
HBS 9-793-039
Strategic Decision:
Choice of New Technology
Types of Producers
Minimills
Key Players: Nucor, North Star, Florida Steel &
NSW
Use Scrap as input (contains impurities)
Capital cost $100+ / ton of installed capacity
Lifespan of 10 years
Minimum efficient scale: few hundred thousand tons
Require cheap electricity
Nucor
Competence & Strength
In quickly commissioning plant (~18 months)
New plants achieve 25% ROA within 5 years from
start
The tab:
Just CSP 280+30+30 = 340 (p. 13)
CSP +YK-Japan 100+250+60 = 410, till 1989. (p.
14)
Only YK => 175 (p. 11)
Nucor Reserves 185. (all $ million)
manufacturing
Breakouts of one out of every ten casts- encouraging
Pilot ran for 7 min and produced 12 tons- can it
sustain?
Longer run is required to get slabs 100+ feet long.
SCRAP
Low End
Feasible, with
SMSs CSP (I)
High End
(Auto +
Appliances)
Optimistic, due to
presence of
impurities (III)
10
Class question
How would one classify the following decisions
in terms of (scope) & (commitment):
- Going ahead or dropping the agreement with
NK-Japan
- Going ahead or stopping with the CSP
initiative?
11
(Scope)
(Commitment)
If Nucor decides not
to go ahead with
the CSP-SMS now
If Nucor goes ahead
with the CSP SMS
now
(Scope)
12
Decision Alternatives
Yes- Go with
SMS-CSP
(I)
(II)
No, just
(III)
dont go with
CSP now
YK effort:
CSP effort:
YK and CSP together:
Saying No to YK:
(IV)