Indian Steel Pipe Industry

and APL Apollo Tubes Ltd

Analysis using VRIO
Framework
 Introduction To Steel Pipe Industry
• India is the second largest steel producer in the World with production of around 120 million tonnes.
• Steel pipe and tube industry is nearly 10% of total steel production in India.
• India steel production is expected to 300 million tonne by 2030.
• Applications: Construction and oil & Gas industry. Oil & gas sector is traditionally the end users of steel pipes. The pipes are
used in upstream, downstream as well as downstream processing of crude oil. Except oil & gas sector, the other users are
chemical and Petro chemical industry, automotive and transportation sector, mechanical uses, power plant, Building and
commercial construction and infrastructure
• In terms of volume, seamless pipes accounted about 50% of market share. Seamless tubes are manufactured from billets and
there are no seam welds in seamless pipes. These pipes mainly used in the fluid transportation (oil & gas sector). ERW tubes
have gained prominence in the market due to their low prices and better performance. These tubes are mostly used in structures
and is crucial factor to support the infrastructure and building construction sector.
• 8-10% of the steel consumption is for steel pipes. The global steel pipe market grows at 4-5% CAGR over last 5 years. Oil and
Gas sector is the largest consumer of steel pipes and tubes. The Indian steel pipe market is growing at 8-10%.
 Objectives of Study and Research
Methodology
• A comparative study of Steel tube Industry in India and Internal analysis of APL Apollo Tubes limited
using VRIO framework.

Methodology:
• The report and analysis has been done by Qualitative research method by interviewing and asking the
journey of Founders and Directors
• All the secondary data are used in this project after studying and analysing the annual reports and
published announcement of APL Apollo Tubes Ltd
• Interview with Mr Sanjay Gupta and Mr Vinay Gupta, second-generation entrepreneur of APL Apollo
and followed the annual reports to validate the data points
 Literature Reviews
• APL Apollo Tubes Limited is one of the India’s leading manufacturer of branded steel tubes products
• Capacity 2.5million tonne per annum
• SKUs of 1500+
• ERW has been the fastest growing segment in the carbon steel pipe space
• APL Apollo caters to an array of industrial applications such as urban infrastructures, housing, irrigation, solar
plants, greenhouses, engineering and agricultural appliances.
• It has more than 800 dealers, 30 warehouses and 50000 retailers located across the breadth and width of the India.

• APL has always been a pioneer in new technologies & innovative products, which has helped it, grow faster than
its peers do. They also invest continuously in enhancing brand awareness and creating entry barriers for new
entrants.
 VRIO Analysis and Findings
VRIO Analysis:
• VRIO framework is to analysis the resources available with the companies. If the resource
is valuable for the company at the same time, it is rare resource, which is very hard to
imitate, and well organized by the management and employees, then the company having
an advantage over its peers. The competitive advantage implies the company performs well
in the market.
• After the scenario, it is time for strategic plan. If something is not managed will, then there
is an unused competitive advantage, so the management needs to work towards it and
change the unused advantage to sustained resource. Aim is to have as many as
sustained/temporary competitive advantages or to exceed in the business.
 Resources Valuable Rare Inimitable Organized Result
Cost Efficiencies
 
Yes VRIO Analysis (Excerpt):
Due to PAN India presence
Yes Yes
Not impossible, but to have
Yes Sustained
Advantage
Competitive

  with 10 plants and better Transportation cost is lower a such network takes time Fairly, that’s why APL is
management control to send material to synonym to structural steel Sustainability is in question
distributors and dealers tubes if any big group player will
entry or acquisition

Reduced Working Capital Yes No     Competitive Disadvantage

APL managed to work on As working capital depends Companies are learning and
cash and channel financing on business environment doing the same thing
for dealers
Extensive Network Yes Yes Yes Yes Sustained Competitive
  10 plants, 30 branch APL in his 35 years journey Advantage
  offices/sales and To have 800+ dealers, made this network possible Very well organized with
warehouses make it 50000 retailers and 2lac regional heads for APL has created this over
extensive fabricators warehouses and plant heads the year, but sustainability
is not forever
 Findings
APL Apollo Tubes Resources Result
Cost Efficiencies Sustained Competitive Advantage

Reduced Working Capital Cycle Competitive Disadvantage

Extensive Network Sustained Competitive Advantage

Strategic Warehouses and Plants Sustained Competitive Advantage

Technology Temporary Competitive Advantage

Use of Renewable Energy Temporary Competitive Advantage

Brand Value Sustained Competitive Advantage

 Learning Outcomes
• VRIO Analysis of APL Apollo tubes and Detailed overview Indian steel tubes
limited Company Valuable Rare Difficult to Organized Results or

• VRIO Result:
Resources
Scenario 1 No  
Imitate
   
Implications
Competitive
Disadvantage
Scenario 2 Yes No     Competitive
Parity
Scenario 3 Yes Yes No   Temporary
competitive
Advantage
Scenario 4 Yes Yes Yes No Unused
competitive
Advantage
Scenario 5 Yes Yes Yes Yes Sustained
Competitive
Advantage
 Limitation of VRIO
• Business Environment is not considered- The VRIO Framework is static, and not taking
into consideration the changing business environment 
• Rarity and inimitable can be measured thoroughly: accessing the resources to be rare or
valuable too not include many factors like demand and supply, market dynamics
• Sustained Competitive Advantage in practical is not sustained: The sustainability of the
competitive advantage is in question. As many information of company are not publicly
available and any company, can develop or copy the strategy without the knowledge or
information to other company.
 Conclusion
• After studying steel pipe industry and APL Apollo tubes ltd, the largest player in the ERW structural pipes space, I concluded
APL is ahead of its time and create sustainable competitive advantages, which will last long.
• With the capacity of 2.6 million tonne, APL’s capacity is more than double that of its nearest competitor. As APL captures
50% of structural steel market share and it consumes around 2% (2 million tonne steel out of total India’s steel consumption
of 103 million tonnes), it got an edge of economies of scale in raw material procurement and enjoys some discounts from the
raw material vender due to bulk buying.
• The multi-location facilities enable APL to be a cost effective player. The advantage of lower freight costs is to stay with the
company for a long time, as it has strategically placed its plants around India.
• Strong distribution network of 800 dealers and more than 50000 retailers support the volume growth for APL. Now APL is
also looking for smaller dealers and end users awareness for selling strategy.
• APL is always the pioneer in adopting the latest technology. It is the first company in India to have Direct forming technology
with exclusive use. Due to the innovative product offering and use of new technology, it creates a different name for itself.
The reduced execution time and flexibility in design lead to more customization.