Farms of the Future

Scaffolding Assignment 2
Farms of the Future:
Empowering Growth with Automated Vertical Farming

BUS 101 Core Course in Business

Moldir Kaiynbayeva, Timothy Wawn, Aigerim Zhangozina
Nazarbayev University
Astana, Kazakhstan
Jun 27, 2023

by R1T5 group members:

Aibat Tubalykov
Ali Kosmaganbet
Alua Meiirbekova
Darina Ibrayeva
Rauan Ibragim
Sultan Turan
Yershat Abil

Summer 2023
 Farms of the Future

The description of our business idea:

Vertical farming is a method of cultivating plants in vertically stacked layers or
structures, often in urban environments. This method enables crop growing with a less
environmental impact, making it appropriate for urban locations with scarce or
expensive land. Additionally, it offers precise control over variables, namely
temperature, humidity, lighting, and nutritional levels. This enables crops to grow
successfully inside or in low-light conditions.

The Value proposition:

Our approach integrates AI technologies to create a Vertical Farming system integrated
with a mobile application for purchasing and managing processes. The innovation lies in
the AI integrated application's inclusion of customers and partnering business accounts.
The main purpose of an app for customers is to receive any sort of suggestions related
to specific nutrition, and for entrepreneurs to see which products are in high demand.
Moreover, business accounts will be able to access the status of the farm at any time.
This approach enables us to explore market opportunities for both B2B and B2C
interactions. Our project aims to deliver commercial and social benefits by providing an
agricultural venture supplying high-quality food to individuals and businesses. Our vision
is to initiate agricultural development in Kazakhstan and subsequently succeed in the
global market by implementing innovative approaches that align with the UN's
sustainable goals, specifically targeting Zero Hunger, Sustainable Economic Growth,
and Responsible Production and Consumption.

Target customers:
For the business to succeed, it is important to determine the right target market. Since
the cost and maintenance of vertical farms are fairly expensive, it is not suitable for
everyone. Therefore, we will employ a differentiated marketing strategy. The main
targets are other businesses (restaurants, pharmaceutical factories, food supplement
manufacturers, animal farms, etc.) dependent on a constant supply of plants (Fedotov,
2020). Potential franchising customers: Farms of the Future - Urban Farming and
Agricultural Enthusiasts: Urban agriculture is rising, so there are more individuals who
live in big cities and would like to contribute to the development of the local food
production market. Many face challenges like limited space and lack of resources to
start their farm. The vertical farming project offers a franchising opportunity that
provides training, technology access, and ongoing support for urban farmers to set up
and run their vertical farms.
● Entrepreneurs and Investors: including both individuals interested in developing a
sustainable agricultural system as a diversification of their existing business
models, and those who seek out in opening and operating high profitable
businesses with established systems and support.
 Farms of the Future

● Socially Responsible Investors: vertical farming franchises may appeal to

investors that value environmental sustainability and social effect. They see the
opportunity to address food security, reduce food miles, and promote locally
grown, pesticide-free produce. Potential product customers (B2B):
● Restaurants and food service businesses: vertical farming services can provide
restaurants with a reliable supply of locally grown produce, aligning with their
eco-friendly values.
● Small and medium-sized food industry business owners: Vertical farming offers
small and medium-sized food businesses a dependable supply of fresh,
sustainable produce. This helps businesses stand out by offering environmentally
conscious menu options.
● Retail shops (supermarkets, convenience stores, groceries, eco markets):
vertical farming provides a year-round supply of fresh produce, making it a great
option for retail shops to offer their customers locally sourced and pesticide-free
products.
● Kindergartens and schools: farming services can help schools and kindergartens
offer fresh and sustainable produce, promoting students' good eating habits and
wellness.
● Food delivery services: food delivery services need high-quality ingredients, and
vertical farming can provide fresh produce. Partnering with our services can
expand their reach by targeting a bigger audience due to quality food.
● Farmers: Experienced farmers with land can benefit from diversifying with vertical
farming. Year-round production and space optimization are advantages. Our
services allow using existing resources, access to expanding markets, training,
tech, and support to transition to vertical farming and diversify income.
● Pharmaceutical industry: vertical farming can provide a controlled environment
for growing specific plants used in medicinal products, ensuring their purity and
quality. Collaborating with the pharmaceutical industry could lead to the
development of specialized natural remedies and medicines. Farms of the Future
Potential product customers (B2C):
● Eco Activists: these individuals actively search for sustainable food options to
reduce the negative environmental impact of consumerism. They prioritize eco-
friendly practices and support locally-grown, pesticide-free, and environmentally
conscious foods.
● Health-Conscious Individuals: they are nutritionists, dietitians, and allergy
sufferers seeking pesticide-free, nutritious, locally-grown fresh food. They place a
high value on environmentally responsible behavior and are enthusiastic about
promoting the production of food grown close to home without pesticides.
● Fitness Enthusiasts: this segment includes athletes, sports bloggers, coaches,
and gym clients prioritizing high-nutrient and quality superfoods. They want to
 Farms of the Future

