Analysis of different market segments

According to the case there are four market segments for the Vanraj tractors. We have evaluated all of
them in detail. We have defined attractiveness not just as the growth potential of the segment but also
as a matching of Vanrajs features with the requirements and needs of each segment.

1) Marginal and Small Farmers:

Marginal and small farmers is the most attractive market segment for Vanraj. In-fact the development
of the tractor itself was done to suit the needs of this customer segment. This segment is quite large in
number but the level of farm mechanization is low because of smaller land holdings. A product
specifically built for this segment, like Vanraj, is apt to capture this market.
Farmers in this segment primarily use Bullocks for their farm activities. Here we have done a cost
analysis for the use of Bullocks over their given lifetime and that of Vanraj for the corresponding life
time.
Assumptions: Both Bullock and Vanraj run for a lifespan of 9 years.

Small and Marginal

Farmers Cost(Rs) Source of information
Initial cost 1,90,000 Given in case
Less than 30 HP tractors received
this subsidy to promote
Subsidy by the Govt. - 30,000 modernization of agriculture
Assume 12.5% of initial cost
Maintenance cost 23,750 according to case
Assuming 950 hrs per year, 1.5L/hr,
Diesel expenses 4,56,000 Rs. 40/L and life of 8 years
Total Expenses 6,39,750

Bullocks Cost(Rs) Source of information

Intial cost 30,000 Given in case
Assuming 20,000 per year for 9 years
Fodder cost 2,40,000 of work and 3 years initially
Total expense 2,70,000

Difference in Expense 3,69,750

Observations:
 We believe that the difference in expense of Rs. 4,26,750 is going to be bridged by the
efficiency improvements the use of tractors will bring to these small farmers.
Vanraj is functionally superior to Bullocks and is more versatile. The features of three-wheel
convertibility (for inter-culture) and PTO point can be very helpful for small farmers.
The case says that the utilization of tractors is relatively low and hence farmers rent out
tractors for farm and non-farm activities to recover their costs and achieve break-even. Vanraj
is designed such that it can haul goods upto 2 tonnes and hence can be utilized well by the
farmer using it. The income coming from this use will also help in bridging the gap between
Bullocks and Vanraj.
Mechanization will reduce the drudgery of small and marginal farmers who control roughly
account for 82% of total landholdings.
Finally, the cost of manufacturing is coming out to be 1.57 Lakhs, which gives room to
maneuver for the company to further offer discounts to small and marginal farmers.

Due to the above reasoning and due to the fact that most of these farmers do not own a tractor and the
Vanraj is specifically built to suit their needs, hence the attractiveness of this market segment is high.

2) Large Farmers:

This is the largest market segment for tractors. The well-off nature of large farmers makes it an
attractive segment for Vanraj. This segment largely buys large tractors but is attractive for Vanraj as
well because of the segments prosperity and purchasing capability.

Observations in comparison to large tractors:

Vanraj being a versatile technology can do most of the work that large tractors.
They are highly fuel efficient (consuming 1.5 L/Hr) in comparison to large tractors (4 L/Hr)
even though the output of large tractors is more the case mentions that Vanraj is quite
capable of carrying out all the operations at a relatively lower cost
Vanraj is easy to repair and maintain because of its design. The cost of maintenance is also
lesser as compared to large tractors (almost half).
Vanraj offers better maneuverability & control in comparison to large tractors it can reach
places where it is difficult for large tractors to operate.

However, the case points out that tractors are often associated with masculinity, power, prosperity,
and a sign of having arrived; Vanraj might not appeal to this segment because of its utilitarian and
small design. Also, the purchasing power of this segment makes it easy for these farmers to choose
large tractors over Vanraj.

3) Industries:

The case mentions that tractors like Vanraj could be used (with a few modifications) in material
handing operations in industries, airports, warehouses, construction work, etc. It could also be used in
municipal corporations for narrow streets of cities and towns & the applications could be waste
collection and disposal services. The case does not provide data to evaluate the size of this market
segment, but our analysis is that given the varied applications in industries, this could be an attractive
segment for Vanraj. The only drawback, as mentioned in the case, is that Pramal Farmatics would
have to change the overall strategy of their company to target this segment. For example, the sales
paradigm and competitive structure of these industries is completely different from the tractors
industry.

4) Horticulture Farmers:
According to our analysis, this is a very attractive segment for Vanraj. The reasons are:
Vanrajs three-wheel convertible feature (used for Interculture) is useful for farmers growing
cash crops and practicing horticulture.
The area under horticulture has grown by leaps and bounds (Annex 1). This is especially true
for Vanrajs target states of Gujarat and Maharashtra.
Vanrajs versatility make it suitable for other additional uses in horticulture like those of
spraying pesticides, fertilizers and line marking in orchards.

Hence because of the matching between Vanrajs features and the growth in horticulture, this is an
attractive segment for Vanraj.

Market segments to target and reasons

We will target the small and marginal farmers and horticulture farmers because of the following
reasons:
1) Small and Marginal Farmers:
This segment is largest in number and is least mechanized. The potential for growth is high
for Vanraj given its affordable price.
Other factors like Governments push for tractorization to increase farm productivity will help
Vanraj to develop its sales in this segment.
Vanrajs versatile technology and the fact that it is specifically built for this segment make
this segment an obvious target.
The cost analysis performed in the previous segment further validates the attractiveness of
this segment.

2) Horticulture Farmers:
The growth of the area under horticulture (Annex 1 of the Case) is a good motivator to target
this segment
The locations that Vanraj is primarily operating in (Gujarat, Madhya Pradesh and Maharastra)
have the highest number or horticulture farmers. Thus existing transport and distribution
channels can be used.
Further, Vanrajs technological capabilities like the three-wheel convertible feature for
interculture and its ability to line mark orchards and spray pesticides and fertilizers make it a
perfect product for this segment.
The case does not provide data to do an analysis against the alternatives currently used by
horticulture farmers but the overall growth and product fit make it a segment worth targeting.