Utkarsh Chaturvedi

PGP/23/426
Case: Vanraj Mini-Tractors: Is small beautiful?
Question: Evaluate the attractiveness of different market segments for Vanraj.
Following four market segments have been identified for Vanraj mini tractors:
1. Small and Marginal Farmers
2. Large Farmers
3. Industries
4. Horticulture Farmers
I will evaluate attractiveness of each segment by mentioning pros and cons of launching the tractor in that
segment while considering following pointers:
1. Segment Size and Growth
2. Segment Structural Attractiveness
3. Company Objectives and Resources

I. Small and marginal Farmers: Farmers with less than 2 hectares of land come under this
segment
a. Segment Size and Growth:
i. 82% of total landholding comes under small and marginal farmers
ii. There are at least 2 million small and marginal farmers in Gujrat alone
(according to Jagdip Trivedi)
iii. Average land holding in Indian agriculture had declined from 2.30 hectares in
1970-71 to 1.57 hectares in 1990-91, i.e there has been an increase in the size of
this segment and is expected to increase further
b. Segment Structural Attractiveness
i. There are no major competitors in providing 10 HP mini tractors at affordable
prize. Only Chinese assembled tractors, three Gujrat based brands are the
competitor.
ii. HMT, one of the large tractor manufacturers, have decided to target this segment
with its low price 18-20 HP mini tractor
iii. Purchasing power of customers in this section is low. Marginal farmers have less
than 3 acres of land and do not get credit from the bank. Small farmers tend to
default the loans and are often not able to even reach break-even point
c. Value addition by company
i. Specifications of Vanraj are in line with what customer of this segment needs
ii. It costs less (0.19 mn rupees) as compared to alternative options (35 HP tractor
costs 0.25 mn rupees)
iii. It is more fuel efficient as compared to other alternatives (consumes only 1.5
litres of diesel per hour whereas big tractors consume around 4 litres per hour)
iv. Big tractors are not viable for small and marginal farmers with landholding size
of 0.4 hectares and 1.4 hectares
v. It is first mini-tractor with tested Power Take-Off (PTO), which is a demanded
feature in tractors
vi. Though bullocks are cheaper, it is more versatile and efficient as compared
vii. It could reach small corners of land inaccessible to big tractors
II. Large Farmers: Constitutes of farmers with greater than 4 hectares of land
a. Segment Size and Growth
 i. Size of this segment is relatively small with only 18% of landholding
ii. As agricultural lands are getting more fragmented, the size of this segment is
decreasing further
b. Segment Structural Attractiveness:
i. Though small, this is a lucrative segment as customers here are relatively better
off
ii. All the big players are focused on serving this segment
iii. There is stiff competition in this segment comprising of 12 major national players
and 4 major multinationals
iv. There is more mechanization in this segment, so people are more willing to buy
new technology
c. Value addition by Company
i. Customers in this segment are used to tractors with high horse power, Vanraj
could perform almost all the functions of big tractor at lower cost
ii. Lower price meant farmers could break-even earlier
iii. Had the same lifespan as larger tractors
III. Industries
a. We don’t have much data regarding size and growth of this segment
b. It can be used at industries, airports and municipal corporations; all of these have high
purchasing power
c. Its small size has some advantages in this area as it can be used on narrow streets of cities
and towns for waste collection and disposal services
d. No data regarding competition and its offering in this segment
e. However, this segment required changes in overall strategy of M/s Pramal Farmatics as
the material handling industry had completely different structure and competitive
environment than tractor industry
IV. Horticulture
a. Segment Size and Growth
i. Area under horticulture has been increasing
ii. In Maharashtra and Gujarat it has almost doubled in the period 1991-2002
b. Horticulture farmers have large landholding and form a market niche within the market
segment of large farmers
c. No data regarding competition in this segment
d. No data regarding specific value addition by Vanraj in this segment

Question: Which market segment would you target? Why?

M/s Pramal Farmatics should not target the following market segments:
I. Large Farmers: The competition is too intense here. All the major players are focusing
on this segment. It would be difficult to grab market share here with initial launch.
II. Horticulture: Regions of growth for this segment are in Gujrat and Maharashtra, but the
soil in these regions in black soil/laterite soil for which tractors of higher horsepower are
required.
e. Industries: This segment required changes in overall strategy of M/s Pramal Farmatics as
the material handling industry had completely different structure and competitive
environment than tractor industry
In the small and marginal segment, M/s Pramal Farmatics should not target marginal farmers because
marginal farmers have less than 3 acres of land and hence they won’t be getting credit from banks for
purchasing tractors. As a result there won’t be enough purchasing power with marginal farmers. For
launching Vanraj they should focus on small farmers because of the following reasons:
I. It will have first mover advantage here, these farmers require small tractors and no major
player is focusing on small tractors with 10 HP
II. As fragmentation of agricultural lands in happening in India, this segment is continuously
increasing
III. With lesser price and low maintenance cost, farmers can break-even early even if they
have small land holdings
IV. They can also rent out the tractor for farm and non-farm activities
V. Cost benefit analysis for alternative options for customers in this segment are:

Vanraj Bullock Tractors on rent Large Tractors

Purchase price: Purchase price: 22k - Purchase Price: 0.30
0.19mn rupees rupees mn rupees
Lifespan: 8-9 years Lifespan: 8-10 years - Lifespan: 8-9 years
Lifetime - - Lifetime
Maintenance cost: Maintenance cost:
19k rupees 30k rupees
Fuel cost per year: Fodder cost/year: 17k Operational Fuel cost per year:
40*900*1.5=54k cost/year: 40*900*4=144k
rupees 250*900=225k rupees
rupees

We can see that Vanraj’s operational cost is less than both large tractors as well as tractors on
rent. Bullocks have a cost advantage, but Vanraj is much more versatile as it can perform
interculture operations. Vanraj also offers Power Take-Off (PTO) point, which can be used to run
rotovator, thresher, water pump for irrigation, floor mill etc.
Tractors are also a sign of masculinity, power, prosperity and a sign of having arrived for the
Indian farmers. M/s Pramal Farmatics should position Vanraj as the pioneer of mechanization for
small farmers who are still struggling with manual farming techniques and subsistence farming.
This will instill a sense of confidence in the customer base and in turn create a set of loyal
customers for Vanraj.