incorporate nutrient-dense foods into their diets to support their athletic

performance and overall health, which our product can help.
● Gastronomy Enthusiasts: people who love freshly foraged produce prioritize
unique, locally grown greens, herbs, and vegetables to enhance their culinary
experience.
● Technology Enthusiasts: this market loves technology and would love to have a
modern system for their home. They're excited about the idea of having a vertical
farm with the ability to grow fresh produce easily in their homes.

There are many ways to reach these customers of the target market. Firstly, mass
advertising on social media such as Instagram, TikTok, and Facebook helps gain public
attention. Secondly, forums related to agriculture are a great place to reach a target
audience interested in vertical farming. Thirdly, as important as the above mentioned
strategies are cold calls to target businesses in the local area to expand our influencing
market.

Table 1. PESTEL Analysis

Political Economic Social

- Governmental regulations -Economic stability of the - Consumer preferences

and laws towards state - Health consciousness
agricultural projects -The maintenance of - Urbanization
- Governmental purchasing power within - Technology adoption
regulations in developing the population
agricultural innovations -Cost of land and required
and approaches materials
- Political stability -Investment and
subsidizing opportunity for
social ventures

Technological Environmental Legal

- Microcontrollers paired - Greenhouse: climate - Food safety and standards

with variety of detector (i.e.
humidity)
- Mobile application
- AI-powered surveillance
system
- Greenhouse options
controlled farming
- Hydroponics:
conservation of natural
resources
- Pesticide free
- AI and data regulation
- Zoning and land use laws
- Intellectual property
- Environmental regulation
- Import and Export
Regulations
 Farms of the Future

Power of suppliers:
The main inputs into the vertical farming are IoT (internet of things) details, nutrients,
growing media, seeds, energy, and water. The IoT details may be hard to find in
Kazakhstan, however, there are plenty of suppliers from China, India, and South Korea,
with the former one being the cheapest and closest one. When it comes to the nutrients,
seeds, and media there are plenty of organizations within the country, so the power of
the suppliers is low there. The only problem may occur with energy and water, since in
Kazakhstan housing and communal services are monopolistic. Even though they are
controlled by the government, there is a slight risk of being asked for extra charge for
connection of the services.

Power of buyers:
We assume that there will be a high concentration of buyers, since vertical farms are
useful in many areas mentioned in the assignment #1. The order size varies from the
size of the customer’s business. For example, an ordinary citizen may buy a couple of
grow racks the size of a typical closet, while supermarkets and pharmacies may order
farms that cover about 5000 f t 2. The bargaining power of customers is extremely low,
since the number of businesses that offer our product and services is little to zero. Since
there is low competition in the market, buyers will rarely ask for cost reduction and
demand better quality.

Threat of new entry:

Currently, there is little to no competition for vertical farms on the market. There is
modest threat from new ventures since due to their technological limitations compared
to our product. However, there are a large number of Russian and European companies
that produce high quality, high-tech vertical farms. They have not been targeting
Kazakhstan because the demand is low and delivery time and costs are high. Once
they notice a good demand in Kazakhstan, they might come up with reducing costs and
mass marketing their products in the local market, thereby posing a serious threat to
our business.

Threat of substitution:
The other ways of farming include traditional outdoor farming that is deeply rooted in
human history and still remains as the major source of agricultural products. However,
with the reduction in water supply and land, the increase in population, traditional
agriculture may lose its supremacy. The next one is importing the goods. Despite the
24/7 control over the plants' growth, there are some limitations in vertical farming since
not all types of vegetables and grains can be produced. So, the easiest way for the
restaurants or other businesses would be to continue importing such products. Finally,
there are other types of high-tech farming, excluding the augmented vertical farming
 Farms of the Future

such as aeroponics and aquaponics, which may have their own privileges. Considering
all threats of substitution, enforcing the benefits of our technologies and product
services is very important.

