INTRODUCTION

Thinking global, acting local,' goes the mission statement of New

Holland tractors, like most other international companies which
wish to make a mark in the country's local market. But unlike the
other manufacturing industries, the challenge here is much greater.
The product may ofer world class technology, but it has to fnd a
place in the in the highly traditional rural market of India. The
farmer here can't be swayed by hi-tech gimmicks-he means
business. Unless he is assured of signifcant returns in income and
productivity he will not easily part with his money. "Being the latest
is not necessarily an advantage for us because agriculture all over
the world is still a very traditional industry," admits T.L.Palani
Kumar, Managing Director, New Holland Tractors.
The company, which manufactures Ford tractors worldwide, and
boasts of a global market share of 20%, came to the country about
two years ago with ambitious plans. Along with the mammoth task
to establishing a tractor unit, it also wanted to create a self-
contained knowledge base through information systems. "We did
not have the luxury of frst putting our project in place, letting the
company become operational and then look at the management of
information. We were clear that a knowledge base was also
important and had to be created along with the project. This was an
ambitious move because there is so much to be done in setting up a
business-making a plant, creating the supply chain and putting the
best practices in everything that you do," says Palani Kumar.
Power of knowledge
The idea behind creating such a knowledge-oriented culture in the
company was obviously to understand the real needs of the
consumer through information from dealers and suppliers. There
was a need to create product-related databases that were relevant
specifcally to the Indian farmers. The company was also seeking a
complete customer database, which has much more detailed
information compared to a traditional invoice. This would enable
the company to provide much better service. "The fact is that rural
marketing even in the West is logistically a nightmare. So, when you
have to deliver a service to the farmer in a large country like India,
it is even more difcult because practically every region has its own
specialized farm practices, says Palani Kumar.
Gradually, New Holland went on to create an entire set of databases
including ones that contained information about business
associates, employees, customer and so on. Based on the knowledge
base it created, the company had to devise a structure and focus for
its operations. The emphasis was on having a fat organization,
where the process of decision making was decentralized. For this, it
was important to have total connectivity, which would allow people
in any location to share information on a day-to-day basis. At
present there are four locations in and around Delhi-the corporate
ofce, spare parts center, training farm and factory, including the
research and design center. Each of these has its own local area
network, which allows access to information from the database.
Says Palani Kumar, "This has promoted a culture which allows the
company to follow the best business practices while setting up the
supply chain."
An investment of Rs 11 crore was planned for Baan ERP and Lotus
Notes groupware.
Baan's advantages were:
Orientation towards a manufacturing environment and more
functionality.
With limited time for understanding and implementation,
simplicity was an essential prerequisite and Baan was found
qualifed in this regard.
After inclusion of implementation costs and consultation fees,
Baan was found comparatively more cost efective.
The parent company had a legacy of a variety of systems and
Baan was one of them. Although selected locally after
evaluation, the decision was also supported by the parent
company.
The ERP project began in October 1997 with basic modules such as
sales and purchase, inventory, fnance and manufacturing. It went
live in the beginning of this year and at present, there are 75
licenced users of Baan. The number is likely to increase to 125 in
the next two years. It runs on RS/6000 F50 model Unix servers
from IBM, which have been divided into database server and client-
server architecture. They work together in a cluster mode, which
means one can take up the job of the other in case of any failure.
Both systems have about 1 GB memory each and 50 GB storage
space. Besides the ERP servers, there are two NT servers for each
location. One of them is used fur running network services and the
second is used for Notes. They have been segregated to avoid
overloading. Each location runs on a switched ethernet-based LAN,
which rests on fber optics cables.
It has developed and installed about 12 groupware applications
designed for specifc operations. For instance, a product-related
database application has been devised to solve problems that crop
up while designing products.
The company wants to extend the workfow systems in three main
areas and administrative procedures are being developed within
these areas, namely:
Manufacturing.
Supply chain with dealers and suppliers.
Ofce Automation for administrative functions like travel
bookings, purchases, personnel management.
