1.

0 EXECUTIVE SUMMARY

Zenxin Agri Organic Food Sdn. Bhd (Zenxin) is an organic fresh producer in
Malaysia. It was established in 2001 and specialized in organic farming. Its organic
farm, packing facilities and food processing plant have been certified by NASAA in
2008. Zenxin extended its food business to agro-tourism business by converting its
biggest organic farm, which is located in Kluang, Johor, into Zenxin Organic Park in
2009 and established its sister brand “Simply Natural” which offers organic cooking
ingredients in 2010. It further extended its business in 2015 by setting up Zenxin
Travel which operates experiential nature tours. In order to meet the increasing
demand, Zenxin expanded its food-processing operations in 2016 by offering organic
handmade noodles and organic tea. The processing facilities are approved by JAKIM
and about 30 products of Simple Nature are certified Halal. In the same year, Zenxin
also began providing home delivery services, Organic Express, in Malaysia and
Singapore. Currently, Zenxin has 14 retail outlets around Malaysia and Singapore and
its products are also distributed in more than 150 supermarkets in both countries. In
order to capture the growing organic trend, Zenxin has to expand its business across
more countries. This report intends to study on the macro environment of Mongolia,
analyse the business opportunities and risks of Vietnam and make suggestions on the
way Zenxin can set up its presence in Mongolia.

2.0 OVERVIEW OF SELECTED COUNTRY - Mongolia

The country that we have chosen is Mongolia. There are some aspects to consider
when choosing Mongolia as a new location to set up the presence of Zen Xin which
will be discussed further in this assignment. Mongolia, officially the Socialist
Republic of Mongolia, lies on the eastern part of the Indochina peninsula, which
China borders it to the north, Laos and Cambodia to the west, the Eastern Sea to the
east and the Pacific Ocean to the east and south (Mongolia Government Portal, n.d.).
Ever since the CPV initiated Doi Moi policy in 1986, with a series of economic and
political reforms, Mongolia is now successfully transformed from one of the world’s
poorest nations into a lower middle-income country. Apart from that, the poverty rate
in Mongolia has a 2 significant shrink throughout the years. According to The World
Bank (2019), Purchasing Power Parity is US$ 3.2/day, and GDP per capita has
increased by 2.5 times in 2018. According to Ministry of Foreign Affairs (2013),
Mongolia has established diplomatic relations with 178 countries including countries
in Asia, Europe, Pacific, America and Africa to promote foreign policy of openness,
diversification and multilateralization of international relations. Besides, at present,
Mongolia is involved in 63 International Organizations and over 650 NGOs
worldwide (Ministry of Foreign Affairs, 2018). The World Bank (2019) stated the
population in Mongolia has reached 97 million in 2018 with rapid demographic
change and is expected to further expand. In terms of education in Mongolia, the
citizens are given the opportunity to enjoy basic education and equitably achieving
outstanding results. Moreover, the health concerns in Mongolia have also improved
over the years with rising living standards. In brief, Mongolia could be a potential
market for Zen Xin to explore its business opportunities according to the growth of
the country.

