Vanraj Mini Tractors Case Analysis

Vikas Almal PGP/23/486

Q1. Evaluate the attractiveness of different market segments for Vanraj?

Ans 1. The key states that Mr. Trivedi is looking to sell his tractors are Gujarat, Madhya
Pradesh, Maharashtra and Uttar Pradesh.

The market segments can be differentiated based on following criteria:

1. Size of agricultural land owned by farmers
2. Type of soil
3. Type of crop cultivated by farmers

1. Based on the size of agricultural land owned by farmers there are three key
demographics
• Marginal farmers – they are the largest demographic with a majority portion living
in Uttar Pradesh. The average size of land owned by marginal farmers is only 0.4
hectares (1 acre). These farmers will most likely buy Vanraj by taking loans.
However, banks are financing loans for farmers having land of size 3 acres and above
only and in that as well they are facing higher default rates. If these farmers opt for
loans from other agents, they then will have to pay higher interest rates which won’t
be a preferable option for them. Hence, these farmers will be apprehensive on
buying Vanraj.
• Small farmers – this segment satisfies the bank requirements for availing loans and
possess 1.4 hectares of land which can be easily and efficiently cultivated by them
using Vanraj.
• Large Farmers – these farmers have sufficient monetary funds available with them
and hence will prefer to buy tractors with higher horsepower. Hence, Not a target
audience for Vanraj.

2. Based on type of soil there are two demographics

• Alluvial soil – Uttar Pradesh region has alluvial soil on which Vanraj can operate
efficiently for tilling and other farming activities.
• Black and laterite soil – Gujarat, Madhya Pradesh and Maharashtra all have black
and laterite soil which require higher horsepower tractors for agricultural activities.
Hence, these states can’t be our target audience.

3. Based on type of crop cultivated by farmers

• Fruits – Since Uttar Pradesh be our key target region, the cultivable area under
fruits has decreased from 303.2 hectares in 1991-92 to 288.3 hectares in 2001-
02.
• Vegetables – In Uttar Pradesh, the cultivable area under vegetables has
increased from 576.7 hectares in 1991-92 to 777.9 hectares in 2001-02.

Q2. Which market segment would you target? Why?

Ans 2. Based on above analysis, we can see small farmers in Uttar Pradesh region, clearly
stand out as one of the primary contenders. Lets’ do a cost benefit analysis to figure out
whether Vanraj will be a value proposition for them.

Per Year Bullock Vanraj Rent

Initial Cost Price 27500 190000 0
Working Life 8 8 -
Span
Cost Price/Year 3437.5 23700 0
Fuel/Fodder 17500 950(hrs)*1.5(consumption 250(price/hr) *
cost /hr) *45(avg. diesel price) 5(hrs/day) * 180(#
= 64125 days) = 225000

Maintenance 0 190000*0.125/8 = 2969 0

Cost
Inter-culturing 400 (man-hrs) * 20 Already included 0
cost (labor price/ hr) *
1.4(#hectare) * 2 =
22400
Interest 0 19000 @10% 0
Revenue from 0 425*(250– 1.5*45) = 0
renting 77562.5

Total Cost 43337.5 109794 – 77562.5 = 225000

32231.5

As we can see from the cost benefit analysis, Vanraj tractors clearly provide cost benefit
over both bullocks and on renting other tractors. On top of this, time and effort saved from
cultivation would be a huge boost in productivity and efficiency of these farmers. Since
Vanraj consumes less fuel as compared to big tractors, it will increase profits for the farmers
and will lead to less default rates of loans. Since, no big competitors are working towards
creating a mini tractor, the first move advantage would help Mr. Trivedi in capturing the
majority market share.