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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

International tractors limited

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.

Acknowledgement
I take this opportunity to express my profound gratitude and deep regards to my guide
Professor GK Agrawal, International Management Institute, New Delhi for his exemplary
guidance, monitoring and constant encouragement throughout the course of this thesis. The
blessing, 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.

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 & Nadlers Congruence Analysis,
Organizational chart.

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. 20hp 120 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.

Table of Contents
TITLE OF THE PROJECT ........................................................................................................................................... 2
ACKNOWLEDGEMENT ............................................................................................................................................ 3
ABSTRACT .............................................................................................................................................................. 4
TABLE OF CONTENTS.............................................................................................................................................. 6
INTRODUCTION ..................................................................................................................................................... 8
ABOUT SONALIKA GROUP: ............................................................................................................................................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
MODE OF PAYMENT ................................................................................................................................................24
MICHEAL PORTER FIVE FORCES ANALYSIS ............................................................................................................ 26
SHORTLISTING CRITERIA FOR DISTRIBUTER ......................................................................................................... 29
ABOUT EUROPEAN UNION................................................................................................................................... 31
MONETARY UNION .......................................................................................................................................................32
RUSSIAN MARKET ................................................................................................................................................ 33
PESTEL ANALYSIS .....................................................................................................................................................33
AGRICULTURE SECTOR IN RUSSIA ............................................................................................................................38
CHALLENGES IN AGRICULTURE IN RUSSIA ..........................................................................................................................42
TRACTOR MARKET IN RUSSIA..........................................................................................................................................43
CROATIAN MARKET ............................................................................................................................................. 48
INTRODUCTION ............................................................................................................................................................48
PESTLE ANALYSIS OF CROATIA .................................................................................................................................50
ECONOMY OF CROATIA .................................................................................................................................................50
2013 ENLARGEMENT OF EUROPEAN UNION(CROATIA ENTERED EU) .....................................................................................52
AGRICULTURE IN CROATIA:.............................................................................................................................................52
REGION WISE YIELD: .....................................................................................................................................................55
CEREALS BREAKUP ........................................................................................................................................................58
CROATIAN TRACTOR MARKET .........................................................................................................................................58

COMPETITORS .............................................................................................................................................................61
OPPORTUNITIES FOR SOLIS ...........................................................................................................................................63
UKRAINIAN MARKET ............................................................................................................................................ 65
GEOGRAPHY ................................................................................................................................................................65
PESTEL ANALYSIS .....................................................................................................................................................66
ENVIRONMENTAL FACTORS.............................................................................................................................................72
AGRICULTURE SECTOR IN UKRAINE ............................................................................................................................72
TRACTOR MARKET........................................................................................................................................................78
TRACTOR IMPORT.........................................................................................................................................................79
CONCLUSIONS ..................................................................................................................................................... 83
RUSSIA AND UKRAINE: ..............................................................................................................................................83
CROATIA ..................................................................................................................................................................83
LIMITATIONS OF THE STUDY ................................................................................................................................ 84
REFERENCES......................................................................................................................................................... 85

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 of
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, Sonalika
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 Limited


International 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 groups success 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

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.

Tractors

DI-series

RXSeries

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.

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.

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

Operations

Sales - Asia

Sales - Europe
& America

Sales Africa

General
Development

Product

Nepal

Latin America

Africa 1

Branding

Service &
Spares

Sri Lanka

Central
America

Africa 2

Commercial

Bangladesh

EU

Plant
Cordination

CIS Gulf

Non-EU

LOC

HR

Tushman & Nadlers Congruence 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

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, Mechanical
Engineer 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 &
Development

Sales(Domestic and
International) and
Marketing

Human Resource and


Finance

Organizational Chart:

Sr. President

Vice President

Application
Business

Implements

Marketing

Operations

Sales - Asia

Sales - Europe
& America

Sales Africa

General
Development

Product

Nepal

Latin America

Africa 1

Branding

Service &
Spares

Sri Lanka

Central
America

Africa 2

Commercial

Bangladesh

EU

Plant
Cordination

CIS Gulf

Non-EU

LOC

HR

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 vision the 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.

