Tractor market in Russia and Ukraine

8/10/2019 Tractor market in Russia and Ukraine

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International tractors limited

Research for Expansion/Entry Strategy in Non EU Markets

A Report

by

ANKUSH ARYA

13PGDM078

INTERNATIONAL TRACTORS LIMITED, SONALIKA Group

A Report Submitted in Partial fulfillment of the requirements of PGDM program

International Management Institute

New Delhi 110016

Date: 6/7/2014


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Title of the Project

Research for Expansion/Entry Strategy in Non EU Markets- Estimating the Market Potential, potential

barriers, exploring partners and feasibility study for the Solis Brand of International Tractors Limited in

Non-European Union markets.


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Acknowledgement

I take this opportunity to express my profound gratitude and deep regards to my guide

Professor GK Agrawal, International Management Institute, New Delhifor his exemplary

guidance, monitoring and constant encouragement throughout the course of this thesis. Theblessing, help and guidance given by him time to time shall carry me a long way in the journey

of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my Company Mentor Mr

Ajay Kumar, Manager International Business, International Tractors Limited, for his/her cordial

support, valuable information and guidance, which helped me in completing this task through

various stages.

I am obliged to staff members of International Tractors Limited, for the valuable information

provided by them in their respective fields. I am grateful for their cooperation during the period

of my assignment.


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ABSTRACT

With the Indian Tractor market being saturated with many competitors, and more and more countries

opting for WTO accession and promoting Globalization, world is the limit. More and more domestic

tractor brands are exporting tractors in foreign countries. With many competitors in foreign market as

well, the selling point remains how efficiently is a company able to match its needs with the needs of the

customer. Exports of tractors in India is still in introductory phase, hence opting for the market which

suits the company best is very crucial.

International Tractors Limited (ITL) is the third largest manufacturer and seller of tractors in India after

Mahindra Tractors and Taffe tractors. They sell SONALIKA brand of tractors in India and SOLIS brand of

tractors in foreign markets. Both Sonalika and Solis are within hp range of 20hp -120 hp and comes with

both 2 wheel and 4 wheel drive options. The USP of Sonalika and Solis tractors is Value for Money. The

domestic growth of ITL in past 5 years in India has been incredible. ITL has grown by Compound annual

growth rate (CAGR) of 20 % in Indian market which has grown by not more than 4% in past 5 years and

had negative growth in past 2 years.

With International Tractors Limited touching new heights of growth in India, they are also not ignoring

foreign markets as a big potential source of revenue. Around 15% of their revenue come from exports to

foreign markets. ITL has grown 30% CAGR in the past 5 years when it comes to International Business or

exports. Hence ITL is putting up more efforts to expand the market for its SOLIS range of tractors all

around the world. This report considers only 3 of the 9 non European Union countries (Ukraine, Croatia,

Russia). Among Non-EU countries Solis presence is felt in Turkey and Croatia but yet to enter Ukraine

and Russia. Before entering into any country through setting up of dealerships, extensive research about

the country is done so that the decision taken is the calculated one.

The project assigned to me in summer internship at International Tractors limited was to collect relevant

data through various secondary sources which could be used in order to formulate an expansion

strategy for Croatia and entry strategy for Ukraine and Russian market.

The report in the beginning include the introduction to Sonalika group and International Tractors limited

as a company and also looks at its SWOT analysis, Tushman & NadlersCongruence Analysis,

Organizational chart.


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The data to be collected and analyzed involve PESTEL ANALYSIS i.e a detailed study of the Political

factors, Economic factors, Social Factors, Technological Factors, Environmental factors and Legal factors

affecting businesses in Russia, Ukraine and Croatia. It also involved Geography study , and study of

agricultural practices used in Russia, Ukraine and Croatia. It also includes study of Tractor market of the

country and scope of SOLIS tractors in that tractor market. Also a study was done to identify the major

competitors present in the mentioned countries and a feasibility of SOLIS range of Tractors in these

foreign markets.

At the end it discusses the opportunity with ITL to expand its presence in the respective foreign markets

on the basis of growth of agriculture, economy and size & growth of tractor market in that particular

country. Also it depends on the hp range of the tractors being used in the country as tractor market will

only be an opportunity if tractors being used fall in the hp range of SOLIS (i.e. 20hp120 hp)

After carrying out the feasibility study successfully a list of potential partners/distributers for SOLIS

brand is being produced and assessed thoroughly while contacting them through mail and phone is in

progress. The report includes the process of short listing of distributers include secondary research

which is done from India, and primary research which is done by higher management by visiting the site

or the foreign market and assessing the dealership. The report also includes certain parameters on the

basis of which we shortlist 4-5 distributers from the list of more than 100.

The report also contains the export process as a whole, from ITL in India to the distributer footsteps. It

also includes all the documentation which is required to make the efficient Export process and the

process of payments made by distributer of customer to the seller i.e. ITL. The report also includes all

the costs which are incurred in exporting an ITL product from India to the client site or distributer site.


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Table of Contents

TITLE OF THE PROJECT ........................................................................................................................................... 2

ACKNOWLEDGEMENT ............................................................................................................................................ 3

ABSTRACT .............................................................................................................................................................. 4

TABLE OF CONTENTS .............................................................................................................................................. 6

INTRODUCTION ..................................................................................................................................................... 8

ABOUT SONALIKAGROUP: ............................................................................................................................................ 8

ABOUT INTERNATIONAL TRACTORS LIMITED ........................................................................................................................ 8

MARKETING MIX ........................................................................................................................................................... 9

ORGANIZATIONAL CHART ............................................................................................................................................... 11

TUSHMAN & NADLERS CONGRUENCE ANALYSIS : ............................................................................................... 12

SWOT ANALYSIS .................................................................................................................................................. 17

ABOUT SUMMER INTERNSHIP PROJECT ............................................................................................................... 18

OBJECTIVES OF PROJECT ................................................................................................................................................ 19

EXPORT PROCESS ................................................................................................................................................. 20

TRANSPORTATION COSTS ............................................................................................................................................... 21

DOCUMENTATION ................................................................................................................................................... 22

MODEOFPAYMENT ................................................................................................................................................ 24

MICHEAL PORTER FIVE FORCES ANALYSIS ............................................................................................................ 26

SHORTLISTING CRITERIA FOR DISTRIBUTER ......................................................................................................... 29

ABOUT EUROPEAN UNION................................................................................................................................... 31

MONETARY UNION ....................................................................................................................................................... 32

RUSSIAN MARKET ................................................................................................................................................ 33

PESTELANALYSIS ..................................................................................................................................................... 33

AGRICULTURESECTORINRUSSIA ............................................................................................................................ 38

CHALLENGES IN AGRICULTURE IN RUSSIA .......................................................................................................................... 42

TRACTOR MARKET IN RUSSIA .......................................................................................................................................... 43

CROATIAN MARKET ............................................................................................................................................. 48

INTRODUCTION ............................................................................................................................................................ 48PESTLEANALYSISOFCROATIA ................................................................................................................................. 50

ECONOMY OF CROATIA ................................................................................................................................................. 50

2013ENLARGEMENT OF EUROPEAN UNION(CROATIA ENTERED EU) ..................................................................................... 52

AGRICULTURE IN CROATIA:............................................................................................................................................. 52

REGION WISE YIELD: ..................................................................................................................................................... 55

CEREALS BREAKUP ........................................................................................................................................................ 58

CROATIAN TRACTOR MARKET ......................................................................................................................................... 58


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COMPETITORS ............................................................................................................................................................. 61

OPPORTUNITIES FOR SOLIS ........................................................................................................................................... 63

UKRAINIAN MARKET ............................................................................................................................................ 65

GEOGRAPHY ................................................................................................................................................................ 65

PESTELANALYSIS ..................................................................................................................................................... 66

ENVIRONMENTAL FACTORS............................................................................................................................................. 72

AGRICULTURESECTOR IN UKRAINE ............................................................................................................................ 72

TRACTOR MARKET ........................................................................................................................................................ 78

TRACTOR IMPORT ......................................................................................................................................................... 79

CONCLUSIONS ..................................................................................................................................................... 83

RUSSIAAND UKRAINE: .............................................................................................................................................. 83

CROATIA .................................................................................................................................................................. 83

LIMITATIONS OF THE STUDY ................................................................................................................................ 84

REFERENCES ......................................................................................................................................................... 85


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INTRODUCTION

About SONALIKA Group:

Incorporated in 1969 to accomplish new heights of success, the Sonalika Group has come a long way. Today

Sonalika group is among the top three tractor manufacturers of India (After Mahindra and Taffe tractors) and

provides a complete product line of tractors, multi-utility vehicles, engines, farm machinery and attachments,

diesel gensets, auto components and pick & carry cranes.