Vale-added products
Although the entire business and IT plan has been designed to
cater to the Indian agriculture industry, localization was brought in
only gradually. The frst product was launched mainly to introduce
the technology and to inform the farmers that Ford is back in the
country, so the scope of localization was very limited only to 10-
15%. But it increased to about 60% with the second product. While
the 70 HP tractor was priced at Rs. 5.75 lakh, the 50 HP comes at
Rs 3.8 lakh.
When the company talks of keeping the product afordable and
relevant to the Indian market, one wonders whether the poor farmer
can really aford this price. Palani Kumar says, "The price of
products may be higher than competitors, but the additional
features justly the costs. Although the Indian customer is quite
conscious of price, we want to make him conscious of the value-
added services of our product."
The fact that the company decided to set up an R&D center in the
country even when it had 12 centers around the world does indicate
that the company is well aware and focussed on the local needs.
The design department has incorporated various features
specifcally for India. For instance, water-proof tractors had to be
developed keeping in mind the style of rice cultivation here. Palani
Kumar says, "In India, we had to remove some sophisticated parts
because they are not required here. Moreover, maintenance would
be such a problem because you depend mainly on the roadside
mechanic."
The design department, which is working on CADDS 5 software
based on Sun Workstations is now planning to shift to Parmetric
Technology.
Towards a new era
From a small make-shift arrangement in a corner of the ofce to a
fully-equipped development center, the company has come a long
way. Ranging from infrastructure bottlenecks to cultural changes,
it has encountered and solved a number of implementation hurdles.
And adaptation is the key word. "The biggest problem of
implementing any technology is with the human interface. No
technology can be utilized up to its optimum level if the people are
not ready for it. The companies that are ver old and have many
senior people usually face a problem in adapting to new technology,"
says Palani Kumar.
Being a start-up, adaptation to the latest business practices was
not too difcult. As the company moves up on the maturity curve,
people's knowledge and understanding of the application would also
improve. Its future plans include data mining, data warehousing
and further optimization of the present infrastructure. Although it
has made an ambitious beginning, New Holland now has to live up
to the challenges ahead. It has to cut across the monopoly of
existing tractor makers to create room for its niche product. With
knowledge management and information systems as foundation,
New Holland is certainly gunning ahead to usher in a new era in
Indian farming.
NEW HOLLAND TRACTORS: VENDOR
DEVELOPMENT
New Holland Tractor is a 100% subsidiary of New Holland a fat
Group Company. Earlier on the parent Company had 40% Stake in
Escorts tractors Ltd. and the tractors were marketed under the Ford
Brand name. During the restructuring of Escorts Group the entire
stake was purchased by Escorts group and the division in now a
part of Escorts Ltd. It is selling the tractors under Farmtrac Brand
name.
Consequently New Holland has established its own 100%
subsidiary. As the Escorts Tractors was using the technology
supplied by New Holland it was market leader in more than SOHP
segment with a loins share of 50%. So there was a number of
dedicated vendors of Escorts Group who went to the Escorts Ltd.
Moreover selling the same product would not have been useful to
New Holland. So it entered the market aiming to be the technology
leader with a number of new features in its tractors such as Euro II
complaint engine, improved brakes, sheet mental Components etc.
Automobile units have slowly being converted to joust assembly
plants world over with the component manufacturing shifting to
ancillary units. Telco has nearly 1200 Vendors and Punjab Tractors
200. There is going incidence of setting up dedicated ancillary units
as has been done by Maruti Udyog, Daewoo motors and Telco (Car
Project).
New Holland Tractors has currently 80 vendors. It includes
Companies like Sundeam fastres, Lucas TVs, Wheels Indica, Mico,
etc. Company is at present importing a number of components
including Engines from its parent Company. Paints are procured
from Asian paints which has a Collaboration with PPG Inc. for auto
mobile paints. PPG Inc. is the Global supplies for fat Group.
Engines are being procured from IVECO - a group Company.
IVECO is planning to convert the present engine plant of Ashok
Leyland into a joint venture. This plant is likely to take up the
manufacturing of engines for New Holland tractors in future.
Realizing the realities of tractor market in India Company plans to
increase its capacity utilization from current levels of around 25
tractors per day New Holland plans to enter lower HP tractors.
Indegnisation levels are expected to be higher for those tractors.
