CASE STUDY:

Introduction Will it be a groundbreaking approach to farming in India? Will it create the much-needed wow effect in the market? thought Amit Mittan, the Country Manager at Agroy Group India, as his thoughts drifted towards crafting and developing a market for smart farming in India. Although Amit himself hailed from a smallholder farming family in rural India and was familiar to the traditional models of farming, he wondered if the Agroy model would be a gamechanger. Amit previously worked for 10 years in several agricultural companies after completing his Master of Science in Agriculture. Agroy claimed to be the first global agri e-commerce platform. It was a cloud-based Web and mobile platform for farmers to buy agri-inputs across continents. Founded in 2011 in Helsinki, Finland, Agroy expanded internationally to the US in 2016 and was poised to expand into India in 2017 with Brazil and Canada slated next for expansion. Though high in potential, expansion into targeted rural India for Agroy presented several complexities. Indian farmers had low technological awareness, were price sensitive and had virtually zero digital transaction knowledge. Moreover, the company had to tackle demographic and language complexities, changing crop seasons and stiff competition from micro-retailers and other major local and international players with well-established operations. Would its strategy work with Agroy intending to replicate its success in an uncertain environment such as India? Would it be able to surmount the challenges and sustain despite the adversities it was sure to face in a developing country like India? Agroy farms worldwide were present in several continents

Entrepreneurial beginnings An Iowa farm boy named Brad McDonald (Brad) who raised pigs and grew corn, had an entrepreneurial spirit. He sold puppies to pay for college at Notre Dame, and after college, he worked at Bunge specializing in economic research for industry trends and later advised traders at their North American headquarters in St. Louis. Later, Brad transitioned to Wells Fargo to collaborate with US bankers in agricultural lending. This led to Agroys birth. After working with farmers in the agri-business, Brad realized that farmers were unable to compare prices of the products that they had to buy, irrespective of what the prices quoted to them were. Coincidentally, in 2016, Brad was approached by a client with a novel idea of providing agricultural products online. It was met with phenomenal success in Europe, though still nascent in the USA. Capitalizing on this, Brad co-founded a company in the USA called Agroy Inc. with the idea of replicating the European business model. Brad kept thinking to himself that this concept was akin to an Amazon for farmers!

Agroys modus operandi Agroys intention was to provide a cloud-based global platform for farmers to buy agriinputs efficiently at scale. Starting locally and optimizing globally, the platform was for farmers to broaden their buying experience by not just buying from their neighbors, owing to their ignorance about their choices, but also comparing and contrasting prices from other farmers across other states and make judicious buying decisions. Initially it was an online Web-based application, but later its services were extended to include a mobile application in 2018. The online option allowed them to buy in bulk with the best available discounts. Agroy intended to revolutionize agricultural buying. Agroy bought directly from manufacturers and sold to farmers without any intermediaries. Farmers had to sign up for free at Agroyinc.com and when Agroy had a product to sell, primarily seeds, fertilizers or chemicals, farmers registered with Agroy in that region would get an email with the information about the product and the price. Farmers would use the information shared in the email to negotiate better prices or buy directly from Agroy. Reasonable prices were negotiated by Agroy owing to the leverage they gained due to the scale of farmers registered with them. Agroys goal was to save farmers money while buying agri-products. For example, Agroy was able to offer savings of $35 per ton on dry fertilizers. Further, the company also offered incentives to large-scale farmers to help grow their network rapidly. Farmers with 10,000-plus acres (in the USA), with the capacity to store extra fertilizer or other such related products, were paid for their storage facility. Agroy was primarily a platform for farmers to meet and buy products online, similar to e-commerce. Online trading allowed farmers to avoid high fixed costs. Further, when Agroy introduced the phone app, farmers on downloading the app could get relevant information such as seasonal growing patterns of crops, seeds, pre-sowing instructions, post-harvesting and other such inputs for proper and efficient crop sowing, growing and harvesting. In addition, the app had the best fixed prices for farmers compared to the fluctuating prices and hidden costs of other players in the market. Agroy negotiated prices based on volume and monitored operations. It offered a three-tier channel of distribution to reach the consumer similar to a carrying and forwarding agent. The core value proposition of the firm lay in services such as door-to-door service, which is practically unthinkable in the rural Indian set up. Agroys registration process included filling in details of the total hectares or the acreage under cultivation of the variety of crops along with the farmers details. Those with more than 10 ha of land as commissioned by the Ministry of Agriculture and Farmers Welfare, the Government of India or from other authorized agencies of the government were required to provide required documentation for authentication. On Agroys part, there was a careful selection of farmers with a comprehensive list of personal contact details. Potential farmers were also listed despite not being registered with them. Farmer meetings were planned and information spread through word of mouth about the company. Further help was sought from various agencies, including The Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industry (CII), to promote Agroy and raise awareness about the company. A management information system (MIS) and a work process were set up for each employee and process at Agroy. Finally, Agroy targeted a minimum number of registrations prior to the commencement of the crop season to be able to benefit the farmers at the right time. Agroys plan was to register farmers before they established their business. Digitization and smart farming were the basis for Agroys success, owing to the tremendous benefits it provided farmers. With smart devices such as sensors, drones and GPS connected to the internet, data was generated on predominantly four fronts: weather data