The Sonalika group understands the requirements of its customers well and tries to come up with exceptional

tailor-made products to suit their needs. The state-of-the-art production plants spread across a large land area o

many acres and are strategically situated in a pollution free zone of states of Punjab and Himachal Pradesh.

The Group has also joined hands with some of the leading and popular international names like Yanmar of Japan

JM Finance Trustee, and Magma Sharachi Finance.

Today Sonalika has become synonymous to prosperity, success and growth. With entry of international

technologies, state-of-the-art production units, experienced and skilled teams and tailor-made solutions, Sonalik

group has responded really well to its customers' needs in India as well as in abroad. The coming years will bring

the same results , with associates and customers provided, they go along with the same fervor and optimism.

About International Tractors LimitedInternational Tractors Limited (ITL)is a company, part of the Sonalika Group, involved in manufacturing

and Export of Tractors and Farm Equipments. It manufactures tractors in 20-110 hp range. ITL sold total

of 75000 units of tractors in financial year 2013-14 of which exports comprised of 9500 units in more

than 70 countries making it the leading exporter of tractors in India. Apart from tractors it also

manufactures agricultural equipments and implements. ITL sells tractor in domestic market under

Sonalika brand name and exports tractors under SOLIS brand name across the world

Global Presence

The credit of the groupssuccess goes to its sheer dedication that enabled it to go beyond national

boundaries and carve a niche for itself. Today Sonalika Tractors are known for its world class quality

products not only in India but also across the globe. Today, Sonalika products are present in more than

62 countries. The global recognition of Sonalika's growth has been highlighted by the strategic


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investments into the group by leading International Brands like Yanmar of Japan. Not just this, the group

also has its own R&D wing with world-class facilities adhering to highest quality standards.

Marketing Mix

Putting the right product in the right place, at the right price, at the right time is always crucial and it

decides market share and profitability of business.

Product

ITL exports Tractors to the Foreign markets.

The power range varies from 20 hp to 120 hp for both 2WD(2 wheel drive) & 4WD tractors.

SOLIS tractors belong to the 3A and 3B stages/generations of tractors. (There are 5

stages/generations of tractors: 2, 3,3A, 3B, 4)

DI-series: They belong to 3rd generation of tractors

RX- series: They belong to 3A generation of tractors.

Usually The model of tractors exported are of 20 hp, 60 hp, 75 hp and 90 hp power range.

USP of ITL tractors is Value for money. The products may lag behind in some aspects of quality

when compared with global brands like John Deere and New Holland but SOLIS tractors are

much cheaper than John Deere and New Holland. When compared with similar price range

brand of tractors for eg. Chinese brands, Solis is far better in quality.

Almost all the specifications of the models available in European markets are same as of models

available in India. In india ITL tractors come with a SONALIKA Brand sticker where as in foreign

markets it come with SOLIS brand sticker.

There are some specifications which are changed/modified according to country requirements.

For example, In many European countries like Russia or Ukraine, unlike India the minimum

temperature can go well below 0 degree Celsius. Hence required modifications are made in

order to make the product compatible with the climatic as well as geographic conditions in the

target market.

Tractors

DI-seriesRX-

Series


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Price

Price of tractor varies from market to market. Following factors are considered while setting up price of

a tractor in foreign market.

Cost incurred in transportation

Competitiveness in the industry

Purchasing power parity of Customers

Taxes and subsidy.

Just to give an overview of Price, a 30 hp SOLIS tractor in India is priced around 4 lacs, where as it is

priced more than 8 lacs( when converted into Indian currency) in Turkey and more than 10 lacs in

Croatia.

Place

Tractors are exported in 72 destinations across the world. I although studied only Russian, Croatian and

Ukrainian market. The specifications of the tractors varies a lot from market to market. For example in

India, One might not see tractors with HVAC (Heated and Ventilated Air conditioning) cabin but in many

European countries, where temperature may drop below 0 degree Celsius and can also exceed more

than 50 degree Celsius, HVAC cabins are a necessity.

ITL follow the following distribution channel.

Make tie-ups with a distributer with the maximum reach in order to cover the whole geography.

Sometimes one distributer has dealership in multiple countries and sometimes ITL has to make

Tie-ups with more than one distributer for one geography.

Take a selective distribution approach

The dealer network of the distributer might be of his own or might be on franchise basis or a mix

of both. Franchise helps in increasing the reach rapidly.

Promotion

Promotion in foreign markets is done from the dealer side although cost is shared by both ITL and

dealer. For example, 1% of the Ex-works cost of the tractor for advertising is given as goodwill to turkey

dealers. Modes of promotion include:

Exhibition: ITL participate in exhibitions in the foreign market where they have the opportunity

to interact with several dealers and customers which in turn increase the visibility of the brand

and provide opportunity for new tie-ups.

POP Material: How should dealership look like is also managed by ITL. ITL dealerships are a

combination of blue and yellow which are key colors of ITL.


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Website: Besides ITL website, Every dealers maintains a website where all the product features

are available.

Social Media: ITL is active on social media, majorly on Facebook through facebook pages. All the

dealer information and product information is also available on the facebook pages

Print Media: ITL also increase the visibility of SOLIS brand through Newspapers, Magazines and

other forms of print media.

Banners: One can also see big banners displaying SOLIS products on the highways in the foreign

markets.

CIP: Common identity programme is another way to increase the visibility. The facia of SOLIS

remains same throughout the world.

Demonstrations: SOLIS also allow dealers to give free demonstrations to the customers so that

they become more familiar with the brand.

Organizational Chart

Sr. President

Vice President

Application

Business

Implements

Marketing

GeneralDevelopment

Branding

Operations

Product

Service &Spares

Commercial

PlantCordination

Sales - Asia

Nepal

Sri Lanka

Bangladesh

CIS Gulf

Sales - Europe

& America

Latin America

CentralAmerica

EU

Non-EU

Sales Africa

Africa 1

Africa 2

LOC HR


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Tushman & NadlersCongruence Analysis :Organizations are systems which combine technical and formally structured ways of organizing with the

informal, social structure of human society. The congruence model, first developed by David A Nadler

and M L Tushman in the early 1980s is a useful tool that helps leaders fully grasp the interplay of social

and technical forces that shape the performance of each organization. The organization consists of a

basic set of elements: input, strategy, output, and the transformation process.

The underlying principle of the Congruence Model is that an organization's performance is derived from

four elements: tasks, people, structure, and culture. The higher the fit or congruence amongst these

elements, the greater the performance. The highest performing organizations are those which achieve

the best fit between all these elements. The environment imposes demands, constraints and also

creates opportunities. There is a high level of congruence between the four elements at CRISIL. It can be

improved by training the employees and developing their skill-sets.

Congruence analysis for Internal Tractors Limited (ITL) is given below:

Step 1: Analyse each key element separately

Work

ITL is a well known tractor and implements manufacturer which is currently third largest by market

share in India after Mahindra Tractors and Taffe. With sustainable competitive advantage arising from

its strong brand, Value for money products, unmatched credibility, high market share in tractor market,

and large customer base, they deliver Products, solutions and After sale Service that make the


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agriculture sector function better. Their defining trait is to read the customer needs and provide high

value product at low cost and very efficient after sales service.

