Vanraj_AS.docx
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VANRAJ:::: ANALYSIS The given case is about deciding on the market segment for “Vanraj Mini-Tractors” and thus selecting the most appropriate market segment. The segmentation can be done on the basis of the land holding, the type of soil (geographical) and by the type of the crop cultivated. The focus states for Vanraj Mini- Tractors are Uttar Pradesh, Madhya Pradesh, Gujarat and Maharashtra. Field trials conducted to check its functionality in black and laterite soils have provided satisfactory results so segmentation on type of soil (geographical) doesn’t seem necessary. To solve the dilemma of choosing the right segment for Vanraj we have done cost benefit analysis from the perspective of small farmers having average land holding size of 1.4 hectare. 90% of tractors are bought on credit availed from banks. Due to restriction in credit from banks to marginal farmers as their land holdings are less than 3 acres, Vanraj may not be viable for them. Thus marginal farmers are not part of the target segment. As per case to target small farmers we need to make them switch from use of bullocks or from the use of rented tractors to Vanraj. Following table shows the cost benefit analysis of different alternatives for small farmers. Table1: Per Year Bullock (in Rs.) Vanraj (in Rs.) Rent (in Rs.) Initial 27500 190000 0 Life span 11 years ( Useful life- 8 years) 8 years - Fuel/Fodder cost Fodder cost: 17500/year*11/8= 24062 Fuel cost= 33 liter/acre*2 crops/year*Rs 40/liter*3.458(land size) = 9129 Rent – (@ Rs. 250 /hr) For 1 acre – 22 hours (2 crops)* 22 hrs*3.45882 (land size)*250(rate)= 38038 Maintenance cost 0 2968 (12.5% for 8 years) 0 Inter- culturing cost 400 man-hours @ Rs. 10/hr for 1 Hectare =400*10*3.458/2.47=5600 (Included in Fuel cost) 0 Interest 19000 (@10 % per year) 0 Total cost/year 29662 31097 38038 From the cost benefit analysis we can conclude that using Vanraj tractor provides clear advantage over using services of rented tractor by a small farmer. When we compare it with the use of Bullocks the initial cost of Vanraj may be higher but it has many added advantage like possibilities of alternative uses of Vanraj adding to revenue generation. It would also increase efficiency in agriculture operations. Thus for a small farmer it is a better option to switch to Vanraj from bullocks as well as from the use of service from a rented tractor. Compared to big tractors Vanraj will be a viable option for small farmers. Currently they are purchasing big tractors by taking credit from banks but they are not able to meet their break even hours of operation due to higher fuel consumption and higher initial cost, this is leading to higher default rates in cases of tractors purchased on credit. Vanraj with advantages of low fuel consumption and lower initial cost would cater to their needs. Vanraj can be positioned as a product that will give ownership to small farmers and remove their dependence on large farmers. This will increase their social status; provide emotional benefits along with ensuring timely agriculture operations leading to better yield and income. The big tractors are not utilized to the full capacity and thus are given on rent to the small farmers thereby generating an extra income for them. Generally, the small farmers don’t buy the big tractors as they can’t afford to. Instead, they rent these big tractors to serve their purpose. This would be the point which we would be serving as an incentive for the small famers to buy Vanraj. This would be more like “Not buying a tractor but buying Independence”. They would be more autonomous and given the low cost and similar features of big tractors, it would aptly serve their purpose. Thus the major objective for M/S Parmal Farmatics should be clearly to target small farmers and capitalize on first mover advantage as there is no branded player catering to needs of small farmers. Requirements of marginal farmers match with small farmers, marginal farmers will present an opportunity for small farmers to rent out services of Vanraj to them which would give additional revenue to small farmers. Vanraj tractor’s added features of better maneuverability and control in farm operations make it suitable for small operational holdings which are emerging as a result of land fragmentation. Three wheel convertibility and smaller size favor its use in intercultural operations. Intercultural operations form an important component of Horticulture Farming, thus Vanraj will have acceptance among horticulture farmers . From the case we can see that Horticulture segment recorded very high growth in the period from 1991-92 to 2001-02 with 50% increase of land area under fruits and 39% increase of land area under vegetables. Thus owners of many such farms are Semi-medium, medium and large horticulture farmers and thus will use Vanraj as an additional tractor specialized for intercultural operations. Thus the company may look to increase its target segment in future to cater the needs of above segments of horticulture farmers.
