HRM Issues/Diversification Strategies

Trends in the steel industry over the past 50 years and changes in steel making technologies have brought a revolution to the global steel industry. In 1960’s steel industry used capital-intensive basic oxygen blast furnace technologies together with hearth furnace technologies to produce steel. The appearance of electric arc furnace technologies became a new start up for companies entering the steel making business. There has been the use of new technologies that led Nucor to have increased production and cost saving. The introduction of arc furnace allowed reducing the cost of production. It has been cost effective strategy employed among major steel industries. Nucor Corporation that was the first to introduce this technology had competed with the mini-mills in the US. This was in the late 1980’s when many steel companies were going out of business because the demand for steel had reduced drastically. The economies were also falling. The use of arc furnace became a cheaper route instead of building new plants.

Another trend in the steel industry in the late 1990’s was large companies acquiring already failing funds to increase their production. Partnerships and mergers dominated in the steel industry. With acquisition of small firms Nucor managed to become the largest steel producer among all steel industries in the US. Before the introduction of arc furnace of electric refining used by many companies, they relied on iron bearing scraps. It became easy to dominate the market when Nucor took advantage over China which was the leading in steel making. Nucor has become aware that the legislation that is passed will affect their business. This includes laws on green house emissions that have a direct impact on their production of steel. Another regulation that had been passed to cater for mileage requirement for Nucor’s will mean reduction in steel content and other substitute materials.

Over the years Nucor has been leading in the world steel arena. Another common phenomenon in the steel industry has been a downsizing. This has been brought about by companies shifting from earlier stance of being labor-intensive to a capital-intensive. Nucor has become concerned about the overcapacity of China, which has taken over as the world’s leading producer and consumer of steel.

The organization structure and management philosophy of Nucor

The management structure of Nucor is laid in a way different from the lay out of other steel firms in the USA. An organization structure always consists of all the activities of the human resource management that include tax allocation, coordination and supervision. All these are directed towards achieving the organization’s aims; organization’s structure enables firms to allocate responsibilities to be performed by different entities such as departments, work groups, branches and individuals. Nucor Corporation has employed and decentralized the organizational structure. To increase employees’ innovation, Nucor’s structure is streamlined. It has a well defined management philosophy. In contrast to other companies, Nucor has not laid off employees for such reasons as lack of enough work. These decentralized structures have allowed the general managers and staff to make day-to-day decisions. The layers of its managerial hierarchy are composed of shop floor workers, supervisors, general managers and the executive vice president at the top. The CEO is at the top.

Human Resource Management Issues and Recommendations

General Managers at Nucor are supposed to make a 25% return. Therefore it means that they must decide on how to execute strategies for them not to be weeded out. This leaves managers to their own devices to decide how to make production policies. This is a problem for them since if they fail to meet their performance quarters they are at the risk of being fired or being prevented from advancing in the company. Workers have also become accustomed to high payment as a bonus. They are always money-driven, and if their returns in the company are down, they may become motivated. The Nucor corporation’s human resource department is not effective due to its few managers. Comparing these with the large number of employees appears unreasonable. The recommendation to the managerial philosophy would be that they examine the value of their compensatory skills and if possible readjust them accordingly. This will help the company to retain the large number of employees and remain competitive. The current market conditions at Nucor seem to have an upper hand. The existence of a well articulated managerial philosophy with a better pay structure appears hard to replicate or even initiate. Nucor appears to have the best employees. However, the market condition does not favor their performance in case of a decline.

It appears that profit margins for Nucor Company are going down. Therefore, the management must find a way to stabilize this downfall. They should also get strategies that will make the company remain more competitive in the steel industry. It is paramount for Nucor’ human resource management to contain losses the company is incurring as a result of uncertainties prevailing in the market place. Its future employment prospect largely depends on the human resource management members. It would be better if the team is increased.

Diversification and Rationale Recommendation

From the analysis, it appears that Nucor Corporation has already diversified in the steel industry because of its acquisition of smaller firms. However, the already mentioned legislations will require the company to consider acquiring companies that are not even related to steel production. On the other hand, such a company must be within the metallurgical family. Another diversification possible for Nucor would be to engage in production of metals such as aluminum, which competes with steel. The company can use aluminum to manufacture some lightweight motor vehicles.

Recommendations on how to Implement Diversification

Nucor has shown some strides towards approaching globalization. However, it remains an all-American company. The analysis also shows that the company holds exclusive rights for strip casting technology in Brazil as well as in Trinidad. In addition, the company has a joint venture with steel mill in Italy. Until 2008, another joint venture with some multinational companies in Australia enabled Nucor to diversify its operation even with a Chinese company. It is, therefore, recommendable that Nucor should develop and register its presence in China. However, this will require selection of sites with plentiful sources of electricity.

Nucor has to be aware of the challenges ahead. It appears that the company has recorded good economies of scale and is the leading top recycler and steel producer. However the company must bear in mind that the future of steel production is uncertain. That is, it heavily relies upon natural resources and infrastructure, which must be reinvented.

Finally, the human resource management of Nucor will have to come up with plans that will align the employees’ efforts to their mission. This is as a result of the way the US government has been advocating pay for performance in order to retain employees in the economy.