The Nucor Corporation is a steel company is a steel company based in Charlotte, North Carolina. The highly segmented and independent company allows each manager to operate their own segment as a business entity. The company maintains a high level of respect between its management and employees. This has helped the company acquire its goals and has given the employees job security and a good working environment. The organization structure and the human resource issues have contributed to the success of the company; however, the trends in the steel company have caused impacts forcing it to venture into related diversification.
The trends steel industry: impacts on Nucor Corporation
Nuclear company was originally set up to manufacture nuclear instruments and electronic gargets. This business was highly profitable at the time but it failed to gather momentum. The Nucor Corporation went through years of financial strains while under the Nuclear Corporation of America hence the board of directors opted for new management. The board elected Kenneth Iverson as the president; he viewed that the only way of bringing change was by building the company around its subsidiary that was dealing in steel production at that time. The president named the company Nucor Corporation and planed to make it the largest steel industry in the United States. By 1985 The company had grown and was ranked the seventh largest in the United States, it had a four state of the art steel mills that used electric furnace and six beam plants. By the year 2000, it was the second largest producer earning revenue of 4.8 billion dollars. The current trends in the steel industry are that there are shortages in demand due to the fall of the global economy (Hitt 2009). The company will highly rely on automotive and construction recovery, if there is less demand then the company will have less supply hence less profit. The issue of competition from other steel companies is another great hindrance. The company is experiencing pressure from substitutes, suppliers, and new entrants in the market. The company however, is bracing its self towards dealing with such issues by implementing strong marketing strategies, diversifying into products and new products, and using new technologies.
Organization structure and management philosophy at Nucor Corporation.
Nucor is known for its culture and its commitment towards employees. The organization structure at the company allows the employees to make and implement quick decisions nurturing trust teamwork. Most of the daily decisions are made by the plant level managers together with their staff members with minimal interference from the top management. The general managers are given freedom to take decisions regarding setting production targets, finalizing marketing strategies, finding customers and sourcing for raw materials. The managers are free to use new technology. This encourages employees to try out new technologies and new processes. Moreover, the management made it a policy not to punish mistakes but maintain high tolerance levels.
For example, one manager chose to install an induction furnace that was worth 10 million dollars. The new furnace failed to perform breaking down, later he decided to install back the electric one back. The manager was not punished but was encouraged in replacing it. The workers are not laid off even in times of economic crisis neither has the company shut down. The recruitment process at Nucor focuses on employing people with the right mind and morale for work rather than those with skills. The reward system insists accurate pay based on the level of work done, they are given certain production goals, and their pay depended on the goals. However, the hourly pay was nine dollars per hour as compared to the average of eighteen per hour but they earned more than their counter parts in the industry due to the reward system. The incentive plan resulted in healthy competition among different plants and promoted high productivity. For instance, workers at Nucor’s Hickman plant worked hard to break the production records of Nucor’s Yamato. The grievance scheme at the company allows any employee to approach the management whenever there is a complaint. This factor has influenced performance at the organization.
Human resource management issues related to strategic management
Firstly, Nucor Corporation should hire skilled personnel. Currently there are enormous changes in technology and Nucor Corporation has adopted the system of not hiring skilled personnel into their company. The company prefers hiring people that have a mind focused on growth. The company has made many profits while still under the same work force but if it trained its employees, the situation would be better. For a company to achieve its goals the issue of having a competent workforce is important. The company should have employees that understand are specialized at there level of work. For example, the manager who installed an induced furnace should have sort for expertise knowledge if he did not know about the services the furnace could have given. The manager should have been experienced in the area.
Secondly, the employees should be taken through training processes. The whole structure of management should be trained before they are employed for the job to avoid damages and unanticipated losses. Training is an essential part of contributing towards organizational goals since the employees with be knowledgeable of the direction the company is headed.
The president should only assign partial responsibility to the managers so he can monitor and make the most crucial decisions. These will reduce damages and losses committed by the line managers in their units. The costs incurred by the separate units will also be reduced since they will be distributed from a central office. Company benefits, the company should implement a scheme that offers benefit packages to its members apart from the payment scheme that is based on productivity. This is important in boosting the morale of its employees. The company should also acquire medical covers for the employees incase accidents occur. Strategic management deals with managers taking initiatives on behalf of owners. These human resource issues like the skilled employees, training processes, manager’s responsibility and compensation contribute to strategy management. These people are the people building the company and without them, the company would not exist.
Related diversification is more successful strategy than unrelated. Diversification is a form of growth strategy for a company, it seeks to increase profits through increased sales obtained from the new products. It is more likely to expand to a new segment of an industry but within the same business existing. Scholars have long argued that firms should diversify into more related industries to pursue synergies (Thompson 2010). However, if diversification strategies are solely based on synergy benefits, then after controlling for conditions such as competition and market growth. We should observe the company exhaust potential opportunities in all related markets before venturing into unrelated diversification that is regarded as having less synergy benefits. Related diversification should be implemented, for example, the company should manufacture farm equipments this will increase their market and profits will rise. When Nucor Company opens a new subsidiary dealing with farm equipments they will incur less costs and enter new markets. They will get more profits since both companies will be making sales. Finally, related diversification is a form of marketing because the people will have full information of where to get steel products without incurring much cost.
The organizational structure of a company venturing into related diversification
In order to venture into related diversification, the company should enact a different organization structure. The structure should compose of other managers who head the new section created; the company should also hire more employees to run the new business. The company will in other words grow more and become complex. The company should hire new workers who are highly skilled to head the new unit of business because it will be entering a new market. The business structure will be bigger and will need to be headed by skilled personnel since the business will be making a new entry in the market. For example, if Nucor opens a company specializing in farm products, the new company will require employees who are knowledgeable in the field and they again need to train the employees to ensure efficient running of the company. Training, hiring skilled staff, delegating authority and decentralization of activities are the organization issues. Centralization of activities will have to be done in order to manage the resources of the company within the same area hence costs will be reduced.
The Nucor Company is facing shortages of demand since there is a crisis in the global economy. It should implement strong marketing strategies to help it market its products. The company is also bracing itself towards using new technology. The company has a strong organization structure composed of independent managers who make their own decisions. This however, is a threat to the organization since work is not centralized leading to incurring high costs. Lastly, the company should venture into related diversification to increase its profits.
Hitt, M., (2009). Strategic management: Competitiveness and globalization: cases. California, Cengage Learning.
Thompson, A., Strickland, A.J., & Gamble, J.E.(2010). Crafting and executing strategy: The quest for competitive advantage: Concept and cases: 2009 custom edition (17th Ed).New York: McGraw-Hill-Irwin.
Zhou, M. (2007). Related diversification and structural complexity. Michigan: University of Michigan.