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Transcript of Vanraj_AS.docx
VANRAJ::::ANALYSISThe given case is about deciding on the market segment for Vanra !ini"Tractors# and thus se$ecting the most a%%ro%riate market segment& The segmentationcan be done on the basis of the land holding, the type of soil (geographical) and by the type of the crop cultivated& The focus states for Vanra !ini" Tractorsare'ttar(radesh) !adh*a(radesh) +uaratand!aharashtra& ,ie$dtria$sconductedtocheckitsfunctiona$it*inblackandlateritesoilshave%rovidedsatisfactor* resu$ts so segmentation on t*%e of soi$ -geogra%hica$. doesn/t seem necessar*& To so$ve the di$emma of choosing the right segment for Vanra 0ehave done cost benefit ana$*sis from the %ers%ective of small farmers having average land holding size of 1.4 hectare.90 of tractors are bought on creditavai$ed from banks& 1ue to restriction in credit from banks to marginal farmers as their $and ho$dings are $ess than 2 acres) Vanra ma* not be viab$e for them&Thus margina$ farmers are not %art of the target segment& As %er case to target sma$$ farmers 0e need to make them s!itch from use of bullocks or from theuse of rented tractors to "anra#.,o$$o0ing tab$e sho0s the cost benefit analysis of different a$ternatives for sma$$ farmers& Tab$e3: $er %ear &ullock (in 's.) "anra# (in 's.) 'ent (in 's.)Initia$ 45677 387777 7Life s%an 33 *ears - 'sefu$ $ife" 9 *ears. 9 *ears ",ue$:,odder cost ,odder cost: 35677:*ear;33:9< 4=7>4 ,ue$ cost< 22 $iter:acre;4 cro%s:*ear;Rs =7:$iter;2&=69-$and si?e.< 8348Rent @ -A Rs& 467 :hr.,or 3 acre @ 44 hours-4 cro%s.; 44 hrs;2&=6994 -$and si?e.;467-rate.< 29729!aintenance cost 7 48>9 -34&6B for 9 *ears. 7Inter"cu$turing cost=77 man"hours A Rs& 37:hr for 3 Cectare>4 23785 29729,rom the cost benefit ana$*sis 0e can conc$ude that using Vanra tractor %rovides c$ear advantage over using services of rented tractor b* a sma$$ farmer& Dhen0e com%are it 0ith the use of Eu$$ocks the initia$ cost of Vanra ma* be higher but it has man* added advantage $ike %ossibi$ities of a$ternative uses of Vanraadding to revenue generation& It 0ou$d a$so increase efficienc* in agricu$ture o%erations& Thus for a sma$$ farmer it is a better o%tion to s0itch to Vanra frombu$$ocks as 0e$$ as from the use of service from a rented tractor&Fom%ared to big tractors Vanra 0i$$ be a viab$e o%tion for sma$$ farmers& Furrent$* the* are %urchasing big tractors b* taking credit from banks but the* are notab$e to meet their break even hours of operation due to higher fuel consumptionand higher initial cost) this is $eading to higher defau$t rates in cases oftractors %urchased on credit& Vanra 0ith advantages of $o0 fue$ consum%tion and $o0er initia$ cost 0ou$d cater to their needs& Vanra can be %ositioned as a %roduct that 0i$$ give o!nership to small farmers and remove their dependence on $arge farmers& This 0i$$ increase their socia$statusG %rovide emotional benefits a$ong 0ith ensuring time$* agricu$ture o%erations $eading to better *ie$d and income& The big tractors are not uti$i?ed to the fu$$ ca%acit* and thus are given on rent to the sma$$ farmers thereb* generating an eHtra income for them& +enera$$*) thesma$$ farmers don/t bu* the big tractors as the* can/t afford to& Instead) the* rent these big tractors to serve their %ur%ose& This 0ou$d be the %oint 0hich 0e0ou$d be serving as an incentive for the sma$$ famers to bu* Vanra& This 0ou$d be more $ikeNot buying a tractor but buying Independence. The* 0ou$d bemore autonomous and given the $o0 cost and simi$ar features of big tractors) it 0ou$d a%t$* serve their %ur%ose& Thus the maor obective for !:S (arma$ ,armatics shou$d be c$ear$* to target sma$$ farmers and ca%ita$i?e onfirst mover advantageas there is no branded%$a*er catering to needs of sma$$ farmers& ReIuirements of margina$ farmers match 0ith sma$$ farmers) margina$ farmers 0i$$ %resent an o%%ortunit* for sma$$farmers to rent out services of Vanra to them 0hich 0ou$d give additiona$ revenue to sma$$ farmers& Vanra tractor/s added features of better maneuverability and control in farm o%erations make it suitab$e for small operational holdings 0hich are emerging asa resu$t of $and fragmentation& Three 0hee$ convertibility and sma$$er size favor its use in intercu$tura$ o%erations& Intercultural operations form an importantcomponent of Horticulture Farming, thus Vanraj will have acceptance among horticulture farmers & ,rom the case 0e can see that Corticu$ture segmentrecordedver* highgrowthintheperiodfrom1991-92to2001-02with0!increaseoflandareaunderfruitsand"9!increaseoflandareaundervegeta#les$ Thus o0ners of man* such farms are (emi)medium, medium and large horticulture farmers and thus 0i$$ use Vanra as an additional tractor s%ecia$i?ed forintercu$tura$ o%erations& Thus the com%an* ma* $ook to increase its target segment in future to cater the needs of above segments of horticu$ture farmers&,o$$o0ing tab$e sho0s the comparative benefit analysis of Eig and Vanra tractors for sma$$) semi"medium and medium farmers&Tab$e4:Assum%tion: Vanra tractor can be used u% to 6 acres of $and&Sma$$ Semi"medium !ediumAverage $and ho$ding -in acres. 2&=69 5&=3 8&99Vanra ,ue$< 22 $iters:acre-22;=7;2&=69;4
