Page 161 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

3. Devote attention to delivering the basics. Low prices should
not mean low value but rather an alignment of price and
value.
4. Make flexibility and a broad job definition the norm. In
low-cost airlines, for example, flight attendants also clean
the cabins between flights.

Take a look at steelmaker Nucor. In the 1970s and 1980s, it
showed that a low-cost model can be used to take on a wide
range of competitors. In the mid-1970s, Nucor was a minimill
steel company like many others. It used the same equipment
(the highly efficient electric arc furnace), used recycled steel
products for its raw material inputs, made simple and inexpen-
sive steel parts, and had few manufacturing plants.
In the second half of the 1970s, Nucor developed a national
chain of plants that all produced the same low-end steel prod-
ucts and that were placed in equally spaced locations across the
country in order to reduce transportation time and costs.
Simultaneously, Nucor used a decentralized management
structure and had a nonunionized workforce. That business
model—which today would be known as a low-cost model—
was quickly successful relative to other minimill companies that
lacked Nucor’s scale.
After succeeding in the minimill market, Nucor proceeded
to use its business model to compete directly with the large,
integrated steel mills that produced high-value products but
were encumbered by a large cost base. In the 1980s, Nucor
gradually moved up the value chain, taking on the integrated
mills across many product categories. All the while, Nucor
focused on large product runs and resisted the temptation to
offer the same kind of customized products as its integrated

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