People:

Normally the employees are Mechanical Engineers as they understand the product better. For

Operations department, Mechanical Engineers are preferred, for sales and Marketing, MechanicalEngineer with Management degree are preferred and for Finance department, B-com and CAs are

preferred.

ITL carefully nurtures a fungible talent pool that can rotate seamlessly across businesses, providing the

domain expertise and cultural cement that holds the business together. They are providing business

leadership opportunities to an increasing number of talented employees because of rapidly-growing ITL

business, range of products, and geographical footprint. People remain the factor that makes the

totality of the ITL far more valuable than the sum of its parts.

Structure:

Below listed are the functions of ITL:

International Tractors

Limited

Production and

Research &

Sales(Domestic and

International) and

Marketing

Human Resource and

Finance


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Organizational Chart:

Culture:

People within the organization are given an opportunity themselves to figure out their competence and

growth chart. Many of the people in Middle management have been working with company for years

and have grown within the company. Also, management of the organization has a visionthe bigger

picture. There is a blend of both people and senior management. This has ensured better growth and

takes care of the overall personality development of the employees. Training plans & sessions are

designed as per business requirements as well as employee needs. ITL not only realizes its responsibility

towards its employees but also towards its society.It is the continuing commitment by business to

behave ethically and contribute to economic development while improving the quality of life of the

workforce and their families as well as of the local community and society at large.

Sr. President

Vice President

ApplicationBusiness

Implements

Marketing

GeneralDevelopment

Branding

Operations

Product

Service &Spares

Commercial

PlantCordination

Sales - Asia

Nepal

Sri Lanka

Bangladesh

CIS Gulf

Sales - Europe& America

Latin America

CentralAmerica

EU

Non-EU

Sales Africa

Africa 1

Africa 2

LOC HR


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The Congruence Model at ITL

INPUT

Environment

Resources

History

OUTPUT

System

Unit

Individual

Informal Organization

Open door

communication

Good Culture

Formal Organization

Hierarchical

structure

Centralized

Rewards and

incentives

Work

Manufacturing/

sales of tractorsand implements

After sale

service

People

A large no. Mechanical

engineers

Domain Expertise

Professional

Expectations

Strategy


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Step 2: Analyzing the elements

Work and People: There is a good congruence between work done and people hired by the company.

All employees are well qualified and dedicated for this job. Although for sales and Marketing

department, more fresh MBAs can be hired.

Work and structure:Work and structure restrict the flow of daily processes sometimes. ITL is acentralized organization which includes asking for lot of permissions from the top management. The

congruence is poor

Structure and people:There should be more people in Business development and more mechanical

engineers for one sector to reduce burden. The congruence is not good.

People and culture: Lower management is disappointed with low pay structures. Frequent Reward

Programs and Compensation Agreements can help subvert the situation

Culture and work:Work culture is not really good in any automobile company. ITL is no exception.

Structure and culture: More hiring should be done for various specific roles to achieve better

congruence.

Step 3: Recommendations to achieve better congruence are:

1. They should have separate hiring activities for all domain specific businesses. For

example, separate hiring for mechanical engineers for operations and separate hiring

for MBAs for marketing department. Frequently keep a check on the supply and

demand.

2. They should hire more talent. More people are required for Business development in

order to compete with larger competitors in the industry.3. Improve HR practices to make work culture more efficient.

4. Try to share responsibilities at top management in order decentralize the organization.


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SWOT ANALYSIS

Strengths

Value for money product

Has its own range of implements

ITL products provides highest power in its range.

High Degree of Customisation to international clients.

Cash Surplus company(1500 cr+)

High Growth Rate (CAGR=20% for past 5 yrs)

In house manufacturing of all major components

Weakness

Not the best quality.Lack of marketing especially advertising.

Lack of automation in operations.

HR practices not upto the mark.

Highly centralised management.

Failure in Car segment with Rhino and Extreme notmaking a big impact in market.

Opportunities

Indian sub continent tractor market growing at highpace

Southern part of india untapped.

African and asian tractor market growing.

Farms are getting consolidated in India and moremoney with indian farmers.

Car segment still an opportunity

Threats

Lot of competitors, both domestic (mahindra,Taffe) and global (John deere, New holland)

European market not growing due to crisis.

Indians are adapting international brands very

fast.

SWOT


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About Summer Internship Project

Summer Internship at ITL includes following roles:

1. Tapping new Markets, Expanding current markets: This includes,

a. Carrying out secondary research on the Non-European Union (EU):

i. Analyzing the working environment in the country which includes Geography, Land area,

terrain, Climate, Ethnic Groups and languages used

ii. Type of Economy, Government Policies, Growth Prospects and its associations with the

international monetary organizations like World Bank, International Monetary Fund,

and its future prospects to join European union and utilize the benefits of European

Central Bank.

iii. Analyzing the Agricultural market : It includes study on the type of crops grown,

Number of Land Holdings, Size of Land Holdings, Type of Soil, Land area breakup for

crops growing and livestock keeping, Government policies to promote agriculture in the

country like incentives to farmers, subsidized agricultural machinery and tractors ,

making efforts to consolidate land holdings and boost productivity. It also includes the

geography break up on the basis of agricultural activities carried out.

iv. Studying the Tractor market in the concerned country which includes the number of

tractors imported and manufactured in house. It also includes studying market from the

point of view of hp range of the tractors used and the number of competitors present in

the market and perception of farmers towards the tractor brands.

v. Extracting information of potential distributers including the contacts of the right person

to communicate and their distribution network in that tractor market also considering

their historical background and present tie ups with other brands of tractors, if any.

b. Contacting the potential Distributers: After extracting all the required information of the

distributers of SOLIS brand of ITL, they are contacted through email and cold calling, hence

making effort to arrange an appointment on dealers site to know more about the distributer

and initiating the documentation process for merger.


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Objectives of Project

Conduct a secondary research for expansion Strategy which includes estimating the market

potential, potential barriers, exploring partners and conducting a feasibility study for the Solis

Brand of International Tractors Limited in Non-European Union markets.

Coordinating with the existing distribution network in the Non-European Union countries and

act as an interface between the customers/distributers and the operations team in order to

provide them better services.

Sub- objectives

To study the characteristic features of the given countries like its geography, land area, terrain,

climate, type of economy, government policies etc.

To study the agriculture sector of the country including the type of farming, crops grown, and

farm size.

To study the tractor market including the hp range of tractors used, percentage of tractors

imported and doing competitor analysis.

To explore new distributers to enter the new markets and analyzing the potential of the

distributors in order to proceed for the first meeting on distributers site.


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EXPORT PROCESS

The Export process is explained through diagram given below.

Order: The export process is triggered with the order from the client side. The order is usually in

multiples of 5-6 in order to efficiently use the space in the cargo container. Before the order is

confirmed few invoices are exchanged between the client and ITL in order to confirm the requirements

of the customer/client. Types of invoices are discussed in the documentation part.

Payment:The production of tractor to be exported in most of the cases starts after the payment is

processed by the Client. Although there are some exceptions for example if the client history is good and

maintains a goodwill with the company, then production can be initiated before payment.

Again, the modes of payments are discussed in documentation part.

Production:Bill of material (BOM) is made after the payment is processed and the production of

tractor starts in the plant according to the requirements of the customer. BOM is discussed in detail in

documentation part.

Dispatch :The tractor when completely produced is disassembled and then loaded in trucks. Tractors

are disassembled in order to utilize the space of the cargo container efficiently.

Order Payment Production DispatchTransportati

onClient


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Transportation and Clearances:Before going on board, the goods under certain clearances like

Customs etc. which will be discussed in documentation part. Goods are taken to Ludhiana from

hoshiarpur for Custom clearance where it is checked (routine check) and then transported to NHAVA

SHEVA PORT, Mumbai and then transported to the client country through sea. At client port, the goods

are received and undergo some documentations and are then transported to distributer site. This is

taken care by distributer himself.