The Congruence Model at ITL


Informal Organization

Open door
communication
Good Culture

OUTPUT

INPUT

Environment

Work

Formal Organization

Strategy

Resources

History

Manufacturing/
sales of tractors
and implements
After sale
service

Hierarchical
structure
Centralized
Rewards and
incentives

People

A large no. Mechanical


engineers
Domain Expertise
Professional
Expectations

System

Unit

Individual

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 a
centralized 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.

SWOT ANALYSIS

Strengths

Weakness

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

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 not
making a big impact in market.

SWOT
Opportunities

Threats

Indian sub continent tractor market growing at high


pace
Southern part of india untapped.
African and asian tractor market growing.
Farms are getting consolidated in India and more
money with indian farmers.
Car segment still an opportunity

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.

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.

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.

EXPORT PROCESS

The Export process is explained through diagram given below.

Order

Payment

Production

Dispatch

Transportati
on

Client

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.

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 Terms are a series of predefined commercial terms published by the International Chamber of Commerce (ICC) that are
widely used in International commercial transactions or procurement processes. 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.

Inco Terms used by ITL in its transactions is CFR Cost 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.

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 of
lading. 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:

Stuffed
Container

Custom
Invoice

Excise
Papers

Stuffing
Report

Packing
List

Documents Required for Custom Clearance:

Custom
Clearance
SDF(Statutory
Declaration
form)

Shipping bill

Shipping
instructions

Annexure IV and
V

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), package
marks, 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

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

Bank scrutiny

Courier Docs
to foreign
bank

Checking of
doc by foreign
Bank

Inform
customer of
the same

Confirmation
of payment
from
customer

Foreign bank
pays
Domestic
bank

Domestic
bank pay ITL

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 through
shipping 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.

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 dealers across 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.

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

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.

BARGAINING POWER
OF BUYER

THREAT OF SUBSTITUTE
Low

Moderate
RIVALARY
moderate
THREAT OF ENTRY
MODERATE

BARGAINING POWER OF
SUPPLIERS
Low

Five Force analysis

SHORTLISTING CRITERIA FOR DISTRIBUTER


We get list of Distributers through secondary research on internet or by contacting the embassies(in
New Delhi) of the country we are targeting.
Distributer-Short listing is done in two ways:
On the basis of Secondary data
Attributes like Reach, Size, Brands carrying are considered.
On the basis of Primary Data i.e. by visiting the distributer site
Attributes like Sales Staff, Service Efficiency, Finance, Operations and Long Term viability are
considered( which we cant search using secondary research).

Reach
Best Option for ITL (International Tractors Limited) is if they have only one distributor having
enough dealerships to cover all the geography of the market/country. For example in Croatia,

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 Effort
This 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 models
made 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.

ABOUT EUROPEAN UNION

The European Union (EU) is an economic and political union comprising of 28 member
countries of 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.

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 union between its member states.

The single market involves the free circulation of goods, capital, people, and services within the
EU.

The customs union involves the application of a common external tariff on all goods entering
the market. Once goods have been admitted into the market they cannot be subjected to
customs duties, discriminatory taxes or import quotas, as they travel internally.

The non-EU member states of Iceland, Norway, Liechtenstein and Switzerland participate 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, eliminating exchange 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.

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.

Influence of Russia comes from the supply of energy to most of the European countries and from
the large stockpile of nuclear weapons with them.

The government is corrupted and ranks at 154 out of 178 on the perceived corruption index. Russia
also participates in the Quartet on the Middle East and the Six-party talks with North Korea

Member of the Council of Europe, OSCE, and APEC

Leading role in regional organizations such as the CIS, CSTO, and the SCO

Part of NATO-Russia Council

CRIMEAN CRISIS(and hence no longer member of G8): Crimean crisis with its neighbor and
long time ally Ukraine has led to various political events and protests at different part of the world
and has caught the attention of both EU and the United Nations. Both EU and UN dont support
Russias acquisition of Ukrainian territory of Crimea. Hence Russian Federation has been eliminated
from the group of earlier G8 countries (now G7).

