Sample Management Case Study Paper on Nucor Corporation

Case Study

Nucor Corporation had to make a critical decision concerning whether to invest in the new thin slab casting technology at the end of year 1986. The investment could put Nucor Corporation in a situation where it could lose everything it had invested in the prior period. This is because the venture had a huge initial investment cost of $280 million and working capital and start up expenses amounting to $30 million, which was projected to push the total investment cost to $ 340 million. This amount was nearly equivalent to the Nucor Corporation’s net worth, hence risking losing the whole company in case of failure. Highly risky projects have the high chances of generating high returns, and hence benefits to the investor. This supports the idea that that it was worthwhile for Nucor Corporation to invest in the Compact Strip Production (CSP) technology.

The Upsides of Investment

This technological advance would give Nucor a competitive edge over its competitors in that traditional integrated mills casted slabs with a thickness ranging from 8-12 inches. On the contrary, adopting CSP technology would allow Nucor to cast slabs with lesser thickness of up to two inches. By adopting this technology, Nucor would be the first company to penetrate in the market that has not been initially exploited as a first mover. Nucor would, hence, establish its reputation before the competitors among its customers, suppliers, and distributors, winning their loyalty towards the new products. Nucor would also earn high profits during the monopoly period before other competitors invest in new technology, which can be reinvested to improve its resource base. Additionally, technology would significantly lower Nucor’s future production cost, contributing to the company adopting a cost-leadership strategy. This strategy would enable Nucor to produce its products at a lower cost per unit than the competition, gaining a competitive edge in the industry.  

The Downsides of Investment

Technology is expensive for Nucor Corporation; it would consume high initial investment costs that are equivalent to the company’s net worth. Additionally, it would be a risky venture for a pioneer of CSP technology, since it had not been tested previously in the market, and hence lacks previous experience that Nucor could learn from.