PESTEL ANALYSIS

PESTEL analysis is a framework or tool used by marketers to analyze and monitor the macro
environmental that is the external environmental factors that have an impact on an organization.
Tractor industry plays an important role as agriculture sector has a major contribution to Indias
GDP.

POLITICAL ANALYSIS

Govt. stress on mechanization to boost grain production.

Subsidy on agricultural loans from government
Regaining Agricultural dynamism, a key goal of eleventh Five year plan.
Change in taxation policy.
100% FDI policy.

ECONOMIC ANALYSIS

Credit extended by commercial banks, state land development banks and regional rural
banks.
Cost of tractors in India is the cheapest in world .Hence there exists tremendous scope for
exports.
Deteriorating foreign exchange situation in western country, poor buying capacity and
comparatively cheaper import of second hand tractor from developed country.
Inflation may provoke higher wage demands from employees and raise costs.
Higher national income growth may boost demand for a firm's products.
Less interest rate charged by banks for agricultural inputs.

SOCIAL ANALYSIS

Increase in awareness among the farmers for the need of farm mechanization and are
keen to acquire tractor.
Due to land fragmentation farmers with small land holding are not buying tractor.
There is need for more tilling due to depletion of moisture and repeated cultivation of
land.
Animal power available is too inadequate to meet power demand of our farmers.
 More farmers are opting for multiple cropping over last decade. Country's gross cropped
area increased by about 4.7%.

TECHNOLOGICAL ANALYSIS

Accelerated acquisition of technology capabilities to raises productivity in agriculture.

Continuous technological innovation.
Renewable energy development. Ex, coal gas renewable.

ENVIRONMENTAL ANALYSIS

Irrigation facilities reduce reliance on the monsoon and allow for quick yielding varieties
of food -grain .This reduces the cropping cycle to 3-4 months from the traditional 5-6
months. Reduced cropping cycle require deep tilling which translates into higher demand
for tractors.
Strong monsoons, increase lending by nationalized banks which leads to farming of
commodity prices money availability catapulted tractor demand.
Global warming

LEGAL ANALYSIS

Collaboration with government which shapes policy issues.

Agricultural policy.
Rules and Regulations laid down by the govt. over labor employment, safety, wages

PORTERS FIVE FORCES ANAALYSIS

This analysis is mainly done to deal with competition, it covers threat of new entrants,
substitutes, bargaining power of customers and suppliers and the competitive rivalry. Porters five
forces analysis of tractor industry can be explained in the following way,

BUYER POWER

Varying density of consumer base across locations.

Some places are over tractorised and some are under tractorised.
Firms: buyers concentration ratio is 1:20000 (but only 4 major players
 No of players in an industry determine how effectively the demands can be met.
High switching costs for buyers.
Mostly a tractor is one time buy for the farmers.

SUPPLIER POWER

Minimal chance of forward integration.

It requires large capital and technological expertise, making it unviable in the part
of the suppliers.
Too many suppliers
This reduces the dependency on a single supplier
Switching cost is less for tractor companies
The raw materials are generic and widely available from many suppliers

EXISTING COMPETITION

Entry of foreign players

They may bring high technological innovation and expertise hence better products.
Larger M&As
This makes the existing firms bigger and hence brings more rivalries.

THREAT OF NEW ENTRANTS

Entry/ Exit barriers and costs

Large dealer network needed
Tractor needs intensive capital and technology
Brand loyalty high

THREAT OF SUBSTITUTES

No credible availability of substitutes

Tractors dont have substitutes as such. The only option available is bull plough
which is not that efficient as the use of tractors, certain parts have hardly any substitute.
For e.g. Power tillers have very low power of substitute
High number of complements increases demand.
 For eg. Plow needs to be complemented with tractor for its use.

SWOT ANALYSIS

STRENGTH

Government support for agricultural sector

High rate of Indian GDP
Easy availability of finance

WEAKNESS

Sale depends on monsoon

Indian farmers have low income
Fragmented land ownership.

OPPORTUNINTIES

Low penetration of tractors

Export of tractors
Commercial use other than agriculture

THREAT

Agriculture has the minimum growth among all sectors

Some parts of India have high penetration