For choosing Vendors New Holland gives priority to factors like
Quality of Components, Reliability of supplier ability to meet
delivery schedules and technology. Company plans to follow the
policy of Global Vendors in tune with the emerging concept in the
world automotive Industry.
Companies like Mahindra are planning to introduce the concept of
satellite plants to control inventory. In such a Competitive Scenario
New Holland plans to introduce the concept of setting up vendor
warehouses with a radius of 50 k.m. of the New Holland plant. The
cost of such a warehouse will be shared by New Holland and
Vendors jointly.
Vender Relations :
The vendors of New Holland use state-of-art technology. They are
non-dedicated suppliers i.e. they supply to a number of tractor
manufacturers. When its J/U with Escorts ended Escorts took
away its dedicated suppliers with it. New Holland gets sheet metal
from abroad. Some of its vendors have capacity constraints. They
treat their suppliers as partners, right from the design stage to the
product distribution stage. Its suppliers are its active partners and
they follow the policy of 'live and let live' they do cross-beneft
analysis of whether to go for global sourcing or location.
Inventory :
New Holland follows a 'Push' strategy i.e. they have a safety stock
which is according to the forecasts done. Their plan goes as follows:
1. They frst fnd the number of orders in the market. These
orders are for the total market.
2. From this, they prepare a market schedule.
3. Market schedules are translated to weekly plans.
4. From weekly plans, they see how many orders are pending and
how many new orders have come. They stock according to this
estimate.
Their marketing department is pulling the production department
to come out with tractors. They are too mature to follow (mark-to-
order/Pull strategy). They keep the bufers high.
Supply Chain Management :
New Holland has an efective SCM, the result of which would be felt
in the near future. It is undergoing a radical and technological
changes. It has installed BAAN ERP (Enterprise wide Resource
Planning) to make its SCM efcient. BAAN ERP is a weapon in its
hands and they plan to use it optimally. Currently they are using
frst 20% of it and the rest of is left to be harnessed.
E-Commerce will further help it in building 'lean supply chain'. At
present, New Holland has to mop up its processes internally and
then fully integrate its entire network for ERP to be implemented
fully. By 2002-2003, they aim to achieve their target of achieving
complete implementation of ERP in its supply chain management.
A winning edge for New Holland would be controlling suppliers and
customers through ERP.
Its competition M & M has a satellite supply controller system
which quickness their supply chain. New Holland is always ready
to learn from the competition. The era is the survival of the fttest?
M & M has a website in which a customized tractors can be
ordered, E. Comm is an enabling technique.
Can New Holland implement JIT?
JIT cannot be implemented in New Holland in its entirely at present.
They use the concept of DSL (Direct Supply Line). They do not have
a rotrust JIT implementation. They major reason for this is than the
demand for JIT has to be in band. But in the case of tractors, the
demand reasonable and form spikes.
New Holland translates its requirements to the suppliers, who in
turn provide them with the material. They follow the concept of
'supplier part' i.e. they have warehouses in and around the plant,
so that the inventory carrying cost can be on shared basis. Third
party logistics is currently in news. They integrate their schedules
with the supplies. Currently, they have a capacity of 20 tractors a
day. Due to seasonal demands, they do land up in shortages.
Its JIT can be regulated by keeping bufers high. They aim for
10,000 tractors a year and have to be equipped for seasonally. Their
has to be a smoothing factors so that they handle the least
material, they are away from the concept of JIT-II. The forecasting
for it should be concise and accurate, while it is erratic in case of
New Holland.
Quality :
New Holland uses the concept of 'quality' in every process it does.
Its cutting edge are production and critical processes. Quality is
implemented at every stage. They have strong quality checks like in
process quality check, during production. New Holland is planning
to go for ISO 9001 and hope to get it by Nov. 2000. For quality
implementation the have management representative. The ISO
9001 standards are very stringent, at present, as it includes eco-
friend lines. Systematic care in being taken to achieve. So
certifcation the quality standards car code from the top and cuts
across functions, employers align with the customers needs. Their
daily work management is done by through standard processes.