ECONOMIC FACTORS:

Following are some facts about the Russian Economy.

Russian economy shifted to market economy after disintegration of Soviet Union in 1991 and
due to which Russia faced recession in the early 90s.
It is the 8th largest economy with its GDP more than 2.5 trillion USD (PPP). With low population,
Per capita income is high at USD 19,840.
Major source of its income is primary sector consisting of Mining, Oil exploration and timber
which also account for majority of exports which as a whole amount for more than USD 530
billion.
Russia is a trade surplus economy with its exports leading imports by around USD 200 billion.

Type of Economy

Market

GDP

$ 2.5 trillion(PPP), 8 largest

GDP per capita

19,840 (PPP)

Average Salary

$967 per month

th

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 metal


products

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

GDP( $b)
3000
2500
2000
GDP( $b)

1500
1000
500
0
Year 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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.

GDP breakup

AGRICULTURE
4%

Industry
36%
Services
60%

SOCIAL FACTORS
Religion and ethnic groups:
Ethnic groups are 81 % Russian, 3.7% Tatar, and around 1.4% Ukrainian.
Orthodox Christianity, Islam, Judaism and Buddhism are 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 Tatar with 5.3 million and Ukrainian with
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 ( 55th in world).

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 care for 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 education system, which is guaranteed for all citizens by the Constitution,
however entry to subsidized higher education is 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.

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% of
arable 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

Total Production in past years


120
100
80
60

production

40
20
0
2006 2007 2008 2009 2010 2011 2012 2013

Land area and Type of Farms


Total land area
Arable land
Average farm size
Yield
Area under grains

180 million hectares


23 million ( 13% of total land area)
150 hectares
1859 kg per hectare
50 % of cropland

Large Enterprises

Small Enterprises

Household Plots

Family Farms

Number of farms
Total Land(million
hectares)
Avg. Farm size

27,787
107.4

20,392
24.5

22,799,400
9.6

285,141
24.1

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.

Farms before 1991

State owned and USSR


collective farms

House hold farms(< 1ha)

Farms after 1991

Joint Stock company

House hold farms(< 1ha)

Private farms

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.

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:

2.

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.

Barley (16.5 mt)

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.

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.

Tractor Market in Russia


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

2014(till Feb) %change


2WD
<40 HP
40-100 hp
100+ hp
Total 2WD
4WD

Total

2013 %change

2012 %change

1865
3404
1144
6413

82.50%
-0.60%
-21.20%
8.90%

13328
19326
6638
39292

9.64%
-1.02%
-24.16%
-2.82%

12156
19525
8753
40434

21.60%
-5.00%
58.68%
12.11%

149

-2%

866

-30.66%

1249

34.16%

6562

8.60%

40158

-3.66% 41683

12.67%

2011 %change

2010

9997
20553
5516
36066

113.57%
70.95%
44.63%
75.78%

4681
12023
3814
20518

931

101.52%

462

36997

76.34%

20980

Analysis
The tractor market has been growing at around 6-7% in past few years in Russia.
Less than 100 hp tractors(which comes under SOLIS hp range) comprises around 80% of the
total sales in Russia, which is a big opportunity for SOLIS to make mark in Russian market.

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

2011

2012

Growth
rate,%

Total

16,841

14,582

86.6

wheel tractors

16,271

14 226

87.4

1258

1202

95.5

Ltd. "Vladimir Motor-Tractor Works" (VMTZ)

518

134

25.9

JSC "Petersburg Tractor Plant" (PTZ)

636

903

142

JSC "Agrotechmash"

104

165

158.7

14,173

10,388

73.3

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

The manufacturer

wheeled tractor plants in Russia


Among them:

JSC "Uralvagonzavod"
Tractors under license "MTW"
Among them:

JSC "SAREX"
JSC "Cherepovets Casting-Mechanical
Plant"

1300

1150

88.4

55

50

90.9

20

840

2636

313.8

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

573

356

62.1

ZAO SHMZ "Kranspetsburmash"


Tractors on the licenses of foreign
companies, total
Including:

Among them:
JSC "TK Volgograd Tractor Plant"

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


AGCO
Case New-Holland
John Deere
Valtra

2282
3593
3454
3290
1408

SPK
Class

1787
732

Foton
TYM

4820
2355

(Source: Rosagromash,2013 data)

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


Foton is the most accepted brand among imports.

