Marketing Management Case Study

Vanraj Mini-Tractors

Group 5, Sec C
Ankush Siddhu 135

Gaurav Gupta 145

Piyush Verma 155

Praneeth Kumar 165

Siva Kumar 175

Yeshwant Kumar 185

 Issues: Identification of the most appropriate market segment for Vanraj Mini Tractors

Objectives:

 Analysing different market segments : Small and Marginal farmers; Horticulture farmers.

 Selecting the most appropriate market segment for Vanraj tractors

 To determine the break-even point for Vanraj tractors

Features of Vanraj Mini-Tractor:

 Mini Tractor of 10 HP power

 Performs all functions of big tractors at lower costs

 Lesser Fuel Consumption

 Better manoeuvrability and control in farming operations

 First tractor with “Three-Wheel Convertible “ feature

 First mini Tractor with tested Power Take-Off point

Demographic Segmentation

Small Farmers and Marginal Farmers Large Farmers

 Large in number
 Small Landholdings (Avg 1.4- 0.4
hectares)
 Engaged in subsistence farming
 Uneconomical for farm mechanization
 Small in number
 Large landholdings (Avg > 3 hectares)
 Engaged in commercial farming hence
earning high income
 High levels of farm mechanization

Geographic Segmentation :

Northern India (UP) Southern and Western India (Gujarat, MP,

Maharashtra)
 Soil is alluvial and fertile  Harder soil-laterite and black soil
 Require lower horsepower tractors  Require higher horsepower tractors
 Area under Horticultar farming:  Area under Horticultar farming:
1066 (‘000 hectares) 1550 (‘000 hectares)

Analysis:

I) Calculation of Break Even Point

Total Revenues = Fixed Cost + Total Variable Cost (at break even point)

Assuming break even in 1st year itself (costs corresponding to 1st year only)
1.9*S = (12.5 + 100) + (1.55*S) + [(S*1.2/300) + (S*0.6/300)] + (5.04 + 3.94 + 1.44 + 1.43 + 4.80)

R A B C D

S = 380

Since sales are more than 300 (production in 1st year), we have to consider costs in 2nd year too.

1.9*S = (12.5 + 100) + (1.2 + 0.6) + (5.04 + 3.94 + 1.44 + 1.43 + 4.80) + (S-300)*(1.44+0.6)/330 + (6 +
4.32 + 1.8 + 1.36 + 4.56) C’
D’

Gives, S = 433 (Break Even Point)

R: Revenue earned from tractor sales

A: Paid up capital and cost of acquiring the technology

B: Cost of raw material (variable cost)

C: Cost of electricity and consumables (variable cost in 1st year)

D: Cost of salary, overhead, sales expense, depreciation and interest paid (fixed cost in 1st year)

C’: Cost of electricity and consumables (variable cost in 2nd year)

D’: Cost of salary, overhead, sales expense, depreciation and interest paid (fixed cost in 2nd year)

II) Analysis of Small and Marginal farmers sector

In India, small farmers traditionally relied upon bullocks for all their agricultural needs. Therefore, the main
competitor for Vanraj Mini tractor were bullocks rather than other Chinese make cheap tractors which were
not suitable for Indian trying conditions.

(i) Comparative Analysis:

Average land holding of marginal farmers was 0.4 hectares and small farmers was 1.4 hectares. Hence,
assuming that farmers in this segment would meet their farming requirements with a pair of bullocks, a
comparative analysis is presented below :

Bullocks ( 2 ) Vanraj Mini Other small tractors

Initial cost Rs 0.027 m Rs 0.19 m Rs 0.16 m
Life span 8-9 years 8-9 years 6-7 years
Other Costs Fodder= Fuel= Fuel costs same as
Rs 17500*11yrs 950 hrs*1.5 l/hr *Rs that of Vanraj
=Rs 192500 33/litre*8
=Rs 376200
Maintenance costs Nil 15% of SP = 40% of SP=
Rs 0.03 million Rs 0.06 million
Total cost incurred Rs 0.22 million for 8 Rs 0.6 million for 8 Rs 0.6 million for 6
yrs usage yrs usage yrs usage

(ii) Challenges:
 • Though, using a mechanized equipment rather than bullocks would increase efficiency in agricultural
methods, total cost incurred on Vanraj mini is 3 times more when compared with total cost incurred
on bullocks. Hence, it is not economical for small farmers.

• It is more economical for farmers to hire a big tractor. This way they would be saving time and work
more efficiently.

III) Analysis of Horticulture Sector:

(i) Advantages of Vanraj Mini tractor over others in horticulture sector :

• The big tractors are unwieldy in negotiating their way through the small gap between the lanes in
horticulture farms. Vanraj’s small turning radius and mini-size would make it easy to maneuver it
through the small lanes of horticulture farms.

• The three-wheel convertibility option available in Vanraj would be of great use in interculture
operations in Horticulture farms.

• Savings on initial cost:

Vanraj Mini tractor price= Rs 0.19 million

Least price of a Big Tractor= Rs 0.24 million

Savings= Rs 0.05 million

• Savings on fuel Cost :

Vanraj Mini Tractor consumption= 1.5 litre/hr

Average consumption of a big tractor= 4 litre/hr

Savings in fuel= 2.5 litre/hr

Savings in fuel cost= 2.5 * 33 = Rs 82.5 /hr

Hence, Horticulture sector would serve as a niche market for Vanraj Tractors.

(ii) Estimation of market potential in Horticulture segment :

• Percentage change in area from 1991-92 to 2001-02:

Area under Fruits Area under Vegetables

Maharashtra 127.56 66.9
Gujarat 76.33 102.6
Uttar Pradesh -4.9 34.88
Madhya Pradesh -27.99 -22.66
• Horticulture sector 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.

• Total land under Horticulture in 2001-02= 2615.6 hectares

• Owners of such farms are well off and they can afford Vanraj as their second tractor for their special
needs where big tractors are unwieldy.
 • Hence, making a reasonable assumption that 1 tractor is required for every 2 hectares ( i.e
approximately 5 acres ), then number of tractors required = 1308

• Hence, estimated market potential in Horticulture = 1308 * 1.9

= Rs 24.85 crores

(iii) Recommendations:

1. Horticulture sector presents a niche market for Vanraj. It is concentrated only in few pockets of
states. Hence, Vanraj marketing should focus on such areas to fully tap the market potential.

2. Area under Horticulture saw a decrease in states like Madhya Pradesh. Hence, Vanraj s.hould
interact with farmers in this region, find out the reasons and give them proper advice and hence
should try to create a market for them.

3. Market of small and marginal farmers is not a viable option according to the cost-benefit analysis
done above.