Recommendations : 1. More variety at reasonable prices is
recommended. 2. Auto nomination on the shop foor. Japanese
style of production on the shop foor is recommended. Poka-yoke
i.e. full-proof methods are also recommended to reduce wastages.
3. They should be very sensitive to their customer proper
information system to get data.
Tractor industry is directly linked with agriculture. So it is afected
by a host of factors ranging from Government's excise policy, credit
policy, Irrigation, Monsoons, Agricultural production, Crop Prices,
Export Policy and fnancial well being of farming community.
Credit Policy :
The tractor Industry has always enjoyed a favourable credit policy
due to emphasis of Government on Farm mechanization. 95% of
tractor sales are on credit. Farmers are given for a maximum
period 9 years and installment is required to be paid by farmer after
harvesting of each crop. Commercial Banks are required by RBI to
earmark 40% of their advances to priority sectors i.e. agriculture,
Small scale Industries, Small scale borrowers and exports.
Agriculture accounts for 18% of these advances.
Bank supply 40% fnancing of tractors, 60% comes from state Land
Development Cooperative banks and Regional Rural Banks. All
these loans are refnanced by NABARD. Bank loans are refnanced
by NABARD at the rate of 10% in Comparison to Prime lending rate
of 18%. Interest paid by farmers is generally around 14%. Loans
are secured against the mortgage of farm lan and hypothecation of
Tractors. Generally Prescribed limit of minimum Land holding is 8
Acres, although it varies from state to state. Another encouraging
feature is high recovery rate of 95-97% on tractor loans unlike other
priority sector advances. Participation of private sector is negligible
due to low rate of interest and problems arising out of joint holdings
of Land.
Government is also considering a proposal for providing fnance for
the purchase of second hand tractors. This will develop the market
for second hand tractors and consequently the dependence on Bank
credit for new Equipment is likely to come down gradually in the
long run. Interest do not efect the purchasing decision while lower
interest rates do not spur growth. Interest rates do not rise sharply
due to refnancing by NABARD and absence of private fnance.
Thus the correlation between monthly tractor sales and interest
rates (Minimum lending rtes of banks to the rate at which farmers
borrow from NABARD) has been found to be -1.19.
Irrigation :
There is a direct correlation between tractor sales and availability of
irrigation facilities. The States which have high Ratio of Gross
irrigation to the %age of cropped areas are having high proportion
of tractors. The irrigation potential has increased from 76.5 million
hectares in 1990 to an estimated 89.6 million hectares in 1996.
Showing growth of nearly 20% Government is also providing liberal
credit and subsidies for installing tube wells, bore wells and drip
irrigations. (for promoting dry farming).
Monsoon :
Monsoon is one of key factors for the agricultural growth. In the
bigger states which have more Land under cultivation like U.P.,
Maharashtra, M.P., Bihar, Andhra Pradesh and Karnataka, the
irrigation facilities are confned to 11% to 50% of the Land under
cultivation. The failure of Monsoon may result in reduced demand
of tractors because but does not result in drying up of the demand
because it is just one of the factors. Further certain irrigation
projects underway are likely to raise the irrigation potential
immensely in states like U.P., M.P., Maharshtra, Gujarat, A.P.,
Karnataka, T.N. and Rajasthan. These states have low tractors
population an it will provide a boost to the demand for tractors.
Agricultural Production :
The agricultural production efects the tractor Industry as god crop
results in more cash surplus in the hands of farmer which raises
the demand for tractors. The foodgrain production has increased
from 171 million tonnes in 1990 to 191 million tonnes in 1995. But
more important is the yield per hectare which has moved up from
1349 Kg/hectare in 1990 to 1487 Kg/hectare in 1994.
Crop Prices :
Crop prices have signifcant impact on cash surplus available to the
farmers. Government has continusely raised the support prices of
foodgrains to provide better deal to farmers.
Thus prices of agricultural commodities have risen at a faster pace
than industrial goods.
There is an estimated post harvest loss of nearly one billion dollars
in fruits an vegetables due to the lack of infrastructure. So a lot of
stress is being laid to promote the processing sector which will save
such a huge loss and provide enough surplus to the farmers.
Export Policy :
India stands to join from GAAT agreement on agriculture which
mandates the signatories to lower the subsidies on agricultural
based goods. As subsidy is below 10% in India, Indian farmer
stands to beneft from this clause.