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.

CROATIAN MARKET
Introduction

Croatia or officially the Republic of Croatia is a unitary democratic parliamentary republic in the Central
part 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.

Area

56,594 km2

Population

4.28 million

Number of Counties

20

Ethnicity

Croats

Language

Croatian

Literacy rate

99.2%

Climate

Continental(mean temp: 3 C-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 $)

PESTLE ANALYSIS OF CROATIA

Economy of Croatia
The service sector dominates Croatia's economy, which accounts for as much as 66% of GDP, followed
by the industrial sector with 27.2% of GDP and agriculture 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, especially transport routes and facilities along the Pan-European corridors. Tourism
dominates the Croatian service sector and accounts for up to 20% of Croatian GDP.

2014 estimate GDP(PPP)

GDP(Nominal)

Total

$80.620

$61.280

billion

billion

$18,314

$13,920

Per capita

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.

GDP Breakup
Service
7%

Industry
27%
Agriculture
66%

Labor Force Breakup

Agriculture
15%

Service
56%

(Source: 2013 data worldbank.org)

Industry
29%

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 Union saw Croatia join the European Union as their
28th member state on 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 issues be 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 complex and 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 1/4th of 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

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 <10 hectares in size.

Around 54.4 % of farmland in Croatia are worked upon by the owners, and the remainder
(45.6 %) being worked upon by tenant farmers.

Number Of Land

Croatia

EU

Croatia as % of EU(%)

233280

12014710

1.9

1316010

172799570

0.8

5.6

14.4

513680

24960570

Holdings
Utilized Agriculture
Area(ha)
Average Area per
Holding
Number of Persons

2.0

working on farms
[Source: Eurostat(online data codes: ef_kvaareg and ef_olfaa), 2012]

Region wise classification:


The table below shows the region wise classification of agricultural land in Croatia with the
characteristics of the area, type of farming done and crops grown.
Regions

Characteristics

Crops

Animal Husbandry

Slavonia

most fertile ,capital

sugar beets, corn,

Pigs, cattle, and poultry

intensive, large

wheat, potatoes,

holdings

barley, soybeans,
sunflowers, tobacco

Western para-

smallholdings, low

Fruit growing,

Cattle, pig breeding

Pannonian

yield, Mix Farming

viticulture

The central para-

poorest land and

barley, oats, rye, and

Pannonian

climate for agri, large

potatoes, plums,

areas

apples, pear, cherries,

sheep and cattle

peaches.
Adriatic littoral of Istria

rocky soil, drought,

grapes, olives,

and Dalmatia

small parcels of arable

almonds, figs,

land and poor pasture

tangerines, and some


fruits & veg.

Region wise Crops:


-

The Following figure shows the region wise crop distribution in Ukraine

Sheep and goats

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.

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

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

Cereals Breakup

Others
8%

Cereals break-up

Wheat
30%
Maize
52%
Barley
11%

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

783

1066

1032

1272

498

660

563

602

649

Tractors

Number of Tractors
1400
1200
1000
800
Number of Tractors

600
400
200
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

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 of
agricultural 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.

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.

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 for
agricultural 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

Trend of CROATIAN Tractor Market with others


4500
4000
3500
3000

France

2500

Germany

2000

Netherland

1500

Croatia

1000

EU

500
0
2008

2009

2010

2011

2012

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

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%

The below pie chart show the tractor market of Croatia.


SOLIS
2%

Market share(by units)

others
23%

AGCO
9%

CNH Group
6%
New Holland
6%
Fendt
9%

Zetor
7%
John Deere
23%

SDF
8%
Deutz Fahr
7%

Opportunities for SOLIS

Within Solis HP range: More than 80% of the Tractors registered in Croatia are within 10hp120hp 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.

Part of European Union: Croatia joined European Union(EU) on 1st July, 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.

