MECHANIZATION HIRE SERVICE BUSINESS MODEL

Introduction

A business model is the blueprint of how an enterprise or a company does business. As a conceptual framework, it contains the elements and relationships that enable companies to express their business logic showing how a business can acquire its customers, service them and make money in doing so (Business model institute). It can also be understood as the way a business organizes itself to generate revenue and sustain itself (Osterwalder A.). The model represents the architecture of the business and its network of partners to create, market and deliver value to generate profitable and sustainable revenue streams.

Based on the generical business model components: the customers, competition, offering, activities, organization, resources, and supply of service, this case study tried to assess and summarize the performance of one of a well performing small scale mechanization hire service provider in Ethiopia.

Individual Full-time Mechanization Hire Service Provider Model

Among different mechanization hire service provision model, the Individual Full time Mechanization Hire Service provider model is a relatively effective, profitable and sustainable model working on small scale agricultural mechanization in project area. Among Service providers under this model category, Getu is the most successful and a full-time service provider. Getu Deneke is a young (36-year-old) two-wheel tractor based mechanization hire service provider in Amhara region of Ethiopia.

Using small horse power two-wheel tractors, Getu is providing planting (direct seedling), harvesting, threshing, water pumping/irrigation and transportation service for farmers in his village. Farmers in this area have been using conventional farming system and they are new for these technologies and services. Having attended training organized by the project and with close support from district Bureau of Agriculture, he is operating his machinery effectively and giving service throughout the year. In year 2017/18 he provided mechanization hire service for large number of farmers in his area and generated lucrative profit. With one set of machinery, he provided harvesting, threshing, irrigation and planting service for 86 farmers in his village and provided transportation service for more than 100 households. Getu is serving underserved households. Most of his customers are small holder farmers with more than 0.5 hectare of land and who don’t oxen and family labor for crop establishment, harvesting, threshing and other operation.

Unlike the other service provision model, he is a fulltime, owner plus operator service provider. According to the assessment result Getu has generated more than 65,000 birr ($2,300) in one season, with a machinery set costs $7,152 (each machinery has more than six years of working life).

Getu is skilled in marketing and promotional activities and being young and having an entrepreneurial character helped him to manage his business successfully. He is also good in identifying potential customers and creating demands through engaging on farms filed days and gatherings. To promote his services, he has been giving different services with discounts as well as credit scheme. Amhara region is one of the areas affected by acidy of soil which forced government and NGOs like GIZ to engage on distribution system of lime to improve soil fertility. Since the amount of lime required is larger than the available means of transportation, Getu used this opportunity to provide transportation of lime from the distribution center to respective farmers using a trailer. This helped him to generate income during off farm operation period.

Due to the growing service provision by Getu and others in the area, there has been an increased need for spare parts for two-wheel tractor-based machineries. To address this gap spare part shops have been opened and have been operational. Similarly, with the linkage created among actors along the value chain local mechanics have also been also trained by machinery importers and supporting Service Providers in area.

Getu has long term goals of expanding as well as upgrading his business to higher horse power tractors (four-wheel tractor) and reach more customer. He is a client of a local financial institution and currently planning to borrow and increase the range of his services.

Business Model Mapping

Based on the actors involved in this business, nature of the services, product and financial flow, support services and partnership, the below business model diagram developed to show how the actors are currently doing business and role of each actors related to this business, based on Getu’s hire service business case

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