INTRODUCTION Decisions form the basis of strategy. Each firm must make choices regarding what resources and capabilities to invest in, as well as what to do with such resources and capabilities in order to achieve sustainable competitive advantage. The star of this week’s case, Nucor Steel, finds itself at a critical inflexion point: Should it invest in a new steel mill to commercialize thin-slab casting? This paper examines why Nucor is considering making such an investment and what risks are involved if they choose to adopt the technology. Based on this analysis, the paper will conclude with a recommended path for Nucor Steel. YOU CAN NEVER BE TOO RICH OR TOO THIN The flat sheet segment accounts for 52% of the U.S. market for steel. The
For CSP, experiments did yield positive results, but no tests had yet been done on a production basis. The lack of testing with continuous operation is particularly worrisome given that the CSP process must achieve a stringent 96% reliability to be cost-effective. Nucor had already spent $6 million on a Hazelett caster. If further tests were to be performed on CSP, a second-hand cold rolling mill could be bought and renovated for $11 million. Technological leapfrogging is another important consideration. Direct casting techniques were projected to become commercially viable in 14 more years. Even if further tests on CSP or the Hazelett caster could prove its production feasibility, would it be worth it to invest in thinslab casting in the interim, with the possibility that it could become obsolete by the turn of the century? In addition, SMS - the company that invented CSP, would be sure to promote the technology to as many steel mills as it could; Nucor Steel would be grappling with the twin risks of obsolescence and imitation. Financial Building a new thin-slab minimill will cost Nucor a projected $280 million. The firm also has a joint venture with Yamato Kogyo that is projected to cost $175 million. These projects would be undertaken in parallel and would stretch the firm substantially outside of its target maximum of 30% debt-to-equity ratio. Nucor has a preference for not