Client:The tractor reaches client in disassembled form and is reassembled at client site itself.

Transportation Costs

Costs incurred by ITL during transportation are:

Freight from Hoshiarpur to Ludhiana

Freight from Ludhiana to Nhava Sheva port, Mumbai

Custom costs Loading unloading cost at Nhava Shiva port

Freight (Shipping line/Vessel), transportation by sea

Loading unloading costs at destination port

Freight from destination port to distributor.

Import duties and taxes. Usually there are no import duties for agricultural machinery in

European countries as India has free trade agreement with them.

INCO Terms: The Inco terms rules or International Commercial Termsare a series of pre-

defined commercial terms published by the International Chamber of Commerce(ICC) that arewidely used in International commercial transactionsor procurementprocesses. A series of

three-letter trade terms related to common contractual sales practices, the Inco terms rules are

intended primarily to clearly communicate the tasks, costs, and risks associated with the

transportation and delivery of goods.


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Inco Terms used by ITL in its transactions is CFRCost and Freight (named port of

destination) i.e.ITL pay the costs and freight to bring the goods to the port of destination.

However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the

goods is NOT included. and This term is formerly known as CNF (C&F, or C+F)

DOCUMENTATION

Invoices

The typical invoices used by ITL were Commercial Invoice and Proforma Invoice.

Proforma invoice: A pro forma invoice is an invoice prepared by ITL before shipping the goods,

informing the buyer/client of the goods to be sent, their value, and other key specifications

Commercial Invoice: A commercial invoice is a bill for the goods from ITL to the buyer. These

invoices are often used by governments to determine the true value of goods when assessing

customs duties.


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Bill of Lading

A legal document between the shipper of a particular good and the carrier detailing the type, quantity

and destination of the good being carried. For example: when ITL exports its goods through maersk

shipping line, Maersk gives a document called bill of lading to the exporter and the shipment can only be

received by anyone (client) at the destination port only if the that person possess the original bill oflading. The bill of lading is sent by exporter to importer by a relatively faster means of transportation so

that it reaches the destination before the goods.

Documents inside container:

Documents Required for Custom Clearance:

Stuffed

Container

CustomInvoice

ExcisePapers

StuffingReport

PackingList

CustomClearance

SDF(StatutoryDeclaration

form)Shipping bill

Shippinginstructions

Annexure IV andV


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Import/Export code: It is needed to setup an export-import business; valid for custom clearing

all over india.

SDF: Statutory declaration Form is to declare that the amount mentioned in the shipping bill is

what the buyer is paying.

Shipping bill: Shipping bill is for Statistical records

Shipping instructions: These are the shipping directives from a buyer or seller to a freight

forwarder, agent or carrier that instructs the shipper about: Movement and handling

,Customs requirements , document distribution, Allocation of documents and charges

(pertaining to connected or intermodal shipping), and Special instructions (insurance,

dangerous goods, insurance coverage, etc.)

Packing List: It lists seller, buyer, shipper, invoice number, date of shipment, mode of

transport, carrier, and itemizes quantity, description, the type of package, such as a box, crate,

drum, or carton, the quantity of packages, total net and gross weight (in kilograms), packagemarks, and dimensions, if appropriate

MODE OF PAYMENT

ITL most of the times prefer Letter of Credit (LC) as the mode of payment.

In LC process, apart from buyer and seller, or importer and exporter, two banks are also involved.

Importer or buyer applies for LC from a domestic bank. Say, if buyer is in Russia, he may apply for LC in


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some bank in Russia(say Bank of Russia). Buyers bank or bank of Russia issues LC and sends it to the

seller/exporter ie ITLs bank which is say HSBC. HSBC authenticates the LC and credit the sales amount

to the ITL.

PROCESS AT BANK END

1. Bank Scrutiny: Exporters Bank(in this case HSBC) ask for some documents before paying the

exporter.

Documents given to bank are:

Commercial invoice: A commercial invoice is a bill for the goods from ITL to the buyer. These

invoices are often used by governments to determine the true value of goods when assessing

customs duties.

Packing list : This contains the list of all the goods sold to the client or all the goods sent throughshipping line.

Inspection Certificate: An inspection certificate provides proof that what you are shipping is, in

fact, what the customer ordered, and is also of good quality.

Certificate of origin: It is a document, completed by the exporter and certified by an issuing

authority, attesting that the goods(in this case tractors) in the export shipment have been

wholly produced, manufactured in a particular country(in this case India).

Insurance certificate: It insures the goods of shipment.

Form A for subsidy: This form is submitted with custom department to seek subsidy which is

around 1%.

2. Exporters bank (in this case HSBC) courier the documents to the importers bank(bank of Russia)

for their scrutiny.

Bank scrutinyCourier Docs

to foreignbank

Checking ofdoc by foreign

Bank

Informcustomer of

the same

Confirmationof payment

fromcustomer

Foreign bankpays

Domesticbank

Domesticbank pay ITL


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3. Before sending the documents, all the documents are checked thoroughly by HSBC as if Bank of

Russia find any discrepancy, they charge heavy amount i.e. $100 per discrepancy.

4. Customer/client is informed of this stage of process and asked for payment.

5. Customer makes payment to the Bank of Russia.

6. Foreign bank (Bank of Russia) in turn pay domestic bank(HSBC) and HSBC pay it to the

Exporter/ITL.

MICHEAL PORTER Five forces analysis

Using Micheal Porter five forces Model, we can know the industry structure and the opportunity and

threats inside the industry. The competitive structure of an industry can be analyzed using Porter's five

forces. This model attempts to analyze the attractiveness of an industry by considering five forces within

a market. According to Porter (1980) the likelihood of firms making profits in a given industry depends

on five factors:

Bargaining power of buyer

Here, buyers are the current or potential dealersacross the country. The stronger the power of buyers in

an industry the more likely it is that they will be able to force down prices and reduce the profits of

firms that provide the product. For tractor industry:

Croatian Market:

The Croatian Market of tractors is very less in number and there are many competitors present in

the market. The market has reduced from more than 4000 tractors annually to just 500-600

tractors in past 5 years.

Due to low consumer base, many options and High switching cost tractors companies cant

compromise on quality.

Hence Bargaining power of buyer is moderate/high.

Ukrainian and Russian Market:

Russian tractor market is more than 40,000 units of tractors per annum and Ukraine market is

more than 10,000 units. Competitors include the worldwide competitors who export tractors to

Russia/Ukraine or international brands having manufacturing facilities in Russia/Ukraine or

their domestic production which account for most of the market share.


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There are lot of options with the customers both in terms of best quality and low price(in case of

domestic production).

Still, since the market is relatively high, there are a set of customers which one can cater and

hence the bargaining power of customer is low/moderate.

Bargaining power of supplier

The stronger the power of suppliers in an industry the more difficult it is for firms within that sector to

make a profit because suppliers can determine the terms and conditions on which business is conducted.

For tractor industry:

The suppliers do not pose any threat of forward integration

Though steel forms a major inputs , the tractor industry is not most important customer for steel

industry

Many number of supplier are there for tractor industry

Switching cost from one supplier to another is less

Hence bargaining power of supplier is less.

Threat of Entry

The extent to which barriers to entry exist. The more difficult it is for other firms to enter a market the

more likely it is that existing firms can make relatively high profits. For tractor industry:

The tractor industry is capital-oriented with intensive technology requirement

Need of a dealer network to represent the brand across the country.

Tractors are highly involved product in porter matrix and buyer takes time to come to a decision

unlike impulse buying. Hence brand presence and credibility matters which is built with years

of better service.

High switching cost


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Competitors are very reactive towards new entry

Brand loyalty of existing brands is high in tractor industry, Ex, John Deere and in rural market

Up to extent the existing companies have control over the suppliers

Hence the barriers to entry are high.

