Farm Equipment Manufacturer

I: Your client The client is a manufacturer of farm equipment such as tractors and is planning to expand manufacturing with a new plant in either Jaipur or Hyderabad. What parameters would you consider to help them decide the same?

C: Can I know more about the value chain of the client, the location where they are presently based, and their products?

I: The client manufactures and sells 3 types of tractors used majorly in agriculture. They have their own distribution network and sell their products through exclusive stores and some retail tie-ups. The client has a presence in Faridabad, Delhi, and Delhi NCR region. They are a major player in the North India market with 60-65% of the market share. They want to start catering to the South India market now.

C: It looks like the client wants to set up a manufacturing plant in either Jaipur or Hyderabad to cater to the South India market where they have no presence at present. To evaluate this decision, I would like to evaluate the barriers, operational viability, and strategic viability.

I: Sure. That sounds good. Why don’t you start with the barriers first.

C: The barriers can be of various kinds. I would like to look at the legal requirements, existing rules and regulations, environmental compliances, and financial constraints if any.

I: You need not worry about financial constraints as the client is a profitable company with sufficient cash flows.

C: Assessing the other barriers and looking at the current landscape when ESG compliance has been the talk of the industry, I would like to understand whether the client is already complying with the same or has faced some difficulties while inculcating the same at their existing plants.

I: Being a major market player in the north, the client has ensured compliance with all ESG requirements. They have been the frontrunner in this and are continuously trying to reduce emissions and improve their manufacturing processes. There is no specific regulatory compliance the client needs to consider besides the ones they are already adhering to. Why don’t we move on to the operational viability.

C: To evaluate the operational viability, I would like to consider the raw material availability, logistical feasibility, workforce availability, technological availability and storage facility.

I: The client has already scouted a huge area to build the plant at both Jaipur and Hyderabad which can ensure that they have ample storage facilities.

C: Do we know anything about the availability of skilled workforce and unskilled labourers? What about the raw material availability, especially iron?

I: There seems to be a sufficient supply of skilled and unskilled workforce at both Jaipur and Hyderabad. About the raw materials, the client has established that sourcing iron would be cheaper in Jaipur than in Hyderabad due to reduced transportation costs.

C: Looking at the operational viability, Jaipur seems more attractive than Hyderabad. Moving on to strategic viability, I would like to look at the distribution network, market demand, market competitiveness, cost of setting up the plant and product pricing.

I: Sure, that sounds good.

C: Since our tractors are majorly used in agriculture, Jaipur would have a higher local demand as compared with Hyderabad. Also, outbound logistics from Jaipur would help cater to a larger market in South India. As the client already has their own distribution network, this would take some time to establish one in South India so initially they could tie up with retail outlets to sell their products and after a thorough market understanding, establish their exclusive stores in areas with higher sale prospects.

C: That sounds good. Can you quickly tell me two main factors to consider while determining our market size.

C: Sure. We need to consider the existing market size for tractors in total. This would include the replaceable factor and the market growth rate and cover the demand side of the market. Next, we need to consider the market share we can capture. This would essentially factor in the supply restraints the client would face.

I: That’s good enough. Let’s close the case now.