Vanraj Tractors

Topics: Economics, Madhya Pradesh, Agriculture Pages: 6 (1796 words) Published: August 8, 2011

The case depicts the dilemma of a decision-maker Mr Trivedi who has to select an appropriate segment for marketing the 10 horsepower (HP) Vanraj Mini tractor in the states of Gujarat, Madhya Pradesh, Maharashtra and Uttar Pradesh. The four segments identified for Vanraj tractors: small and marginal farmers, large farmers, industries, and horticulture farmers. Vanraj was economical and could perform almost all the functions of a big tractor at lower costs serving multiple purposes and uses. It provided added and immense advantage over the existing Chinese made mini-tractors and bullocks used by small farmers and the existing market players catered to the larger farmer segment considered lucrative and substantive in nature with a higher level of mechanization. India has emerged as the world’s largest market for tractors and the small and marginal farmers are dominant in terms of numbers but no player currently serving this segment. Mr Trivedi found a huge market potential in the small and large farmer segment as they had a latent demand and believed that this segment was the most appropriate target market for Vanraj but the other board members advised him to consider and study the feasibility and profitability from the other identified segments before deciding to freeze a particular target segment. Decision Problem

1. Selecting an appropriate target segment for Vanraj among the 4 identified segments. 2. Determining the appropriate price level for Vanraj to be sold in the selected segment.

Vanraj was designed for agricultural and transportation purposes with a robust and versatile technology. The segment demarcation and selection is crucial as the overall marketing strategy will get modified wherein each segment has a completely different industry structure and competitive environment. Vanraj was design to address most of the problems faced by small and marginal farmers which no other big tractor was able to do. This had led Mr Trivedi to believe in its perfect fit to the needs of this particular segment of farmers. STATE| ANNUAL SALES (in units)|

Gujarat| 17345|
Maharashtra| 28443|
Madhya Pradesh| 15288|
Uttar Pradesh| 54392|
Table 1: Average past sales of tractors in respective states The high fragmentation of agricultural landholdings with 82% held by small and marginal farmers with an increasing role of mechanization to increase foodgrain production provided a boost to tractor sales in India over the last two decades. The size of landholding did not inhibit the use of tractors and with declining size of landholdings per farmer; the big tractors were not economically viable for use in such farm sizes. The issue was that horsepower of tractors was increasing and size of landholding was declining which led to the exclusion of the small and marginal farmer segment from the purview of tractor companies.

Demographic segmentation
Small and marginal farmers| Large farmers|
* Large in number * Small landholding (average 1.4 to 0.4 hectares) * Engaged in subsistence farming * Uneconomical for farm mechanization| * Small in number * Large landholdings (average 3 hectares) * Engaged in commercial farming hence earning high income * High levels of farm mechanizations|

Geographic segmentation
Northern India (UP)| Western and Southern India (Gujarat, Maharashtra & MP)| * Soil is alluvial and fertile * Requires lower horsepower tractors * Area under horticulture farming - 1066 (‘000 hectares)| * Harder laterite and black soil * Requires higher horsepower tractors * Area under horticulture farming - 1550 (‘000 hectares)|

Breakeven analysis
Actual production of the ‘Vanraj’ varies from 300 to 480 across the seven years. The cost of production also varies from Rs.471.84 lakhs to Rs.758.76...
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