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Analysis of Mongolian lamb export to China

Introduction
Since its increase of Mongolian agriculture such as sheep, there
is great opportunity to export lamb to our neighbor countries.
Mongolian agriculture is greatly increasing last 5 years. It stated that
number of head 5 types of animal will reach 60 million end of this year.
The most dominant number of animal is the sheep that has been
reaching 23.214.800 in 2014. (infomongolia.com, 2014)
The target market of exporting will be to China. China has chosen
it is because of increase of potential customer and the closest area
from Mongolia.
Start up lamb business to China has to deal with Food Standardization
first.
If the companies interested in to export the food commerce and would
like to export any meat products in China they have to assemble the
conditions of the Food Safety Law of the P.R.C.
Their standards derived into The Standardization Administration
of China unites manage, direction and organization of the quality
principles of the products in China. Mutual agreements endorsed
among China and the exporting company. It included setting up the
veterinary and health requirements for perishable goods to export in
P.R.C.
The registration conducts foreign manufacturer recording at the
General Administration of Quality Supervision Inspection and
Quarantine all through the Certification and Accreditation
Administration of the P.R.C.
(center)

So these processes are vital for a company to consider at first for


introducing their product into Chinese market.

Analysis of product and competitors


Mongolian sheep are quite different breed than other sheep such
as New Zealand and Australian. It has a fat tailed and it is feeding in
Mongolian wild nature. So the scale of product would the most organic
export. Mongolian sheep standard weight is around 20-25 kg.
There is not much difference between Inner Mongolia and
Mongolia sheep. Inner Mongolian lamb and mutton is Chinese local
product but it couldnt cover enough this huge market.
In case of that the taste of Mongolian mutton will not make any
difference to the target customers.
As a competitors analysis there are several competitors still dominant
in Chinese market.
New Zealand lamb has been exporting to China since its
agreement of free trade between two countries in 2008. It has been
significantly increasing through these years of Chinese big economic
growth. New Zealand has exported 31.686t of sheep meat in China,
which has worth 66.6 million US$. It gained to 158.174t that calculated
595 million US$ in 2014. (Reed, 2015)
Due to Chinese economic scale and huge market potential all
international businesses interested in to penetrate Chinese market.
Even Australian companies are already competing against New
Zealand exports. They have used cheap entry method against New
Zealand lamb. Australia is a top potential country for leading with sales
of meat export in the world.

The major issue in China has facing with pollution; Chinese are
more concerning on food safety rather than taste or quality. Australia is
a well-experienced country to meet safety food as an exporter. Their
sales recorded 845 million USD in 2013. (Locke, 2014)

(lamb, 2015)
It shows New Zealand sheep meat has acquired more than half of
the market that is 65% of market share and Australian others.
China has detained a gradually more vital duty in world lamb and
mutton market since its 2010. It has been an eventual market for
exporters with diverse goods and services it is because of big and fast
increasing middle class population. On the other hand Chinese lamb
trade have been rising since 2010. Also it took in place of worlds
largest lamb buyer France in 2012.

Market analysis
Expensive sheep meat and lack of providers are influenced the
Chinese government to prefer attraction of foreign investor for selling
more sheep meat in the local market to create competition. These
processes grew local meat production. Occasionally it also improved
imports of sheep meat since 2010.
But the reduction of Chinese economic growth and to take controlling
with over-spending from the government was contributed to slow
demand for imports meat in China.
The decreased demand for sheep meat importing has effected to
charge of sheep meat starting to fall in the mid of 2014. It has still
sustained in 2015.
According to the Chinese Ministry of Agriculture, the price of mutton
dropped at wholesale stores 56 Yuan(per kg) into to 49 Yuan in Jun
2015. It has declined 12% per year.

(AHDB, 2015)

STP model
Segmenting

segment 1

Restaurants
Supermarkets
Wholesalers
Local shops
Local markets

segment 2

Direct online consumers


Households
Employees
Individuals

Segment 1 is determining the business customer that could lead


wholesaling organization with the company.
Segment 2 is final consumers of the company through retailing
method.

