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Nucor Has Different Structure Due To Stable Environment January 30, 2007

Posted by Jordi in Manufacturing, Organizational Environment.
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Our book used Nucor and Alcoa as examples of firms in environments that are relatively stable.

From page 9: “In contrast [to nimble companies like Microsoft and Intel], organizations like Nucor and Alcoa, which produce sheet steel and aluminum, respectively, face relatively stable environments in which customer needs are more predictable and technology changes more slowly.”

According to a June 13, 2006 report in The Financial Times, consolidation in the last six years has lead to a few dominant firms (Sorry, its behind a gate).

The bankruptcies at the start of the decade – which saw names such as Bethlehem Steel absorbed and disappear – has left 70 per cent of domestic flat-rolled capacity with the top three producers – Mittal, US Steel and Nucor – compared with just 25 per cent in 2003.

I worry sometimes about the pervasive image of manufacturing as stodgy and rigid while service companies or new products (especially IT) are the source of all that is good, benevolent amd flexible in the world. This may be one case of that image creeping in. Look at the way that Apple and Google are held up as paragaons of new economy ethos. However, Steel in the US still employs 210,000 people! An alternative approach to Microsoft is that it took advantage of some good moves in the late 80s to solidify its position in the OS market, and has since been fending off attacks to its near monopoly position. My point is, when was the last big innovation from Microsoft that reflected quick responses to competitors? How long has XP been out? Six years?

Does Nucor have a stable environment?

Does its value model and strategy reflect stability?

To answer the second question, we need to answer the prior question. How would we measure stability? The number of entrants? The number of exits? Stock price variability? Number of patents? Customer turnover? Employee turnover? Changes to the legislative arena?

Those all seem like plausible measures to start to look at. But, only a start. Two further issues remain.

1) What about the “destructive creativity” of capitalism? The boundaries of the company’s environment can shift. Look at Apple’s iPod and iPhone. Look at the shifts in consumer choices that drive the choices the brewers and wineries face in the Bartles and James case. If you are Gallo, are you competing against beer makers or snooty wine distributors?

2) Wgat is stability matters mroe in the minds of key decision makers. The top management team’s perception fo stability may matter far more than any attempt to more objectively measure stability or flux in an environment with shifting boundaries.

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Comments»

1. Maximus - December 20, 2007

I would like to see a continuation of the topic

2. Jordi - December 20, 2007

Maximus…
Glad you checked in. This was a class project for a class that ended last spring. More along this theme can be found at
netsweweave.wordpress.com and also
orgtheory.wordpress.com


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