Threat of substitute

This measures the ease with which buyers can switch to another product that does the same thin. The ease

of switching depends on what costs would be involved and how similar customers perceive the

alternatives to be. For tractor industry:

There are no credible substitutes to the tractors

The only option available is bull-plough

Power-tillers very low power of substitute

Hence there is low threat of substitute for tractor.

Rivalry among competitors

This measures the degree of competition between existing firms. The higher the degree of rivalry the

more difficult it is for existing firms to generate high profits. For tractor industry:

The rivalry is extremely high owing to the consolidation that the industry is witnessing

across Europe including Croatia, Ukraine and Russia

Entry of foreign players

Continuous technological innovation

Less merger and acquisition of tractor industry increases rivalries

Opening of world market

Hence there is moderate/high degree of industry rivalry.


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ITL has only one distributer which has multiple dealers across the country. Dealers can be

shortlisted on the basis of the secondary data available on the internet.

Brands carrying

SOLIS ( international Brand of ITL) is not a renown brand worldwide and hence do not find its

place in the John Deere and New Holland of the world. Its USP is value for money. Hence, If we

target the distributer who is carrying exclusive brands like John Deere or New Holland or Valtra,

then the probability of conversion is minimum. Our focus remains on those distributers who are

carrying less costly brands preferably Chinese or domestic brands. They are more prone to

dissatisfaction due to the lack of sales of the current brand they are carrying and may want to

switch to other brands.

Size

Size of the distributer and their each dealership also matters, Although there is no specific

criteria on the basis of Store Size which ITL follows. The dealership outlet should be large

enough to accommodate major Solis Tractor models and have facilities for demonstration.

Sales and Marketing EffortThis includes effort made by the sales personnel and the marketing strategies used. Marketing

efforts include increasing visibility on the internet through social media, Dealer website,

Hoardings and most important of all organizing exhibitions.

Service efforts

How dealer handles customer after sales is of utmost importance as SOLIS is entering or has just

entered into most of the European Markets. The credibility of the brand is maintained through

efficient After Sales Service. Dealer act as the interface between the end User and ITL hence the

dealer personnel has to be cooperative and efficient when it comes to After Sales Service. Also

with this, ITL come to know about the problems Customers of a particular country are facing in

the Solis Models and with this information required changes are made in the future modelsmade for that specific country.

Ability to raise Finance

Dealers ability to raise money for opening new dealership is another important factor which is

considered before selecting any dealer. While making this decision, Dealers turnover and credit

history is also considered.

Assembly unit

Tractors are disassembled at the manufacturing site of ITL and exported to the clients country.

At client site, the tractors are reassembled. Hence a proper Assembly unit is required.

Long Term relationship

ITL takes a lot of time in finalizing a particular dealer, sometimes more than a year. Hence ITL

look for a long term relationship with the client.


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ABOUT EUROPEAN UNION

The European Union(EU) is an economicand politicalunion comprising of 28 member

countriesof Europe. The EU has a standardized system of laws/rules which apply to all member

countries. Within EU, passport controls are not required and this, with common policies on trade,

agriculture, fisheries, and regional development has made the movement of people, labor, capital,

goods and services very easy. This has given rise to a single market comprising of 28 states and has

boosted exports for many countries.


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Two of the core objectives of the European Economic Community were the development of a common

market, subsequently renamed the single market, and a customs unionbetween its member states.

The single market involvesthe free circulation of goods, capital, people, and services within the

EU.

The customs union involves the application of acommon external tariffon all goods entering

the market. Once goods have been admitted into the market they cannot be subjected to

customs duties, discriminatory taxes orimport quotas, as they travel internally.

The non-EU member states ofIceland,Norway,LiechtensteinandSwitzerlandparticipate in the

single market but not in the customs union.

Monetary union

All EU member states, except Denmark and the UK, are legally bound to use the euro as their

currency. The euro is designed to help build a single market by, for example: easing travel of citizens

and goods, eliminatingexchange rate problems, providing price transparency, creating a

single financial market, price stability and low interest rates, ad providing a currency used

internationally and protected against shocks by the large amount of internal trade within the euro

zone.


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RUSSIAN MARKET

PESTEL ANALYSIS

POLITICAL FACTORS:

Independence/Disintegration: 1991

Adoption of a constitution in 1993 . It is a SEMI-PRESIIDENTIAL Republic.

Russia is ruled by Vladimir Putin alongside Prime Minister Medvedev.


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People below BPL 12.8%

Unemployment 5.4%

Source of income Oil, natural gas, metals,and timber

GINI 41.2

HDI .788

Exports $530 billion(2012)

Imports $335 billion (2012)

Export products Petroleum and metalproducts

GDP Growth

The GDP has grown 5 times in the past 10 years. The following line graph shows it.

0

500

1000

1500

2000

2500

3000

Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GDP( $b)

GDP( $b)


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GDP Breakup:

Service sector is the major contributor to the GDP of Russia contributing 60% where as Industry sector

contributes 36% and agriculture sector 4% of the GDP.

SOCIAL FACTORS

Religion and ethnic groups:

Ethnic groups are 81 % Russian, 3.7% Tatar, and around 1.4% Ukrainian.

Orthodox Christianity, Islam, Judaismand Buddhismare traditional religions in Russia, and all are a

part of Russia's "historical heritage legally.

Language:

Russia's 160 ethnic groups speak some 100 languages. According to the 2002 Census,

142.6 million people speak Russian, followed by Tatarwith 5.3 million and Ukrainianwith

1.8 million speakers. Russian is the only official state language.

Social status:

The literacy rate in Russia is very high at 99.6% of population. Russia has skilled people in

Medical, space, aviation, mathematical and scientific fields.

Human Development index is high at .788 ( 55thin world).

AGRICULTURE

4%

Industry

36%

Services

60%

GDP breakup


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Gini index is medium at 44.7. (0 show shows perfect equality and 100 shows perfect inequality

among society)

According to latest forbes report, Russia has highest number of billionaires after United States.

Increasing purchasing power : Purchasing power increased 6 times in past 10 years.

Health: The Russian Constitution guarantees free, universal health carefor all its citizens

Russia has more physicians, hospitals, and health care workers than almost any other

country in the world on a per capita basis.

As of 2009, the average life expectancy in Russia was 62.77 years for males and 74.67 years for

females.

Education

Russia has a free educationsystem, which is guaranteed for all citizens by the Constitution,

however entry to subsidized higher educationis highly competitive. As a result of great

emphasis on science and technology in education, Russian medical, mathematical, scientific,

and aerospace research is generally of a high order.

TECHNOLOGICAL FACTORS

Russia has given many scientists, mathematician and researchers to the world.

Russias progress in the field of space exploration is also commendable.

Russia has expertise in nuclear technology too.

Russia is a transformer less country

Expertise in Defense equipments is also commendable.

ENVIRONMENTAL ANALYSIS

Russia is a wasteland that it littered with leftover waste from the Cold War and World War II.

The land is scattered with toxic waste, air pollution, soil contamination, left over obsolete

pesticides, and agricultural chemicals.

Russians are able to survive because Russia has an extremely large surface area.

LEGAL FACTORS

Russian law is corrupt.


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15% of Russians have claimed to have paid a bribe in the past 12 months in 2010.

About $400 billion worth of bribes are paid to Putins government.

You can bribe for just about everything in Russia from electoral lists to college diplomas.

AGRICULTURE SECTOR IN RUSSIA

Agriculture sector of Russia suffered a decline after disintegration (due to sudden change in

policies and farm type) and still facing many challenges.

4% of GDP contributed by Agriculture sector and employs 16% population

Total Grain Production: 85.6 million tonnes, up from 67.1 mt last year

Wheat(51.6 million tonnes), Barley (16.5 mt), Oats(4.8mt), Rye(3.5mt) are major crops.