Targeting
Aside from the market segmentation, company can be more
effective with choosing segment number 1. By Wholesaling in B2B
method is the most effective way to provide perishable products.
However it has to consider with cheap pricing but the amount of selling
will get benefit to the organization.
Since its a huge population with big land that could arise difficulty to
control all organization in China. For the company these issues will
reduce by using B2B method.
B2B is a common method in China after Alibaba.coms
implementation.

In other words it will save more money and time.


There are several advantages to use the B2B method in the
organization.

Instant sales, they be able to keep in touch with the company to


seek to do a business deal with, intentions of a business deals,
fast communication, transaction process will done by e-mails,
next product ordering, sales information. These are the clue of

the company will do repeated purchases instantly.


Closer business relationship, B2B method is a good option for to
make close relationship with companies. When you buy instantly

means create stronger relationship.


Cost decline right through long term relationship

Positioning
Online selling sheep meat is quite new in Chinese market. The
major competitors Australia and New Zealand sales conduct with an
export that targeted in mass market. Our differentiation is only
targeting business customers that can get instant selling in China.
On the other hand our offering product has got the fastest
delivery process when it fresh. According to delivery process we could
catch the most potential users in China.

Marketing mix
Product
The sheep will slaughter in the home industry and will ship with
labeled boxes.
We offer four different types of products in case of target customer
1. Mongolian Mutton with bones
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2. Mutton without bones


3. Small chopped mutton package
4. Small chopped mutton rib package
According to culture of Chinese mutton usage the boned mutton is well
used for their foods. Especially they use it in the soup and fried rib
cuisines.
In-terms of Chinese customer new needs, the requirements of
high level of product usage we offer them the most organic grazed
sheep meat with quick delivery, which called fresh. All delivery will be
held under FOB method.

Price
Meat is a perishable product that requires high effort. The
freezing is important situation during the delivery process. So we have
another differentiation for our product. Delivering process will be the
closest than other competitors. Our cost can be built much cheaper.
Price calculation:
Main price of a meat + cost of labor + cost of delivery + 20% profit
as it possible. Seasonal pricing method is the best accurate price for
agricultural products.
1. Mongolian Mutton with bones 3 - 4$ per kg (depending on
season)
2. Mutton without bones 5 - 6$ per kg (depending on season)
3. Small chopped mutton package 7$ per package (500gr)
4. Small chopped mutton rib package 7$ (500gr)

Place
As a perishable product provider using online service method is
effective way to meet customer needs.

Distribution channel will be held under online service through


Alibaba.com. Alibaba is Chinese biggest e-commerce company that
has covered 80% of online sales. It is a great opportunity for company
to use Alibaba as a middleman.
Alibaba offers all commercial transactions in their service, B2B, B2C,
and C2C. It is another opportunity for company to meet with target
customer.

Promotion
Advertising goes with Alibaba as a banner, pop ups and video.
The massage will include the company core value of wholesaling
method, fast and fresh products. Also it has to be attracting business
customers to the closest exporter to china.

Analysis of country variables


Legal environment
The regulation of any meat import from foreign supplier is one
main concern of the Chinese Government since 2008.
The new food safety law of China has implemented since 2009. It was
incidentally required after sequence of food scandals such as Bird Flu.
These have weakened Chinese confidence on the import foods.
This law is similar with Western countries regulation system. It
determines regulatory party duty for detailing and executing national
food protection standards. But enforcement of law still has dealing with

some challenges it is because of food market inefficiencies in the


population.
This law identifies a new outcome at food safety in China through
presenting a legal structure for manufacturer and commerce of foods.
All businesses are arranging the food production and whose would like
to export meats to China has to gather the conditions of Food Safety
Law of China.

Cultural environment
Dining culture
Chinese culture of dining and cuisines are diverse it is because of
different nations are living in big scope of country.
First they are family oriented people rather than Westerns. Chinese
dinner always conduct with big amount of people like whole family or
all friends, all co-workers.
People tend to dine at restaurants rather than at home it is
because amount of customers. As a lamb exporter it is an advantage
to fulfill this demand.