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

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: 13 C 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 and
Ukraine. 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

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.

Gross domestic product has been flat for two years as shown in the graph below. One of the
major reasons is the Sovereign Debt Crisis of EU.

The unemployment rate is 7.5 percent.

Ukraine is highly energy inefficient


2014 estimate GDP(PPP)

GDP(Nominal)

Total

$337.360

$175.527

billion

billion

$7,422

$3,862

Per capita

The graph below shows the GDP change of Ukrainian economy in past 20 years. Just after disintegration
from USSR, Ukraine shifted to market economy leading to fall in GDP sharply.

GDP growth change


0.00%
1992

1993

1994

1995

1996

1997

1998

1999

-5.00%
-10.00%
GDP growth change
-15.00%
-20.00%
-25.00%

Source: Worldbank.org

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.

GDP growth change


15.00%
10.00%
5.00%
0.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-5.00%

GDP growth change

-10.00%
-15.00%
-20.00%

Source: Worldbank.org

The pie chart below shows the GDP breakup of Ukrainian Economy for year 2013

GDP Break-up (2013)


Agriculture

Industry

Service

9%

56%

35%

The pie chart below shows the labor force breakup of Ukrainian Economy for year 2013

Labor Force Break-up(2013)


Agriculture

Industry

Service

15%

23%
62%

Social Factors
Demographics: Ukraine has seen a significant population decline of 10% after announcing its
independence i.e. from 51.838 billion in 1990 to 46372.7 billion in 2008. The birth rate has been
improving since 2001 and reached 10.2/1000 in 2007. Although, death rate has also increased to
16.4/1000, which leads to negative National growth of -6.2/1000. The average life-expectancy
at birth is measured to be 68.25 years in 2006-2007. The average population density in 2008 is 77
people per sq. km

For more than a century before the independence, the language of the country was Russian. The
official language is Ukrainian now which is spoken by 67% of the population; although , large part of the
population speaks also Russian. The prevalent religion is Christian Orthodox. If we look at Ethnic
composition,according to data in 2001 census shows 77.8% of the population is Ukrainian and 17.3% is
Russian. The literacy rate of the population is 99.7% for adults and 99.8% for youth.

Technological Factors
IT Sector
The Internet usage in the country has increased dramatically during the last years. As reported in a
document of the communication branch, "Reorganisation of a telecommunication network,
introduction of new technologies, increase of level of solvency of the population promoted growth of
number of the Internet audience in Ukraine which as of 01.07.2008 totals about 10 million persons
Past achievements of Ukraine in space and military production have left solid traditions of working

through complicated projects that are IT dependent. Higher education remains strong in the areas of
mathematics and theoretical physics, which rely heavily on IT-technologies.

R&D
Ukrainian companies have a strong advantage in R&D. It develops not only in the area of scientific
research, but also in the area of software development that requires creativity and strong skills in
adjacent domains. According to the Ukrainian Statistical Institute, 14.2% of all enterprises were
engaged in innovative activity and 11.5% introduced innovations during 2007.
Government Participation
The Government is strongly encouraging innovations and technological development. The State
Agency of Ukraine for Investments and Innovation is the regulatory body responsible for the
implementation of the State innovation program. Technological Parks have been created on the
territory of the country, in which special treatment for investment and innovation activity is granted.

Environmental factors
Ukraine has significant environmental problems, resulting from the Chernobyl nuclear power plant
disaster in 1986 as well as the industrial pollution. Chernobyl Nuclear Power Plant was permanently
closed in 2000 and the necessary measures for radiation safety have been taken. The disaster has had
huge negative social impact as of 2007, 2 526 216 people (which is 5.5% of the entire population) have
the status of victims.
Ukraine is interested in cooperating on regional environmental issues. Conservation of natural
resources is stated a high priority although implementation suffers from a lack of financial resources.
Ukraine established its first nature preserve, Askania-Nova, and has a program to breed endangered
species. Other environmental problems are inadequate supplies of potable water; air and water
pollution and deforestation.

AGRICULTURE Sector in UKRAINE

Agriculture, traditionally has been one of the most important sectors of Ukrainian Economy,
given the high quality and availability of fertile land. Ukraine is known as the breadbasket of
Europe.

