Vanraj Mini-Tractors:

Is Small Beautiful

PGP/18/122 AJINKYA ANIL PARAB

GHARTE PRITAM
PGP/18/138
RAM
PGP/18/164 SANJIT SAHOO
YALLAMMAVARI
PGP/18/175
RAVITEJA
PGP/17-D/047 SAYEMA SAMDANI
Problem Statement:
Whether Trivedi’s targeting of only the small and marginal farmers for selling the 10HP
mini-tractor ‘Vanraj’ justified? Should he revisit his segmentation and targeting strategy?

Analysis of the case:

This case presents a problem of segmentation and targeting. Though Jagdip Tivedi has come
down to focussing only on the small and marginal farmers, his partners, Jayantibhai Patel and
Pragnesh Patel, are not fully convinced about this decision and hence want Trivedi to take a
holistic view of the issue before zeroing in on a particular market segment.
The case has 2 dimensions-
1) Vanraj as a viable alternative to bullocks for small and marginal farmers
2) Whether to focus only on small & marginal farmers or include large farmers, material
handling industries and municipal corporations etc. in the market
For the 1st situation:
Cost-benefit analysis (per acre per year basis)
Hiring a big Tractor
Bullocks Vanaraj Tractor
on rent
Average Intial Cost 27500 190000 0
11 years
Life Span 8 years N/A
(Useful life= 8 years)

Rent – (@ Rs. 250

Fuel cost= 32.5 Ltr/
/hr)=For 1 acre – 26
acre*Rs. 40 / litre*1.4
hours *2 crops*
Running cost Fodder Cost= 17500 Hectares(max)*2.47*2
3.45882 (land
crops/ year
size)*250(rate)=
= 8990.8
44,964.66

Interest @ 10% 0 19000 0

maintenance @
0 2968.75 0
12.5%
Interculturing cost 5600 Included Included
Total cost / year 25,600 30,959.55 44,964.66

Marginal farmers have average landholding size less than 1 hectare and getting a loan from
bank to buy tractor is not a feasible option for them. As almost 90% of the tractors are sold on
credit, M/S Pramal should focus only on the small farmers. As we find from the above table,
if the small farmers use Vanraj tractor instead of bullocks, they will be at a loss.
But the benefits of three-wheel convertibility, spraying pesticides ability, power take-off
point, transportation ability, compatibility with farm equipment, fuel efficiency, low
maintenance cost etc outweigh the cost difference. These benefits coupled with increased
productivity, elevation of social status, escape from drudgery of manual tilling etc. make
Vanraj the perfect choice for small farmers. Also, even if they hire tractors from big farmers,
they would be incurring loss as shown above compared to using bullocks. Therefore, in all
probability, the small farmers would like to buy Vanraj tractor.
Apart from this, there is a huge untapped market in the lower power (less than 20 HP) tractor
segment and there is virtually no competition. Hence, it would be wise for Vanraj Tractors to
focus on this segment.

For the 2nd situation:

From the case we can see that Horticulture segment 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. Owners of many Semi-medium, medium and large farms may opt
horticulture as additional source of income in unutilized segments of their lands and thus will
use Vanraj as an additional tractor specialized for intercultural operations. Thus the company
may look to increase its target segment in future to cater to the needs of above segments of
horticulture farmers.

Below are some of the factors influencing the purchase of mini-tractor for purpose of
horticulture:

 Mileage : Mini-tractor consumes about 1.5 litres/hour while the larger ones need a spent of
4litres/hour, resulting in 60% saving
 Priced 25% lower
 Better utilization and shorter break-even point as compared to its bigger counterpart
 Simple Design and easy maintenance
 Better manoeuvrability and control.

Other than this, there is a scope for Vanraj to tap to the requirement of industries like airport,
material handling sector and it will also have utility in municipal corporations’ waste
collection and disposal functions.

Conclusion:

Vanraj should go ahead with its plan on focussing on the small famers as they provide a huge
potential market and Vanraj would be able to reap the benefit of initial player advantage in
the market. Due to the financial constraints and credit unavailability for marginal farmers,
this segments should be foregone as of now.

Semi-medium and medium farmers can be tapped in horticulture segment due to the unique
and versatile features of Vanraj Tractor.