India's share in world trade in agriculture is less than 1%. To
enhance exports Government has announced several concessions
like import duty reduction on capital Goods for Processing Industry,
easy credit and lifting of restrictions on export due to huge food
grain stocks of 25 million tonnes.
This Rice, Wheat, Flowers, Fruits an Vegetables are emerging as
items with huge export potential. All these will result in better farm
mechanisation by providing incentives to farmers.
Excise Policy :
Tractor industry being a part of agricultural sector forms an
important aspect of priority sector. So tractor industry has always
received a fabourable excise climate. The small HP segment ( < 30
HP) is totally exempted from excise duty. Whereas excise duty on 30
HP tractors is just 10%.
Potential :
Tractor industry is cyclic in nature. The demand for tractors
depends upon education among farmers, adoption of new farming
techniques, shift towards Cash crops, favourable Govt. policies and
replacement market. Tractors Industry sufered a Recession in
1992-94 due to factors such as sluggish priority sector lending,
Political issues like Ayodhya and Bombay roits and fall in prices of
cash crops. But from FY 95 Industry is back on the rails.
After USA & CIS India is the third largest manufacturer of tractors.
Density of Tractors in India is 7 per 1000 hectares of GCA in
Comparison to 19 in USA. India has 12% of world's areable land
but only 3% of Tractors. While the global demand for tractors had
stagnated two decades earlier. But lack of farm mechanisation in
India has spurred growth with Industry growing at CAGR of 8.2%
from its inception. According to study conducted by NCAER Tractor
is used by farmer for just 39% of time for agricultural purpose.
Rest of the time it is used for Rental or rural transport purposes.
The Tractor Industry is gaining momentum on the export front.
Exports have risen from 850 tractors in 1994 to 2500 in 1995. The
exports are tipped to cross 6500 in FY 96. India is exporting
tractors to Nepal, Bangladesh, Sri Lanka and USA. Europe, Russia,
Australia and Africa are Emerging markets for Indian exports. In
Russia there is a strong demand for 60 HP tractors due to the
fragmentation of 1000 Acre farms. Mahindra as even created a
subsidiary in Huston to develop 25 HP model targettedat US Leisure
farmers, anticipating huge demand potential because US
manufactures are concentrating on > 100 HP tractors.
The demand potential can be calculated on the basis of density in
Punjab & Haryana.
In Punjab and Haryana there is 1 tractor per 23 hectares of gross
irrigated area.
The irrigation potential created by FY 95 is already 87 million
hectares which translates in to a potential demand of 3.78 million
tractors. The ultimate Irrigation potential likely to be created is 114
million hectares which translates into a total demand of 5 million
tractors conservatively on PB/Har norms.
The increased tractor usage is accompanied by irrigation facilities,
HYV of Seeds, and more Cultivation of cash croops. It was been
found that the states where density of tractors is more yield per
hectare is substantially higher which fuels further mechanisation.
So growth in demand is expected from central/west and southern
regions in the coming years due to improvement in Irrigation
facilities, shift towards cash crops, Large area under cultivation and
high ratio of cultivated Land to Tractors.
The Tractor Industry has grown from 34000 units in 1975 to
1,90,000 units in 1996. TMA is projecting demand of 2,27,000
tractors by 1997 and planning commission 2,40,000. In the post
recession period Industry has shown a growth of 19% in FY 95 and
16% in FY 96. However the likely growth rate over the next few
years may not exceed 8% CAGR recorded earlier.
INDUSTRY ANALYSIS TRACTORS
High Lights of Tractor Industry :
Tractors form the major Equipment used in India for farm
mechanisation and have contributed to Rising productivity and
Rural Income.
Due to emphasis laid by Govt. on mechanisatin of Agriculture
tractor Industry has always enjoyed Liberal excise and credit
policies.
Density of tractors in India is 7/1000 hectares in comparison
to 13/1000 in Asia and 25/1000 hectares in USA indicating
huge demand potential.
Tractor Industry is cyclic in nature and demand depends upon
credit availability, crop prices, Monsoons, political and social
stability and surplus in the hands of farmers.