Major crops grown in the Central, Volga and Southern federal districts (they account for 30% ofarable land and 60% of grain harvest)

Tractor per sq km of land : 27.1

Grain Imports: 400,000 tonnes; down from 1.2mt last year

Grain Exports: 18.8 mt; up from 15.2 mt last year. The graph below show grain production for

last few years

Land area and Type of Farms

Total land area 180 million hectaresArable land 23 million ( 13% of total land area)

Average farm size 150 hectares

Yield 1859 kg per hectare

Area under grains 50 % of cropland

Large Enterprises Small Enterprises Household Plots Family Farms

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012 2013

Total Production in past years

production


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Number of farms 27,787 20,392 22,799,400 285,141

Total Land(million

hectares)

107.4 24.5 9.6 24.1

Avg. Farm size 3,864 1203 .42 85

Average Farm size varies from .4 hectare to as much as more than 3800 hectare. Farms held by large

enterprises are very large in size and farms held by households are very small. Whereas on the other

side the productivity of large farms is very less as compared to household plots.

Before 1991 there were two types of farms

State owned and USSR collective farms

House hold farms (less than 1 hectare in area)

Whereas after the disintegration of USSR the farm structure also got changed. State owned and USSR

collective farms were changed to Joint stock farms.

Joint stock farms were similar to joint stock company where each owner was given a share of land.

Hence if earlier there was a 1000 hectare state owned farms, after 1991 the same farm was divided into

say 100 farms of 10 hectare each.

Farms after 1991

Farms before 1991

Joint Stock company House hold farms(< 1ha) Private farms

State owned and USSRcollective farms House hold farms(< 1ha)


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Major Crops

1. Wheat(51.6 million tonnes)

Wheat is majorly grown in Central region, Southern region, volga region, Ural and Siberia. They

account for 75% of the total wheat production in the country.

There are two types of wheat grown in Russia:

Spring wheat: It is planted in May-June and harvested in August-September.

Winter Wheat: It is planted in September-October and harvested in July-August.

2. Barley(16.5 mt)


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Barley is grown in Southern, Central and Volga region of Western Russia which combined account for 75

% of total barley production.Like wheat, barley is also of 2 types:

Spring Barley: It is planted in April-May and harvested in Aug-Sep.

Winter Barley: It is planted in Sep-Oct and harvested in Jun-Jul.

3. Oats(4.8mt)

Oats are majorly grown in Central region, Volga region, Urals and Siberia which accounts for 75

% of total oats production. .

Oats are sown or planted in Apr-May and harvested in Aug-Sep.

4. Rye(3.5mt)

Rye is majorly grown in Central and Volga region. It is planted in Aug-Sep and harvested in June.


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Challenges in Agriculture in Russia

Logistics Problems: Due to its large area, Russia face logistics problems in its supply chain.

Moreover its weather varies a lot across geography and is very unpredictable which also

deteriorate logistics and storage.

Lack of Government support: Government gives priority to livestock and poultry over crop

production when it comes to budget allocation or giving special focus on farming. The budget

allocated to crop production was only Ru 5 billion whereas the required budget was Ru 35 billion

during a project recently.

Unpredictable and adverse climatic conditions in Krasnodar region: Krasnodar region

accounts for major crop production and Rise in average temperature, uneven rainfall, hail

storms, hot winds, dust storms has deteriorate the crop production conditions there. Due to this

crop production declined by 25% in 2012.

Increased competition due to WTO accession:With WTO accession the custom duties has

decreased drastically and due to this competition has increased in Russian agriculture market.

Opportunities in Agriculture in Russia

Large percentage of land still idle: The country has 115m hectares of agricultural land, of

which 25m hectares are idle which is a huge opportunity for Russian agriculture.

Solution for adverse climatic conditions in Krasnodar region: Russias sheer size, and the

diversity of climate types means that production can be shifted as conditions in one part of the

country becomes less conducive to agriculture, but conditions improve elsewhere.

Upcoming projects: Upcoming flour mill projects worth Ru 5.2 billion will boost crop

production

Feed sector(Rye and barley) has been growing by 1-5 m MT every year for past 3 years.

Increasing yield due to slow but more introduction of technology

With WTO accession, competition has increased, although export markets are expanding with

reduction in custom duties.


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Tractor Market in Russia

The following table show the horse power wise breakup sales of tractors in Russia. The tractor markethas been growing at around 6-7% in past few years in Russia.

2014(till Feb) %change 2013 %change 2012 %change

2WD


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There is a negative growth in 40-100 hp category of tractors, and more and more people are

going for less than 40 hp category.

Total production vs Domestic production

2010 2011 2012 2013

total

production(1000s) 21 37 41.6 40.1

domestic

Production(1000s) 7.6 14.7 16.8 14.5

Analysis of Table

`Domestic production had been around 30% of the total production. From 2012 to 2013, domestic production decreased because of the WTO accession of Russia.

Due to this Custom duty on foreign brands decreased from 15% to 5 % only. Hence global

brands became cheaper and were preferred over domestic brands.

Brand wise breakup of sales

Domestic Production

The manufacturer 2011 2012

Growth

rate,%

Total 16,841 14,582 86.6

wheel tractors 16,271 14 226 87.4

wheeled tractor plants in Russia 1258 1202 95.5

Among them:

Ltd. "Vladimir Motor-Tractor Works" (VMTZ) 518 134 25.9

JSC "Petersburg Tractor Plant" (PTZ) 636 903 142

JSC "Agrotechmash" 104 165 158.7

JSC "Uralvagonzavod" - - -

Tractors under license "MTW" 14,173 10,388 73.3

Among them:

TD MTZ-ElAZ 5563 4393 79

JSC "Elabuzhskij Autoworks" 3375 1525 45.2

JSC "Buzuluksky Mechanical Plant" 1455 1520 104.4

JSC "Smolspetsteh" 2425 1730 71.3


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JSC "SAREX" 1300 1150 88.4

JSC "Cherepovets Casting-MechanicalPlant" 55 50 90.9

ZAO SHMZ "Kranspetsburmash" - 20 -

Tractors on the licenses of foreigncompanies, total 840 2636 313.8

Including:

JSC "Rostselmash" 218 466 214

Ltd. "John Deere Rus" 295 1677 568

"CNH-KAMAZ" 327 493 151

Including crawler tractor plants in Russia,just 573 356 62.1

Among them:

JSC "TK Volgograd Tractor Plant" 573 356 62.1

Source: " Production and Market of agricultural equipment in the Russian Federation ",Rosagromash, a monthly newsletter, Issue 12, December 2012, "Production and shipment oftractors, agricultural, forestry, municipal, road construction machinery enterprises of theRussian Federation", January 2013 of

Tractors under MTW amount the most to 10,388 in Year 2012 which has decreased around 40 %

from 14,173 in year 2011.

Tractors under foreign brands setting up manufacturing facility in Russia amount to 2636 units in

2012 and this has increased from 840 units in year 2011, one big reason due to Russias WTO

accession.

Foreign Brands/Imports

Total 23721

Harkov Tractor Plant 2282

AGCO 3593

Case New-Holland 3454

John Deere 3290

Valtra 1408

SPK 1787

Class 732

Foton 4820

TYM 2355

(Source: Rosagromash,2013 data)

Total imports from major brands amount to 23721 units(2013 data)

Foton is the most accepted brand among imports.


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Other brands like Jon Deere, New Holland, TYM, Harkov Tractor(ukriane) and AGCO also have

considerable market share.

There numbers have increased in the past 2 years due to Russian accession to WTO.


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CROATIAN MARKET

Introduction

Croatia or officially the Republic of Croatiais a unitary democratic parliamentary republic in the Centralpart of Europe, near to Southeast Europe, and the Mediterranean. Croatia shares its borders with

Hungary in the northeast, Serbia in the east, Bosnia and Herzegovina in the southeast, Montenegro in

the southeast, the Adriatic Sea in the southwest and Slovenia in the northwest. Its capital is Zagreb

which is also its largest city. In June 1991, Croatia declared independence. Another major feature of

country is its very high Human Development Index, a high income economy.