The expansion In 2016, Agroy felt it had adequate experience and were in a position to expand. The aim was to share the experiences of Finnish farmers and spread the companys business model and trading service to other countries. According to Jukka Peuranpaa (Jukka) the CEO of Agroy: Agroy is like the Uber of agriculture, the world is changing, and we must question the old practices. Uber has revolutionized the taxi industry and Airbnb has revolutionized accommodation. E-commerce will eventually touch all industries and transform them one way or another. In most countries, both developed and developing, agricultural practices, in particular trade, followed traditional methods. This generated low revenues per employee. According to Jukka: The costs of agricultural trade are currently paid by the farmers. The model must be made more efficient. Though the United States has a long tradition of agricultural cooperatives, they have not yet united their forces at a large scale. If the combined purchasing power of these farmers were, for example, a few million acres, the prices would start to go down at a brisk pace. Hence there is still work to be done.In Agroys current model in Finland, the average revenue per farmer from agricultural trade was e15m compared to an average of e1 million provided by most agricultural businesses elsewhere. The Agroy model was designed such that intermediaries were eliminated and was more efficient. In addition, it also helped farmers directly trade their produce.

Moving overseas Having grown to include 1,000-plus farmers in Finland, Agroy had concurrently grown their revenues at a rapid pace. Intending to replicate this model, management made plans for expansion. Europe was their first choice, however, due to linguistic differences, as there are many dialects in Europe among the farmers, the idea was dropped. According to an Agroy spokesperson: We decided to start our globalization in America. The digital age made it easier to make companies global.The expansion into the USA had two subsidiaries: Agroy Plc (India) and Agroy Inc (US). Brad reminisces: We started building our network one state at a time by including the major farmers as our members, like we did in Finland

One of the pull factors in the US market was the countrys large field area open for cultivation. In Finland, approximately 2.5 million acres of land was used for grain cultivation, as compared to 325 million acres available for cultivation in the USA, as per Agroys information. In the following year in 2017, Agroy moved to India. The same expansion strategy that was used in the USA was replicated in India. The company aimed to supply Indian farmers with fertilizers, seeds and agrochemicals. In the category of fertilizers, the products included urea, micro-fertilizers and di-ammonium phosphate (DAP). In the category of seeds, the collective share in for grains, vegetables and forage stood at 40 per cent and individual expected margins of 8 per cent, 12 per cent and 8 per cent, respectively. In this category, the focus was on wheat, rice, corn, oats, mustards, cucurbits, melons, gourds, lucern and sorghum. The last category was agrochemicals and broadly classified into seed treatment, granular growth promoters and insect and fungi powder with the cumulative share in revenue of 40 per cent and individual expected margins of 12 per cent, 6 per cent, 12 per cent and 8 per cent, respectively (Exhibits 3 and 4). In India, Agroy intended to implement its platform in a three-tier manner. The first stage was to focus on efficiency in buying agri-inputs, the next stage was to facilitate the farmers and their organizations to buy online without an Agroy country manager and the final stage was to implement a licensed buying platform with information on farm management that was backed with data collected and analyzed, with tailored recommendations for fertilizer use, pest control and information about alternative ways to increase yield.

