450 - Mehta Tanay Aatur - Vanraj Mini Tractors Case Analysis

Vanraj Mini Tractors Case Analysis
Name: Mehta Tanay Aatur
Roll Number: PGP/23/450

1. Evaluate the attractiveness of different market segments for Vanraj?
Following is the analysis on the attractiveness of different market segments for Vanraj:
 Product Segmentation:
The current products have been segmented into the following categories:
1. <20 HP - (0.37)% growth - 0.5% share
2. 21-30 HP - 15.22% growth - 25% share
3. 31-40 HP - (2.9)% growth - 55% share
4. 41-50 HP - (5.88)% growth - 15% share
5. >50 HP - 17.88% growth - 4.5% share
In the current market, the competitors are offering tractors of 20 Horsepower and more and
there is high competition for penetration into that segment. However, Vanraj is targeting a
new segment as it is offering tractors with 10 horsepower for the small and marginal farmers
at a lower price.
The company is one of the first companies to offer a product below 20 HP and one of the
Competitor HMT had just expressed their desire to sell a tractor with 18-20 HP while the
company is offering a product of 10 HP which is significantly different from the tractors
with power 18-20 HP and above. And the other 10 HP tractors available tractors in the
market are assembled tractors, which are not durable and have high maintenance cost, and
low cost mini-tractors from China, which have not fared well in the hostile Indian
Conditions. Hence the market penetration is not high and it is easy to enter the market with a
higher quality product with a comparable price.
The company is also offering the said products to the small farmers at a lower price i.e. Rs.
0.19 million as compared to Rs. 0.24 to 0.50 million for tractors between 30 to 50 HP.
Further the maintenance for the same is given as a percentage of the cost of Tractor. Hence
the lower price with same percentage of maintenance expense also gives an advantage for
the small and medium demographic segment.
The current option of bullocks cost 25-30 thousand and maintenance of 15-20 thousand
annually with a life span of 8-10 years and the same is not functionally superior with a
possibility of the bullocks staying with the farmer post the useful life span as a liability.
Hence, considering the low presence of competitors in the new market segment and the
lower competition, it can be said that the new Product Segment is an attractive target
segment for the company. However, the low penetration may be due to the higher cost of the
<20 HP tractors. Rs. 0.17 million for 10HP as compared to Rs. 0.24 million for 30 HP.
Hence the company has to demonstrate value of its tractor using the other features of its
product.
 Demographic Segmentation:
The Demographic segmentation is done on the basis of the characteristics of the population.
The characteristics are determined on the basis of the product and target market of the
company.
For Vanraj, the company is targeting the segment of small and marginal farmers of Gujarat,
Madhya Pradesh, Maharashtra and Uttar Pradesh with a market size of 35,096. The target
segment for the current market players is the Large Farmers whose market size in the same
4 states is 10,472. Further, the industry has recorded 0.5% sales in the category of <20HP
tractors which are normally targeted for the small and marginal farmers.
Further, the average land holding has reduced to 1.57 hectares and larger machines are not
viable for lands with area 0.4-1.4 hectares. Hence, the target segment has a large market size
considering the latest land holding statistics, the declining trend of land holding in India and
considering that the small and marginal farmers accounted for 82% of the landholding and
they didn’t own tractors.
Hence, considering the market penetration, market size and the opportunity in the
demographic segment of Small and Marginal Farmers, the said product is attractive in the
market if it can provide the tractor at a lower price for its target segment.
There is already a high mechanization in the segment of the large farmers and the high
Horsepower tractors are more viable for them. Hence, the segment is not very attractive.
However, the company has the three wheel convertible technology with Power take-off
point feature. The company can consider entering the high HP tractor sector on a later stage
and penetrate into the market using its USPs.
 Geographical Segmentation:
The Geographical Segmentation of the Tractor is being done on the basis of type of soil
alongwith the geographical location of the state. The Northern states including Punjab,
Haryana and Uttar Pradesh have alluvial soil and hence requires low horsepower while the
southern and western states including Gujarat, Maharashtra and Madhya Pradesh had harder
laterite and black soil which required high horsepower tractors.
Considering that the company is targeting Gujarat, Maharashtra, Madhya Pradesh and Uttar
Pradesh, majority of the states have harder soil and require high horsepower. Hence, the
northern states, of which Uttar Pradesh is our target market, are more attractive considering
the lower requirement of horsepower. The lower requirement combined with our unique
features, can give a good proposition for the farmers of that region.
 The Segments can also be defined on the basis of the industry of the farmers eg.
Horticulture. Farmers practicing horticulture have great benefit due to the three-wheel
convertible technology of tractors and the company had applied for a patent in the US for
the same feature. The horticulture has been increasing in the target states, especially in
Gujarat and Maharashtra. The horticulture practitioners normally hold a larger land, but the
company can leverage its technology to target the said segment.
2. Which market segment would you target? Why?

The company is offering a low power and low cost tractor to the customers. Considering the
branding and the market opportunity, my first target would be the horticulture practitioners with
lower requirement of Horsepower considering that the company is selling a low power tractor
with its USP of three wheel convertible feature.
The target segment is not low and marginal farmers as a whole as although the company is
selling a low cost tractor, the price difference between the high power tractors is not very stark so
as to persuade the small farmers to immediately buy the tractor. The utility of its Power-take off,
three wheel convertible feature and its high value because of the said features may be
demonstrated by penetration into a portion of the said segment to demonstrate value of the
tractor.
After successful demonstration of the features, my target would be the penetration into the full
market segment of small and marginal farmers.
The following are the advantages to the firm which have been considered for the selection of the
market segment:
1. Three wheel convertible feature which helps in maintaining soil moisture, weeding, etc.
2. Low penetration into the sector and the company is the first company to offer a good quality
tractor in the said segment.
3. The fact that the assembled tractor (not reliable) is Rs. 0.17 million while the company
offers the tractor at Rs. 0.19 million which is not much higher, considering the quality of the
tractor.
4. The value added to the product by the Three wheel convertible feature and the Power Take-
off feature.
5. Advantage over Bullocks.
6. India’s 8 tractors per 1000 hectares as compared to other countries with 19 tractors per 1000
hectares.
7. Maintenance and Running cost of both the tractors (significantly lower running cost due to
lower consumption of fuel)
8. HP requirement of various segments as per their unique features.
Hence, the target segment would be small and marginal farmers, with an initial major focus on
the horticulture practitioners and in a few months, widen the focus to the full sector of small and
marginal farmers and also expanding the market to the full northern region as considering the
type of soil in the region and the relevant requirement of the farmers in the region, which aligns
with the features offered by the company’s product.

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Vanraj Mini Tractors Case Analysis

Name: Mehta Tanay Aatur

Roll Number: PGP/23/450

2. Which market segment would you target? Why?

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