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Area 56,594 km2

Population 4.28 million

Number of Counties 20

Ethnicity Croats

Language Croatian

Literacy rate 99.2%

Climate Continental(mean temp: 3C-18 C) but

sometimes as high as 42 C and as low as -30 C

Rainfall Ranges between 600 mm and 3,500 mm

Currency KUNA(= .18 $)


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PESTLE ANALYSIS OF CROATIA

Economy of Croatia

Theservice sector dominates Croatia's economy, which accounts for as much as 66% of GDP, followed

by theindustrial sector with 27.2% of GDP andagriculture sector lagging with just 6.8% of GDP. The

industrial sector is dominated by shipbuilding, food processing, pharmaceuticals, information

technology, biochemical and timber industry. Since 2000, the Croatian government has invested in

infrastructure, especiallytransport routes and facilities along thePan-European corridors.Tourism

dominates the Croatian service sector and accounts for up to 20% of Croatian GDP.
http://en.wikipedia.org/wiki/Service_sectorhttp://en.wikipedia.org/wiki/Industrial_sectorhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Transport_in_Croatiahttp://en.wikipedia.org/wiki/Pan-European_corridorshttp://en.wikipedia.org/wiki/Tourism_in_Croatiahttp://en.wikipedia.org/wiki/Tourism_in_Croatiahttp://en.wikipedia.org/wiki/Pan-European_corridorshttp://en.wikipedia.org/wiki/Transport_in_Croatiahttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Industrial_sectorhttp://en.wikipedia.org/wiki/Service_sector


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2014 estimate GDP(PPP) GDP(Nominal)

Total $80.620

billion

$61.280

billion

Per capita $18,314 $13,920

Real GDP growth had been around 5.0 per cent annually between 2004 and 2008 but euro zone crisis

affected he economy drastically and Croatian economy experienced negative growth after 2009. Its GDP

contracted 0.40 percent in the 4th quarter of 2013 over the previous quarter. Its 2014 GDP outlook is

revised down further to -0.5% for 2014. The average net salary of a Croatian worker in March 2013 was

5,516 Kuna (US$ 988) per month.

(Source: 2013 data worldbank.org)

Agriculture

66%

Industry

27%

Service

7%

GDP Breakup

Agriculture

15%

Industry29%Service56%

Labor Force Breakup
http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/US$


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Since 2000 the country has been experiencing economic revival but restructuring of the economy

remains a challenge. The EU represents the main trading partner: 63% of Croatian total imports came

from the EU and 61% of Croatian total exports went to the EU (2013 data from worldbank.org).

2013 Enlargement of European Union(Croatia Entered EU)

The 2013 enlargement of the European Unionsaw Croatiajoin the European Unionas their

28th member stateon 1 July 2013. The country applied for EU membership in 2003. The accession

process of Croatia was complicated by the insistence of Slovenia, an EU member state, that the two

countries' border issuesbe dealt with prior to Croatia's accession to the EU. Croatia finished accession

negotiations on 30 June 2011, and on 9 December 2011, signed the Treaty of Accession. The ratification

process was concluded on 21 June 2013, and entry into force and accession of Croatia to the EU took

place on 1 July 2013.[7]

Early Drawbacks of being an EU member: Earlier Croatian government used to provide 40% subsidy to

farmers to buy agricultural equipments and machinery but with accession of Croatia into EU, the

Croatian government subsidy is removed and replaced by EU subsidy. The EU subsidies, which replace

the state subsidies for capital investments, are available only for a limited selection of agricultural

machinery. Since in addition the applications are comparatively complexand knowledge about the

subsidies has not yet reached every farm. Hence absorption rate is still relatively low

Agriculture in Croatia:

Agricultural holdings

Agriculture (mainly grazing and tilling) occupies less than 1/4thof Croatias land and contributes

about one-tenth of the countrys GDP.

A little less than one quarter (23.3 %) of the total land area of Croatia is farmland . This is a

relatively low share as compared to the EU average (40.0 %).

Over two thirds (68.0 %) of the land used for farming (the utilized agricultural area) in Croatia is

arable land
http://en.wikipedia.org/wiki/2013_enlargement_of_the_European_Union#cite_note-7http://en.wikipedia.org/wiki/2013_enlargement_of_the_European_Union#cite_note-7http://en.wikipedia.org/wiki/2013_enlargement_of_the_European_Union#cite_note-7http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Arable_landhttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Arable_landhttp://en.wikipedia.org/wiki/2013_enlargement_of_the_European_Union#cite_note-7


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Croatia has many land holdings or farms but average area per hectare is less(5.6 ha) in

comparison with the EU average(14.4 ha) as shown in table below. In fact, about half (52.5 %) of

all holdings in Croatia are < 2 hectares in size, with as much as 89.4 % being


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Pannonian yield, Mix Farming viticulture

The central para-

Pannonian

poorest land and

climate for agri, large

areas

barley, oats, rye, and

potatoes, plums,

apples, pear, cherries,

peaches.

sheep and cattle

Adriatic littoral of Istria

and Dalmatia

rocky soil, drought,

small parcels of arable

land and poor pasture

grapes, olives,

almonds, figs,

tangerines, and some

fruits & veg.

Sheep and goats

Region wise Crops:

- The Following figure shows the region wise crop distribution in Ukraine


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- SOLIS tractors are suitable for field crop farming which includes wheat, corn, barley etc, and

mixed farming of these crops. Hence we can infer from the above figure that eastern part of

Ukraine is a big market for Solis brand of Sonalika Tractors as in the eastern part, field crops are

grown.

Region wise Yield:

The following figure shows the region wise yield for the year 2013.


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The above map shows areas of Croatia with high yield, average yield and low yield. We can see the

north- eastern and Southern part of the country is fertile and have better productivity than any other

area whereas central part of Croatia has lower and average yield and is not fit for crops like barley.

Agricultural land use

Over two thirds (68.0 %) of the land used for farming (the utilized agricultural area) in Croatia is

arable land
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Arable_landhttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Arable_land


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Of the 895 220 hectares of arable land about two thirds (65.0 %) was given over tocereals,of

which a majority (310 450 hectares) was land under grain maize production.

These relative shares were higher than the EU-27 average as shown in figure below
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Cerealhttp://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Cereal


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Cereals Breakup

Most of the production of cereals include Maize which is exported in huge quantity. Also the the

type of soil and weather conditions favor the production of maize and wheat.

Croatian Tractor Market

- Number of New Tractors in past few years

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of

Tractors

783 1066 1032 1272 498 660 563 602 649

Maize

52%

Barley

11%

Wheat

30%

Others

8%

Cereals break-up


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Almost a third of the sales volume for agricultural machinery in Europe can be attributed to

tractor.

The Croatian agricultural machinery market has been volatile with less numbers in recent years

Few of the reasons for this are:

o Discontinuation in 2010 of the subsidies(40% of the cost of a wide range of

agricultural machines and tractors). In contrast, the EU subsidies, which replace the

state subsidies for capital investments, are available only for a limited selection ofagricultural machinery. Since in addition the applications are comparatively complex

and knowledge about the subsidies has not yet reached every farm. Hence absorption

rate is still relatively low.

o Summer drought in Southeastern Europe: In Croatia droughts occur every 3 to 5 years.

It occurred in 1992,1995,1998 and the droughts in 2000 and 2003 were said to be a

natural disasters for Croatia.

Due to this Agricultural machinery imports, which comprise almost the entire market volume in

Croatia, decreased by 21% to 96 million. On the other hand, the market share of used

machinery rose to approximately 40%.

Following a decline to 167,000 units in the year 2010, the market for tractors in the EU

recovered again over the past three years.

0

200

400

600

800

1000

1200

1400

2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of Tractors

Number of Tractors


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According to 2012 world ban data, Agricultural machinery, tractors per 100 sq. km of arable land

are = 49.441

Mostly tractors within 10hp-120 hp range are registered, which comprise of more than 80% of

the tractor market. One of the reasons of this low hp range in Croatia is the small size of farms.