Internet usage
In order to make an online production Internet usage culture is a vital
consideration for company. China has special regulations at the
Internet usage. But looking at alibaba.com success, it is the highest
rated website in China. Alibaba has three main parts as a shareowner,
1. Taobao is a Chinas major shopping website;
2. Tmall, which concentrates on online sales of branded products
and concerns on Chinas fast-growing middle class
3. Alibaba.com that connects Chinese exporters and importers with
foreign businesses anywhere in the world.

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Alibaba is worlds biggest online commerce company not only in China.


It is done with 248 billion $ online shopping transaction in 2013. There
are 80% of Chinas online shopping completed by Alibaba. It gives
more and more opportunities to investors that could find their valuable
correspondent. As an exporter by using this website to enter in market
is reduces lack of experience risk.
(Wright, 2014)

Economic, finance
The Chinese economy performed greatly growth in last years
that has noted the country to rank the world's second major economy.
Since the beginning of the economic reorganization in early 1980s,
China has turned into the worlds industrialized center that place
secondary area stood for the biggest portion of GDP.
In 2008, year of world crises, China gathered better that most
other countries with decreased economic growth percent. It counted
GDP has decreased 2 digit numbers into above 9 % growth. Their GDP
reached 7574 USD per capita last year.

Economic growth has been

slightly decreasing since 2008 but it was 7.4 % increase in 2014.


The trading balance has only two-time deficit during last 20 years. It
explained that economic is still stable with growth.
As an exporter there are three certain subjects getting an attention
for external environment
1. Potential population increase in terms of economic growth
2. Economic stability
3. Neighbor country which is closest area
These are core value for company will get in beneficial organization.

Imports to China
Due to supply industries and maintain Chinas fast growth,
intermediary goods and a large choice of commodities, including oil,
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iron ore, copper and cereals, commonly leads their imports. Chinas
high demand at raw materials has driven world commodity charge
went up in recent years, thus increasing the funds of many developing
counties and commodity-exporting businesses.
Asian countries are mostly a seller to Chinas supply of imports. It
is with a share of about 50% of sum of imports.
Imports from Europe and North America are about 17and 10 percent.
As a main worldwide purchaser of commodities, trading from Australia,
Africa, south America and from middle east have gained strongly in last
few decades to account a share of about 23%.
(focus-economics.com, 2015)

Analysis of Market entry strategies


The rapid growth of international activities is one of the most
considerable developments in business. Exporting, strategic alliances,
foreign direct investment play important roles in internationalization
process (Bradley, 1998). Exporting is one of the simplest and quickest
ways to enter foreign markets, which might be the first stage when the
companies into internationalization (Bradley, 1998)
Choosing the appropriate market entry strategy for a firm, who
want to export to China must consider these factors: 1) view of
international company entering the Chinese market 2) request for its
goods 3) the forthcoming development of its product; 4) the sources of

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the company; and engagement to get in this industry and 5) the period
of time to get in
As mentioned earlier, bringing products/goods to Mainland China
usually include licensed for import/export companies following Chinese
laws. These are registered companies in China. Therefore, the term
importer in Chinese trade terminology usually refers to the
registered company in China possessing an import/export license. In
the general sense, a company like this is possible to be a buyer and so
importer, although usually it is only a service provider/ intermediary
helping with import (bringing the goods across the border and
facilitating international payment).
Direct exporting advantages:

Process with already established e-commerce


Online promotion makes this cost-effective
Can choose which orders to accept
Relationship with direct customer established
Entire profit margin remains with the business
Can choose basis of payment- e. g terms, currency, delivery

options etc.
Greater potential profit
Greater control over all aspects of the business

Disadvantages of direct exporting:

Conceivably legislative
Danger of not gaining a benefit

There are 3 basic, already experienced ways of entry to China:


-

Market entry via agent settled in Hong Kong


Arrangement of joint venture
Market entry by using direct channel

These three options have its pros and cons.

Entering into market via Hong Kong distributor is not a difficult


way for a company, who wants to be international. Thus it is the
least desirable in case of market penetration.