Tractor Industry is a concentrated Industry with 7 of the 22
licensed manufactures controlling 98& of the market.
Industry has continuously up graded products to suit the
tough working conditions in various parts of the Country.
Demand patterns of the Industry are changing with the market
in north saturating and emergence of strong growth in Central/
West and Southern India.
Due to emphasis on Deep plonghing, multiple cropping and
more work output the demand for higher HP tractors is rising
at much rapid pace than < 30 HP Segment.
Background
Tractor Industry occupies the centre stage of agricultural
mechanisation in the country. 60% of the population depends
upon Agriculture and even now agriculture contributes 30% to the
GDP and nearly 5 billion Dollars to exports.
Tractor industry made a humble beginning during the sixties with
demand in 1967 close to 5000 units. Industry was dominated by
International players like Ferguson and international harvester
along with import of several other brands. The Green Revolution of
1970's and improved farming techniques due to favourable Govt.
Policy spurted the demand to 68,000 units by 1980. The period
saw several new entrants in the industry including two Govt.
promoted projects of PTL and HMT.
Due to economic downturn of early eighties and civil disruptions in
Punjab, traditionally the largest market, demand for tractors fell to
nearly 60,000 units by mid eighties. In 1986 Govt. reduced the
excise duty on 30 HP tractors which spurted the demand in late
eighties and early nineties. Demand for tractors touched 1,50,000
units by 1992. It was followed by two recessionary years with
demand falling to 1,38,000 units. The major reasons being credit
squeeze, social disturbances and unremunerative crop prices.
Industry bounced back in FY 95 with demand rising by 19% to
164000 units. The trend continued in FY 96 also with a sale of
1,90,000 units.
Industry Structure :
With respect to management, ownership and size of the tractor
units, Industry can be classifed as under :
STRUCTURE
Public Sector Unit
(Centre and State PSU's)
Private Sector Units
Large Tractor Units Small manufacturers
Pure Tractor Units Diversifed Corporates
As of now there are 22 licensed manufactures in the country with
the top 7 having a market share of 98%. The installed capacity of
the Industry till March 1995 was 1,80,000 units. Production was
1,64,000 units registering a capacity utilisation of over 91%. The
PSU contribution to the total capacity is 43000 units. Among PSU's
PTL sold 23211 & HMT 16841 tractors. Concerning a market share
of 24.4% with capacity utilisation of 93%.
Among Private companies Mahindra and Escorts are diversifed
companies. Escorts has now divested some divisions and merged
ETL to concentrate on tractor industry. Eicher Ltd is going to merge
Royal Enfeld motors after which it will also become a diversifed
company.
Market :
Market for tractors can be studied on two basis i.e. Geographical
regions and HP.
Geographical Regions :
Tractor Market can be divided into four regions.
North :
Punjab, Haryana, U.P.
Central West :
Maharastra, Gujarat, Rajasthan, Madhya Pradesh.
South :
Tamilnadu, Karnataka, Andhra Pradesh.
Rest of India :
Other states excluding above.
PRODUCTION TECHNOLOGY AND PROCESS
Product :
Tractors are the major farm Equipment used world over. In India
tractors are also used for other purposes like transportation,
Carriage, and power generation. The tough operating conditions in
the country have made the Indian tractor a versatile and Rugged
Product designed to suit the various needs of Indian farmers.
Tractors can be classifed in to various categories on the basis of
their horse power. In India Tractors upto 55-60 Hp are available
whereas in foreign countries the preferred HP Range is 75-300 HP.
The higher the HP Range more will be the out put and deeper is the
plonghing. 25,35,45 HP tractors are more suitable for hard and
Rocky soils. Variants of tractors can also be prepared keeping in
mind the crop cultivated.
Technology :
The technology required for making tractors is simple with straight
for ward assembly lines and there is little technological
development. All the Indian manufacturers except PTL have
obtained technology from multinationals. The machinery includes
assembly lines for Engines, heat treatment shop for gears, heavy
machine shop for castings, assembly line for tractors, paint shops
and tool rooms.