It contributes 9% of the Ukrainian GDP and absorbs approximately 15.2% of the total
employment and accounts for 7% of retail turnover. (Eurostat data 2013)

Ukrainian Agriculture is known for its inefficient practices, but now, Extensive Govt. focus on
Agriculture for past few years(Agriculture Development Strategy 2020) has improved the
efficiency of this sector.

Agriculture provides 25% of currency revenues from Exports

Ukraine has low output per hectare, but one of the best productivity per fertilizer when
compared with EU countries.

FACTS & FIGURES


Agriculture, value added (% of GDP)

8.9

Agricultural land, % in total*

71.2

Population, million

45

Rural population, % in total

31.3

Average annual growth in agriculture value added

2.9%

2000-2012, at constant
prices (%)
Employment in agriculture (% of total

15.2

employment)**
Share of agricultural products in total exports

14%

* 2013 data
** 2012 data

Agricultural holdings and soil.

Ukraine possesses 32.5 m ha of arable land


Thirty percent of the world's black soil is in Ukraine, and 42 million of the country's 60 million
hectares (231,660 square miles) is agricultural land which is 71% of the countrys total land area,
and of which 32.5m ha is arable . Ukraine has rich agricultural soils and access to abundant land
and water resources for large scale agriculture. Arable land represents 76% of Ukrainian
agricultural land. The total amount of Ukrainian arable land equals 30% of the European Unions
arable land and represents 2.4% of the worlds total arable land, according to FAO and Eurostat.
Also the following figure shows the soil quality at various regions of Ukraine.

Ukrainian agricultural producers enjoy inexpensive labor

Yields lower than in European Union countries mainly caused by low fertilizer usage
In 2011, 3 m Ukrainians were working in Ukraines agricultural industry, or 15% of all labor force.
Ukrainian agricultural producers enjoy a number of competitive advantages over their foreign
peers, particularly low labor costs. Labor force is inexpensive and highly qualified. Domestic
agricultural companies pay farm workers USD 2/hour on average Due to insufficient fertilizers
and crop protection products application and lack of modern machinery in the fields,
agricultural compared to USD 40/hour in Germany, USD 6-10 in CEE countries, and USD 3 in
Russia.

Yield:
Ukraine has low Yield per hectare but high yield per fertilizer. The following figure shows the yield per
hectare in different counties of Ukraine
Yield per Hectare:


Source: EuroStat, 2013

Agricultural yields in 2011/2012, in t/ha


Wheat

Corn

Barley

World

2.9

5.0

2.4

European Union

5.2

7.0

4.3

Ukraine

2.7

4.5

2.0

Source: United States department of Agriculture

High Fertilizer Yield:


Ukraines current fertilizer rate stands at 78 kg/ha used for 2011 harvest, which is higher than in
neighboring Russia (33 kg/ha), but still lower than, for example, in Slovenia (195 kg/ha), China (130

kg/ha) or developed EU countries (120 kg/ha on ave.). The US reports the highest fertilizer usage rate in
the world of 150 kg/ha. Despite low fertilizer usage, Ukrainian farms have demonstrated superior crop
productivity per unit of fertilizer applied thanks to the countrys fertile soil. Ukraine reported 52 kg of
crop output per 1 kg of fertilizer applied in 2012(FAO Report 2013).

Major Crops
Major crops grown in and exported by Ukraine are Wheat, Barley, Maize, Oats, Rye and other grains.
The following figure shows the composition of grains in Ukraine in 2012.
Other Grains
2%
Oats Rye
2% 2%

Crops grown

Maize
19%
Barley
31%

Wheat
44%

Exports
Ukraine popularly known as the BreadBasket of Europe has been exporting large quantities Wheat since
its independence.
Its 2012 exports saw the emergence of corn export. Corn exports were even more than the wheat
exports at 12.5 million tones where as wheat exports were 6.1 million tonnes. The following figure
shows the export share.