Indian market overview Agriculture played a critical role in Indias economy, with 58 per cent of the rural households depending on it as the principal means of livelihood. The share of primary sectors is estimated to be 20.4 per cent of the gross value added (GVA) during 2016-2017 at the current prices. The Indian food and grocery market was the worlds sixth largest, with retail contributing 70 per cent of the sales. During the 2017-2018 crop year, food grain production was expected to reach a record 277.49 million tons compared to 275.68 million tons during 2016-2017. Agricultural exports from India reached $28.09 billion during April 2017-January 2018. According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted foreign direct investment (FDI) equity inflow of about $2.02bn and $466.31m, respectively, during April 2000 to December 2017. At 157.35 million hectares, India holds the second largest agricultural land in the world with 20 agri-climatic regions and all 15 major climates. India is the largest producer of spices, pulses, tea and jute and the second largest producer of wheat, rice and cotton. The Prime Ministers Economic Advisory Council (PMEAC) estimated farm sector growth for current fiscal at 4.8 per cent, more than double from previous the years 1.9 per cent. In India there are three main crop seasons, according to which the seeds and other agricultural input products are supplied. Kharif crops are cultivated at the beginning of the monsoons (May-June) and are harvested from September to October. Major Kharif crops are rice, jowar, bajra, cotton and sugarcane. Rabi crops are cultivated at the beginning of the winter season (January-February) and are harvested in spring. Major crops of this season are wheat, gram, linseed, rapeseed and mustard. Agroy wanted to focus on states that had a high GDP and population. One such state is Punjab (Exhibit 5) where the district of Ludhiana (Punjab) has the highest population, GDP and per capita consumption of crops such as rice and wheat. The main crops grown here

are rice, wheat and vegetables. The other state was Haryana, also situated in North India where the soil is very fertile. India has 23 official languages along with innumerable local dialects. Because of this, for Agroy to enter the country as a foreign company would be even more challenging. According to a report published jointly by the Internet and Mobile Association of India (IAMAI) and KANTAR-IMRB, mobile internet penetration in rural India was 18 per cent. To exacerbate the situation, India has approximately 107 million private farms with the average farm size being 1.55 ha. Several well-known fertilizer and agrochemical companies, including Koch Bayer, Dupont and Monsanto along with a host of local manufacturers, were already established in India and could serve as reliable fertilizer and agrochemicals manufacturers/suppliers to Agroy. Market insights and marketing to rural India

REQUIRED:

1. Construct a detailed Position Map or Customer Matrix for its leading product or service. (20 marks) 2. Identify innovation strategic moves and competitive positioning open to the organisation and propose how the organisation can ensure sustained competitive advantage? (20 marks) 3. Determine what type of innovation and value-creation the organisation is capable of undertaking. Is it incremental or disruptive? Please explain fully and support your choice. (20 marks) 4. Based on the findings of the preceding analyses and evaluation, recommend how the organisation should proceed to deliver on the value proposition in the market place by: 4.1 Identifying the required value-added competencies (10 marks) 4.2 Proposing how the organisation should configure these competencies in its capital base (10 marks) 4.3 Proposing how the organisation should align and leverage these value-added competencies to achieve its innovation strategy or goals (10 marks) 4.4 Identify the relevant internal organisational arrangements and suggest how these should be addressed to sustain innovation and value creation (10 marks)