Process :
Process of Tractor making involves following stages :
1. Preparation of Key Parts : It involves preparation of gears in
heat treatment shop, heavy castings in heavy machine shop
and assembly of Engines. Rest of the Components are
outsourced.
2. Preparation of chasis : It involves the assembly of castings,
Gears etc. to form the Gear box followed by Engine and
Components to complete the chasis.
3. Paint : Paint of chasis as well as sheet metal components are
undertaken at Paint Shop.
4. After paint various electrical parts, wheels, sheet mental
components and other spares are assembled to complete the
assembling process.
FACTOR ANALYSIS
Critical Factors in Production
Following are the critical factors in the production of tractors:
1. Raw Material
2. Trained Manpower
3. Technology & plant set up
1. Raw Material : Raw material costs constitute 65% to 80% of net
sales depending upon the outsourcing of Components.
Companies outsourcing Engines have high raw material costs
because engine making involves a lot of value addition. The raw
materials for making Engines includes crank shaft assemblies,
and other components. The other Raw materials for assembling
tractors include forgings and castings, Pig Iron, oil, paints &
chemicals and components. Components include electrical
components, wheels, tyres, steering, Axles, Bearings, flters,
Radiators, head lamps and fastners etc. Components Constitute
nearly 55% of Raw material cost followed by Engine with 25&
and castings & forgings 10%.
2. Trained Manpower : Trained manpower is a very vital factor.
The labour cost varies from 5% to 12% of net sales depending
upon the labour productivity. If the workers are well trained and
highly motivated then employee cost as well as raw material
costs can be reduced by controlling wastages.
3. Technology and plant set up : Most of the manufacturers have
sought technology from multinational. Plant set up is one of the
major factors efecting production. It includes types of
machines and tools used in production, Degree of automation of
Plants, Physical layout for smooth fow of production, ease and
economies in operation and material handling systems.
Structural Analysis (Michael Porter Model)
Michael porter's model analyses the industry attractiveness and
competitive position changes based on certain forces Infuencing
tractor Industry. It attempts to highlight Principal features of an
Industry based on fve forces to draw a conclusion.
Entry-Barriers
Capital Intensive Brand
Loyalty Distribution net
work technology
New Entrants
Rivalry
Princing segment focus
High Exit Barriers
Buyers
Competition
(Intensity of Rivalry)
Suppliers
Factors
95% Bank fnanced
Determinants
Low switching costs
Quality Major Issue Multiple Suppliers
Subsitutes
TRACTOR INDUSTRY STRUCTURAL ANALYSIS
(MICHAEL PORTER MODEL)
Firm Infrastructure
HRM Recruitment training Recruitment training Recruitment
Technology
Development
Design and
development of
products
Mf. technlogy, tool
design, energy, mgt.
value engg.
Information system Market research,
technical literature
Technical knowhow
!rocurement Transportation
services, suppliers
Materials, components,
electric and electronic
parts energy
Transportation services Travel media agency
services
Modern research
facilites, spares,
service network
Receiving, storing,
handling, ware
housing inventory
control, inspection
castings, machining,
assem"ly paint #uality
control
$ollection storing
warehousing, material
handling, delivery vehicle
operation or arrangement
%dvertise promotion
sales force, pricing
%fter sales service
spares product ad r&D
CERTIFICATE
This is to certify that this project of operation
management
Is submitted by:
AMNISH
ANNU ARORA
ABANI KANTA BISOYI
AJAZ ADIL
In partial fulfllment of the requirement of the degree of PGDBA.
Icfaian Business School, New Delhi
Batch - 1999-2001
MR. V. THYAGARAJAN
(Project Supervisor, IBS, N. Delhi)
ACKNOWLEDGEMENT
We convey our special thanks to Mr. V. Thyagarajan for providing
us the opportunity to do our project under his able guidance. The
co-operation we have received from his is unforgettable. It been a
wonderful experience to work under his guidance. We are sincerely
thank to Mr. V. Thyagarajan for her sustained encouragement
and guidance.
We are again thankful to Mr. Manoj Soni of New Holland Tractors
his valuable help in ending the project report.
AMNISH
ANNU ARORA
ABANI KANTA BISOYI
AJAZ ADIL
IBS, New Delhi