Export quantity in m tons

Wheat
30%

Corn
62%
Rice
8%

As of 2013, Major producer of wheat are now also Moving to Corns too. Already Ukraine is a
large wheat supplier to the Middle East, and now Ukraines corn acreage is expanding as well,
as it offers higher profits to exporters and there are far less state regulation than wheat
markets.

Ukraine expect its exports in the 2013/2014 to be nearly 30.2 million tonnes of grain, according
to the U.S. Department of Agriculture, will rank it second among the worlds largest exporters of
grain, according to the Ukrainian Grain Association.

According to a press release from the UGA, the United States might as usual lead the ranking,
with an expected figure of 69.65 million tonnes of export, while the EU countries will rank third
with 29.25 million tonnes

Ukraine Grain exports expected to total a record $5.5bn this year

This years exp. corn harvest of 29m tonnes is 35 per cent jump in exports to 18m tonnes(2nd
Largest)

Agriculture: opportunities

Government Measures: In past few years government have focused very extensively on
agriculture and have introduced many agriculture friendly policies.With the aim of determining

future priorities for implementing the states agrarian policy, Ukraines Cabinet of Ministers has
approved the Agriculture Development Strategy 2020. The document outlines measures aimed
to maximize the potential of agricultural sector, which, in turn, will give a powerful impetus to
investment, technological and social growth in the country

Government enlarges its agriculture budget to UAH-47 billion.

Ukraine to produce 120 million tonnes of grains in next 15 yrs.

Ukraine could become worlds second largest grain exporter. Expected exports of 30.2 million
tonnes of grain for coming FY.

European Union will open its market for Ukraine products after the free trade agreement is
signed (which are delayed due to crimerian crisis)

Ukraine to deepen cooperation with Saudi Arabia and Germany with more barter trade.

Agriculture: Threats

Although due to ousting of President Viktor Yanukovych(due to cremian crisis), Agriculture


sector can get affected.

The access to loans for the Ukrainian agriculture sector will be tougher due to on-going crisis.

The bank forecast Ukraine's grains output falling by nearly 16% to 44.5m tonnes in 2014-15
well below the 51.4m tonnes(govt forecast).

Tractor Market

Tractor market number


close to 20,000: More than 20,000 new tractors get registered every year.

Imports of Agricultural Equipment (2012)


The import of agricultural equipment to Ukraine in 2012 amounted at $ 930 million., with 90%
of the total amount spent on the new equipment. The agricultural equipment market remains

positive trend second year already. The analysis of the grain harvesters and tractors import which makes 2/3 of the total import - of the first half 2013 proves the given dynamics will be
kept this year as well. Since the topic of the domestic production is still more on paper and is
raised by the government before elections only, the market share of the Ukrainian trademarks is
not significant

Tractor Import
The import of tractors to Ukraine in 2012 exceeded $ 312 mln. Belarus (30%), John Deere (28%),
Case IH (15%) and New Holland (10%) traditionally became market leaders. The tractor's HP
segments are not less interesting. Belarus has 97% of the market share in 80-100 HP segment
(which ammounts at $69mln.) and 58% in 100-200 HP segment ($42mln.). The 200-300 HP
segment has more intensive competiotion: Deutz Fahr (27%), Case IH (20%), John Deere (16%),
Claas (13%). Whereby John Deere (43%), Case IH (22%) and New Holland (16%) dominate in the
most attractive >300 HP segment. The figure above illustrates it

Tractors with hp range >59hp


Number: 10 000 tractor
Leading brands and market share:

Belarus (47.2% of total imports)

John Deer (19)

Case (11.3)

New Holland (6.5% ).

New Holland
8%

Market share(>59hp)

Case
13%

John Deere
23%

Belarus
56%

Tractors with hp range <59 hp:


Number: 7000 tractors

Brands: A significant part of the market occupied by tractors low power (<59 hp), 99% of which
is imported from China

Brands

Belarus

(25%)

Deng Feng

(9%)

Dzhinma

(4.2)

Hebei

(6.6%).

