Indian Institute of Management Kozhikode

Case Analysis Note - PGP/19/Section F

Vanraj Mini-Tractors

Students:
Arjit G - #307
Manisha C - #317
Rachit K - #327
Indu Priya S - #337
Sisir VS - #347
Vinoth Kumar N - #357

July 16, 2015

Professor:
Joffi Thomas

Question

Evaluate the attractiveness of different market segments for Vanraj?

Sol: Firstly, we have to decide between small, marginal and large farmers.
Large farmers already had the big companies to choose from and also they
needed tractors with more than 10 HP, thus they would not be interested in
Vanraj.
Also, since 90% marginal farmers take loans for buying tractors and most of
them turn into bad debts. So there is a high probability that the banks stop
giving loans to them and there will be no one to buy them.
So, they should target the small farmers segment. However the small farmer
segment uses bullocks or rent tractors from big farmers. Let us analyse the
different alternatives for small farmers:

Total life of bullocks is 11

Useful life is 8
Total fuel/acre for one crop(from annexure 3) is 33
Number of crops per year is 2
Cost of diesel per litre is 40
Land size of small farmers(hectares) is 1.5
1 hectare in acres is 2.47 acre
Rent per hour is Rs. 250
Time for one crop (annexure3) is 19
Man hour require to cover 1 hectare of land is 400
Approximate cost of man hour per hour is 20
Interest rate is 10
1

Per Year
Initial Cost
Life span(years)
Fuel cost
Maintenance
Interest
Estimated time loss
Total cost per year

Bullock
27500
9
24062.5
0
0
12000
36062.5

Vanraj
Rent
190000
0
8
0
9781.2 35197.5
2968.75
0
19000
0
0
0
31749.95 35197.5

Table 1: Cost Table

Question

Which market segment will you target? Why?

Sol: We see that per year cost of buying a Vanraj tractor is less than
taking tractor on rent or using a bullock and it saves a lot of time and will
increase the productivity. Also though the initial cost is higher, the tractor
can be used for various other purposes like transportation also and also it has
other features like PTO point and can access areas where bullocks cannot go.
Now we will check whether Vanraj can compete with large tractors in
medium-small and medium segments well. We will see this by checking the
cost incurred due to fuel consumption (see Table 2 on next page) by both
Vanraj and large tractors.
As we can see, the benefit of using Vanraj tractor over a large tractor
is high even for semi-medium and medium land holding farmers. So Vanraj
can also be used by semi-medium and medium land holding farmers. These
segments provide market potential in horticulture which in turn is a good
prospect for Vanraj.

Fuel Consumption
.
For Vanraj For Large Tractors
Small
8852.48
21024.64
Semi-medium 18969.60
45052.80
Medium
25292.80
60070.40
Table 2: Fuel Consumption Table

Benefit
12172.16
26083.2
34777.6