Competitive rivalry:
In the vertical farming industry, there are only two companies solely focused on
automated vertical farming, but they do not offer the underlying technologies, instead
focusing on their own products. However, there are other companies in the market that
are selling various types of production and manufacturing technologies, including
vertical farming, although they are not exclusively specialized in it. What sets us apart is
our specialization in vertical farming, allowing us to be experts in the field and provide
comprehensive customer support. We distinguish ourselves by adopting cutting-edge
technology and providing technical support, such as the incorporation of mobile apps
and artificial intelligence into our business strategy. While there are similar
organizations in the international market, we are confident in our capacity to compete by
providing greater quality and service.

Table 2. SWOT analysis

Strengths Weaknesses

Innovation and Technology: Integration High Initial Investment: The integration

of AI technologies and mobile
applications for managing processes and
customer engagement.
Sustainability: Alignment with the UN's
sustainable goals, including Zero Hunger,
Sustainable Economic Growth, and
Responsible Production and
Consumption.
Quality Control: Ability to produce high-
quality food in a controlled environment.
Space Efficiency: Vertical farming
requires less land than traditional farming,
making it suitable for urban areas.
Year-round Production: Controlled
environment allows year-round production
regardless of weather conditions.
Direct Consumer Engagement: The
mobile application allows direct
engagement with consumers and
provides them with nutritional
suggestions.
of advanced technologies and setting up
vertical farms requires a significant initial
investment.
Energy Consumption: Vertical farming
can be energy-intensive due to the need
for artificial lighting and climate control.
Technical Expertise Requirement: The
operation and maintenance of AI systems
and vertical farming technologies require
specialized skills.
Market Familiarity: Vertical farming and
AI-integrated applications might be new
concepts for some markets, leading to
slower adoption rates.
 Farms of the Future

Opportunities Threats

Growing Health Consciousness: The Competition: Competition from existing

demand for fresh and organic vegetables
is expanding as more individuals are
becoming concerned with their health and
fitness.
Urbanization: There is an increasing
need for local food as the urban
population grows.
Global Expansion: The potential to
expand beyond Kazakhstan into the
global market.
Educational and Social Impact:
Opportunity to educate the community on
sustainable farming practices and
contribute to social welfare.
vertical farms and traditional agricultural
practices.
Legal and Regulatory Challenges:
Potential legal constraints, especially
regarding the use of AI and data
protection.
Consumer Perception: Potential
resistance or skepticism from consumers
unfamiliar with vertical farming.
Technological Failures: Reliance on
technology poses risks in case of system
failures or cyber-attacks.

From the analysis above the key strategic issues and challenges were identified.
The first issue is technological vulnerability: the possible bugs in the system and the
malwares may reduce or even stop the production and lead to the customer’s
dissatisfaction with the product. However, as aforementioned in the strength quadrant of
the SWOT analysis, the integration of mobile applications for managing processes can
help us to identify the issue as fast as possible. Then the engineering and programming
team will be provided to the customer for the support and further troubleshooting.

Political and Environmental factors in the PESTEL analysis reveals that another
strategic limitation is a supply of building components of the farm. Since the production
of microcontrollers is not adequately developed in Kazakhstan, the only viable options
are Chinese, South Korean or Indian suppliers. Thus, the political situation, logistics,
price and taxes are not guaranteed to be favorable. Long term contracts may mitigate
this issue.

The next possible challenge is unawareness of customers about the opportunities of

vertical farming. This makes it considerably difficult to create a sufficient customer base
as majority of them stick to traditional outdoor farming or the import products.
Consequently, more effort and funding will be required for the marketing.
 Farms of the Future

References

Fedotov, E. (2020, July 31). Will Vertical Farms Replace Traditional Fields In
Kazakhstan? World of NaN. https://world-nan.kz/blogs/zamenyat-li-vertikalnye-
fermy-traditsionnye-polya-v-kazakhstane

Specht, K., Siebert, R., & Thomaier, S. (2019). Perception and Acceptance of
Agricultural Production in and on Urban Buildings: A Qualitative Study.
Sustainability, 11(16), 4315. https://doi.org/10.3390/su11164315