Comparison with the EU

The EU is a major market for agricultural machinery, with a turnover of 24.2 billion in 2011 equivalent

to 30% of global turnover (VDMA, 2012). The EU is the biggest producer of agricultural machinery, with

a sales value of more than 26 billion in 2011, and it is estimated that production in the EU corresponds

to a third of world production (VDMA, 2012). In 2006, Germany was the major producer of agricultural

and forestry machinery with a share of 26.8% value added in the EU-27, followed in descending order by

Italy (17.7%), France (13.7%) and the UK (5.0%). With an export value of 6.9 billion in 2007 foragricultural and forestry equipment, the EU was a net exporter of 4.3 billion (Eurostat, 2009).

Furthermore, in 2008 the EU intra-trade in agricultural machinery corresponded to 4.2 billion, which

equated to about 57% of all world trade in agricultural machinery.

Number of Tractors in different countries of EU

Year/Country 2008 2009 2010 2011 2012

France 33,981 30,864 23,893 29,980 32,254

Germany 31,250 29,464 28,587 35,977 38,670

Italy 27,121 27,276 23,458 23,441 24,112

Netherland 5,356 3,726 3,480 4,069 43,21

Ukraine 18,966 13,500 14,544 16,714 20,171

Croatia 1272 498 660 563 602

EU 209,866 183,638 166,739 190,809


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Trend of CROATIAN Tractor Market with others

Competitors

Since almost all the tractors are imported so major competitors are the Global giants and tractor

companies from nearby European countries. There is hardly any domestic tractor manufacturer as

competitor.

List of competitors:

John Deere

New Holland

Hittner tractors

AgroLUXS - formerly LIMB

Tomo Vinkovi

Torpedo - (licensed Deutz-Fahr)

Torpedo Deutz

TTB

Tuber

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1000

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2008 2009 2010 2011 2012

FranceGermany

Netherland

Croatia

EU


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Agrolead - Power Harrow

TEHNOMETAL - Ivan Beclin

Agricultural Equipment Cluster Ltd

Messis

gramip

rasco

Among them, John Deere has the largest market share, and then AGCO, Fendt, SDF, Deutz Fahr are

fighting for the second place in market. There are many Japanese and Chinese tractors like Xintao which

also comprise some market share in Croatia.

Units sold by competitors(2013):

Competitors Units sold Market share(by units)

AGCO 51 8.8%

CNH Group 31 5.3%

New Holland 31 5.3%

Fendt 51 8.8%

SDF 40 7%

Deutz Fahr 40 7%

John Deere 128 22.1%

Zetor 39 6.7%

SOLIS 10 1.7%

others 126 21.8%


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The below pie chart show the tractor market of Croatia.

Opportunities for SOLIS

Within Solis HP range: More than 80% of the Tractors registered in Croatia are within 10hp-

120hp range as mentioned earlier. This is within SOLIS hp range (20hp-110hp) hence a huge

opportunity lie in front of SOLIS to increase their brand presence in Croatia .

Tractor market consists of almost all imports: Most of the biggest competitors for an outsider

company are the domestic competitors since they have the advantage of domestic market, have

better insights of market than outsider competitors and sometimes take advantage of

government policies.

High Economic Growth: GDP of Croatia has more than doubled in the last 10 years from 26

billion dollars to 61 billion dollars. Similarly per capita income from 6000 dollars to more than

13000 dollars hence a big opportunity lies to make use of high economic growth.

Average area per holding increasing: Average area per holding is increasing in the past 10 years

with farmers consolidating lands. It has increased from 1.9 hectares to currently 5.6 hectares in

past 10 years. Larger lands need more number of tractors hence boosting tractor market.

AGCO

9%

CNH Group

6%

New Holland

6%

Fendt

9%

SDF

8%

Deutz Fahr

7%

John Deere

23%

Zetor

7%

others

23%

SOLIS

2% Market share(by units)


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Part of European Union: Croatia joined European Union(EU) on 1 stJuly, 2013 and one of the

advantages of it is that now since Croatia is part of EU, it can take advantage of the standardized

agriculture practices of European Union. It is now a part of EU which will lead to faster growth in

agriculture sector.

High Literacy rate, High Income and v high HDI: With high income, Literacy Rate and high HDI,

machinery is preferred over manual labor as the labor costs are high.

Decent Infrastructure: Infrastructure is one of the major factors for growth in agriculture sector.

For eg. to avoid food crop wastage, proper storage houses or ware houses has to be set up.


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UKRAINIAN MARKET

Geography

Ukraine is a country in Eastern Europe It has an area of 603,628 km2(233,062 sq mi) including

Crimea, which is de facto controlled by neighboring Russia making it the largest country entirely

within Europe. Ukraine borders Russia to the east and northeast, Belarus to the northwest, Poland,

Slovakia and Hungary to the west, Romania and Moldova to the southwest, and the Black Sea and Sea of

Azov to the south and southeast, respectively.

Ukraine has long been a global breadbasket because of its extensive, fertile farmlands. As of 2011, it was

the world's third-largest grain exporter with that year's harvest being much larger than average. Ukraine


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is one of the ten most attractive agricultural land acquisition regions. Additionally, the country has a

well-developed manufacturing sector, particularly in aerospace and industrial equipment.

Area 603,628 km2

Population 44.5 million

Capital City Kiev

Number of Counties 25

Ethnicity Ukrainians, Russian

Language Ukrainian(official), Russian

Literacy rate 99.4%

Climate Temperate Continental(mean temp: 13C to

18 C) but sometimes as high as 32 C and as low

as -20 C

Rainfall Ranges between 400 mm and 1200 mm

Currency Ukrainian hryvnia(UAH) (= .086 $)

PESTEL ANALYSIS

Political Factors

Ukraine adopted constitution in 1996 and is being ruled according to that. The country has a

semi-Presidential system where the President is the head of state and shares power with the

parliament. Prime Minister is appointed by the President himslef on the recommendation of the party or

parties in majority in parliament

International Relations

Crimean crisis: It is an ongoing international crisis principally involving both Russia andUkraine. Crimea is a multi-ethnic region which before February 2014 was administered by

Ukraine; It is populated by russian majority and both ethnic Ukrainians and Crimean Tatars in

minority. Currently the Crimea is controlled by the Russia as the Crimean Federal District,

although United Nations does not recognize this status.The crisis has also shown its effects in

the Eastern and Southern regions of Ukraine with active protests going on in these regions and


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also in the capital city of Kiev. The crisis occurred in late February 2014 after the Ukrainian

Revolution, which resulted in ousting of President Viktor Yanukovych by the Ukrainian

parliament which has appointed an interim President, and the formation of an interim

government.

Agreements Signed

Ukraine is a member of the North Atlantic Cooperation Council

Ukraine has maintained very close ties with NATO, which has also helped it in the ongoing

Crimean Crisis.

Ukraine is yet to become member of European Union. It could have become the member by

now but due to recent Crimean crisis, the membership has been delayed and now with

intervention of Russia, the path to EU membership is full of obstacles.

Ukraine is also a member of Organization for Security and Cooperation in Europe (OSCE),

Economic Factors

Ukraine Moved to Market economy from Planned economy after 1991 Soviet disintegration and

faced a great depression afterwards.

Ukraine Experienced deep recession in 1990s soon after the disintegration from the soviet

Union. GDP in those years fell sharply. To prove that, GDP of Ukraine in 1999 was 60% of its GDP

in 1991.

Also, after 2009, Ukraine like most of the EU countries felt effects of recession due to Euro

Sovereign Debt Crisis on its economy and that reduced their trade, affecting exports in a big

way, especially agriculture sector.

One of the major or rather unfortunate feature of the Ukrainian economy is that 40% of its

economy is shadow (black)economy.

Ukraine due to its complex political structure is very slow in implementing structural reforms.

Ukraine is a SEMI PRESIDENTIAL Republic.

Tractor market in Russia and Ukraine

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