HTZ

(5.6%)

Market Share by Number

JD

(8.5%)

NH

(13%)

Belarus
1%

Chart Title

New Holland
34%

John Deere
22%

Deng Feng
0%
Dzhinma
11%

Hebei
17%

HTZ
15%

Opportunities

Need for agricultural machinery in Ukraine met less than half which SOLIS tractors can fulfill

A lot of government reforms to support agriculture ahead which will boost agriculture as well as
tractor market.

Ukraine will enter EU soon hence can make use of free trade hence exports of crops will
increase as well as Ukraine can make use of the subsidies provided by EU and its other facilities.

Increase in min wage of workers so manual labor has become costly hence more farmers will
opt for machinery

Support price for many crops have increased so more money with farmers to buy machinery.

Threats

Domestic Production to Grow:


-

Government is opting for belarus agriculture machinery and setting up joint R&D centre
with Belarus Tractors from this year which will hinder exports.

Government plans to increase domestic production to 12000 by 2017 through kharkov


plant. They are setting up joint manufacturing facilities with chinese companies YTO
Tractors. This will boost domestic production and reduce imports and is a big obstacle
for SOLIS tractors.

Ukrainian domestic farm machinery companies are attracting foreign investments. Apart
from Kharkov tractors discussed above other Ukrainian Farm machinery companies are
also attracting foreign investments and this will boost the domestic production

Cremian crisis is delaying trade agreements and agriculture reforms

John Deere to share credit risks as part of agricultural machinery lending for $50 million.

CONCLUSIONS
RUSSIA and UKRAINE:
We need to consider following factors to come to any decision:

Russia and Ukraine are growing market and are of considerable size.
Majority of the tractors used by customers in these markets are within the HP range of SOLIS
hence this is a big opportunity for SOLIS to enter the market.
Ukraine was already part of WTO , now Russia has also entered WTO, hence low custom duty
will boost imports
Major Crops grown are suitable for SOLIS tractors.
Average farm size in Russia is too big for SOLIS hp range yet less than 100hp tractors form 75%
of the total sales. In Ukraine, the farm size is appropriate for the SOLIS hp range.
Both countries meet only half or less, of the total tractors required and hence tractor market
will grow
Government is very seriously supporting agriculture in Ukraine.

All these factors favor Entering Russian and Ukrainian Market but due to the CRIMEAN CRISIS going
on and excessive tension between these two countries as both these countries are on the verge of war,
the time is not suitable to set a new business in both these economies. Hence ITL must wait before
coming into agreement to open any dealership.

CROATIA

ITL already have tie-up with one distributor in Croatia but the problem is that the sales from that
distributer is very less.
One of the reason is that the tractor market is not growing, there has been a downfall in
Croatian Tractor market due to Euro Debt crisis.
Another possible reason is lack of sales effort from the distributer side.

All these factors were considered and a visit to Croatia was made in order to change the distributer but
ITL officials came to know that all distributers are facing the same problem, hence ITL kept the same
distributer.

Limitations of the Study


1. Lack of funds to carry out primary research: The biggest limitation is that no extensive primary
research is carried out by us hence the information used can be non credible at some times.
2. Some times desired information is unavailable or the information available with us is out-of-date
hence hampering a credible research.
3. Language barrier: Doing secondary research and while doing cold calling, language is
communication barrier as most of the non EU countries dont use English as their primary
language.
4. Lack reliability and credibility of data.
5. Since no primary research is done hence Data may be too broad making it a tedious task to filter
out required data and some of the data acquired might not be useful in our context in order to
reach a conclusion.
6. The data might not be available in meaningful units.

REFERENCES
Croatia

FAO Reports

VDMA Report

OECD Report

www.epp.eurostat.ec.europa.eu

www.cia.gov

www.datamarket.com

www.europages.co.uk

Croatian government Statistics Department

www.mascus.com

www.wikipedia.org

Ukraine and Russia

FAO Reports

VDMA Report

OECD Report

Ukraine government Statistics Department

www.modernukraine.eu

www.agro-expo.com

www.tradingeconomics.com

www.investukraine.com

www.agribenchmark.org

www.wikipedia.com

www.nationmaster.com

www.ibtimes.com

www.agrimoney.com

www.propozitsiya.com

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