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Market entry by using direct funnels in Mainland China is


apparently more challenging plus sluggish than entry via a Hong
Kong distributor, thus actually may be fortunate for a companys

general infiltration.
Market entry by settling up a joint venture of some kind may be
more difficult and time-consuming than the other two export
strategies written above, thus apparently yields the best overall
penetration of Chinas market. Making use of this plan, these two
parties (the foreign firms and the Chinese party) could get the
most benefit.

Market entry by using agent from Hong Kong


A company could transport their goods to Hong Kong afterwards,
by making use of a Hong Kong agent that is active in China, export
/import and possible final users and agents ,that are in China can be
recognized by the Hong Kong agent . Intermediary offices in China ,
that are owned by Hong Kong agents, support with service, sustenance
and assistance with fixing.. A well-established Hong Kong distributor
will have familiarity with doing business in China, Especially involving
currency concern, transporting knowledge and language proficiency
Hong Kong agents do have advantages in doing business with China.

Entry by using direct channel


Selling straightly to an approved overseas commerce firm or
final-user group settled in China is an alternate option to do business in
china through Hong Kong agent. Growth of an array of direct access for
an overseas company are the result of renovating and disintegration.
Using direct channel in marketing possibly, would be the most
suitable for the firm. Directly approaching potential end user customers
is the most direct way to sell products and to get good market

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evaluation. Enormous mass of end consumers do not have a


permission to do a business with an overseas firms, also absence of
responsibility to decide whether to buy or not and also absence of
know-how of foreign trade. Only a few of the final buyers are
accredited and do have an experience of a trading internationally.
Nowadays, having cooperation from ITCs, FTCs or approved
autonomous commerce companies is the only way end-users can do to
process with foreign purchase according to the law. There is an
expected hope that, in the near future there will be a chance that endusers will not need cooperation of intermediaries to trade with an
overseas firms. Furthermore in wanting to regularly make direct sales
calls on a number of end-user customers, in the future firm would be
considering to build own sales force with representative offices in
China.

Recommendation
Importantly firm must consider following recommendations in
process of exporting to Mainland China:

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Every province of china is unlike to each other and china is

not a one market


A rapidly growing middle class and rising disposable incomes are

spreading wealth across China


Rising wages are making China less competitive as a location for

manufacturing
Increasingly strong competitors
Chinas industries are heavily regulated

Management group first of all should focus on the culture


uniqueness of the China and how it affects to the purchasing process.
There are many different regions in China at various levels of
sophistication. Similarly, just as there is not only one market entry
strategy in China, there is more than one type of buyer in China.
Experienced and successful companies know that China is not one
market, and they have learned to analyze and segment the various
areas. To be successful, firm must accomplish its market entry at a
proficient level.

Conclusion

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China is country that attracting international investors in terms of


increase of potential customers and huge market opportunity in the
world. Only challenge for them is a difference of political issue. Even
society has differentiated with its communist system. Banning and
prohibitions are common in China, especially at online system. So as
an investor we need to be consider these regulations and laws at the
first.
But the condition of other environment such as economic and
cultural or business organizations is well performed to the world.
Chinese demand is changing; improving it is because of increase of
income level. People require more valuable than cheap or fake ones.
So getting these opportunities into value is our core goal.
Another advantage for us is China neighbor country for us.
Entry plans to Chinese market , that are written in this report
have its own pros and cons. A particular strategy, chosen by a
company will represent them in what way the Chinese see the
overseas companys coming onto their market, companys product
request in China, product demands rate of growth, a companys
sources to enter the marketplace, and the time horizon to enter. As
long as China is a relevant destination without any doubt for most fifth
quarter products , which dont have domestic market, with the
developing demographic of the population, chance in the high-end
market is also possible, with products that are guaranteed with the
quality.
Food and Agriculture Organization (FAO) figures show that in the
50 years from 1961 to 2011, Chinese meat use increased from under
4kg per capita per year to over 57kg. This has been reflected in a huge
increase in imports, specifically in current years. Figures have grown
from less than 60,000 tones in 2010 to 254,400 tones of lamb and
mutton in 2013.
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Exporting to the China lamb products would be a huge potential


benefit for our home country. Gaining access to Chinese market for
lamb produced in Mongolia would be a game-changer for industry.

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