The Structure Conduct Performance (SCP) Model is an effective tool for industry analysis. The objective of this study is to analyze the Indian Steel Industry with respect to the SCP model and find out the parameters, which significantly affect its structure, conduct and performance over a period of 14 years across the industry. Regression Analysis is used as a tool to extract the above information. The study attempts to combine industry level aggregate data with firm level information from the CMIE (Centre for Monitoring Indian Economy) database to test specified hypothesis. The paper concludes that in order to obtain higher profitability in the Indian Steel Industry, firms must either lower their cost of production and/or government regulation must decrease.

The analysis of the industry has for long been the subject for discussion for both academicians and practitioners. The seminal work on industry analysis was done by Mason [11] where he argued that the structure of an industry would determine the conduct of buyers and sellers which in turn would determine the performance of the industry. The performance of the industry could be measured by profitability, innovativeness or efficiency. Bain [4] advanced the research work by empirically proving that profit margin in manufacturing industries in which eight large competitors accounted for more than 70% of the sales were nearly twice that of industries in which eight firm Concentration Ratios was less that 70% (Concentration Ratio is the summation of the top firms in an industry divided by the total sales in the industry). Bain’s [4] insight led to the growth of a new sub-field of economics known as ‘Industrial Organization’ or IO in short [7]. The next big break came in 1980 when Michael E Porter [12] launched his landmark book ‘Competitive Strategy’ where he described the widely used Porter’s Five Forces Model. In mid- 1990s, two strategies Adam Brandenburger and Barry Nalebuff [3] brought in a new concept of industry analysis called ‘the value net’, where they stated that the industry is affected by four types of players—customers, suppliers, competitors and complementors. The purpose of this paper is the application of the Structure-Conduct-Performance (SCP) Model to the analysis of an industry and the Indian Steel Industry has been taken up as an example.

Steel Industry in India is today going through a high demand phase. But, in mid-1990s, steel industry was facing a crisis because of low demand and poor prices. However, in the last couple of years, due to increased demand of steel from China and also increased investment of governmentin infrastructure (The Golden Quadrilateral etc.) has resulted in a boom in steel demand. The SCP Model helps to break down the industry into structural and conduct factors and thereby evolve a relationship between them so that better understandings of the factors are evolved.