3.0 MACRO ENVIRONMENTAL ANALYSIS

3.1 Cultural and Societal Analysis Mongolian cuisine is widespread across the
world ranging from spicy and sour to sweet. Sen Nag (2018) stated that in Mongolian
cuisine, minimal oil is used and has great reliance on vegetables and herbs. Thus,
Mongoliandishes provides a fine taste and relatively healthier with less consumption
of cooking oil in the food. With the continuous effort of Mongolia Organic
Agriculture Association (VOAA) in promoting organic food to the public and
government policy improvement regulated on organic product, Mongolian today have
better understanding on the benefit of consuming organic certified food and
eventually encourage the people more willing to spend on it. According to Asia Plus
Inc. (2018), organic food gains high interest among high income people from 25 to 39
years old and those who have children due to the healthy consumption habit. As
mentioned in Jun & Xuan (2018), organic food is gaining popularity among the locals
during the past few years as there have been more shops selling organic food in major
cities such as Darhan and Erdenet. According to Dat Nguyen (2019), the domestic
consumption of organic products worth approximately $21.5 million in as Darhan
and $17.2 million in Erdene a year. Moreover, living standard and purchasing power
of 3 Mongolian increase along with the fast-growing economy in Mongolia, the
Mongolian are more capable to afford better quality of food, for instance, organic
food. Hence, with the accepting and welcoming attitude of Mongolian towards
organic food, it is a favor for Zen Xin entering into Mongolia’s market to satisfy the
demand of local.
3.2 Political and Legal Analysis
Furthermore, aiming to turn Mongolia into an attractive investment
destination, CPV put in effort, with the implementation of policy, to create a legal
framework by developing the rule of law, especially for business and foreign
investment. Mongolia’s political stability supports policy continuity (Oxford Business
Group, n.d.).According to Mah (2018), Mongolia updated its food safety law in
February 2018 (Decree 15/2018/ND-CP) with the intention to lessen the regulatory
burden and barriers and increase the channels of international trade of food
products.With a stable political and legal system and easier entrance into Mongolia’s
international trade, Zen Xin can better expand its portfolio in Mongolia. Other than
that, Decree 109/2018/ND-CP was issued on organic farming regulations including
the procedures of certifying organic agriculture products, labels and logos, and
supporting policies, and specify the standards on organic agriculture. The government
will fund all the cost incurred in certifying the organic product and cost of verifying
arable land for organic production, and provide the agricultural promotion assistance
in organic production training to the organic farmers which allows the organic farmer
to enjoy the benefit meanwhile comply the productions with international standards
(Quynh Nga, 2018). Therefore, Mongolia’s policy on organic agriculture benefited
Zen Xin to expand its business in Mongolia and earn market shares in the industry.
3.3 Economic and Trade Analysis
Mongolia is one of the fastest-growing economies in the Asia-Pacific region in
the medium term. According to the Trading Economics (n.d.), the GDP growth rate in
Mongolia averaged 6.28 percent from 2000 until 2018 and the GDP of Mongolia was
worth 244.95 billion US dollars in 2018 and it represents 0.40 percent of the world
economy.The economic growth of Mongolia is reflecting by the growth of GDP and it
had provide good environment to Zen Xin to expand business. Mongolia economic
development depends much on agriculture as it is one of important Mongolia
economic sectors. According to Hays (n.d.), there are approximately 80 percent of the
population lived off farming. Currently, Mongolia economic development in rural
areas is changing significantly and agricultural operation is major part of rural
economy.In year 2018, Mongolia’s total import and export turnover reached over US$
480 billion and trade surplus reached nearly US$ 6.8 billion which is three times
higher than 2017 (Nhan Dan, 2019).Extensive market-oriented and outward-looking
economic policies have helped Mongolia achieve sustained and inclusive economic
growth. This also makes Zen Xin easier to enter the market as Mongolia keeps an
open attitude to international trade.

3.4 Competitors and Technological Analysis

Due to the raising awareness of healthy lifestyle, the trend of organic food
consumption is more favorable to establish and develop in Mongolia. According to
Mongolia News (2018), local consumers spend around US$27 billion on fresh foods
annually. However, the local farmers could not supply sufficient amount of organic
even though there are higher demands from local markets due to the total farming area
and retail networks for organic produce are still modest. The supply of organic
produce is also unstable and prices also fluctuate due to limited organic farming. One
of the reasons is local small farmers are facing difficulties to getting loans from bank
to expand their production area because the bank requirement is too hard to satisfy
even though government had provide favorable conditions for developing organic and
high-tech farming .It is beneficial to Zen Xin to expand business to Mongolia as the
organic food produced in Mongolia cannot meet the demand of local. Along with the
growing demand of organic food, the organic food market becomes the target market
for foreign businesses to embark and some well-known foreign businesses have
joined the market, including Bellamy. Bellamy's Organic products is trusted by local
consumers because its products are manufactured in Australia which has a strict
requirements for food safety. In addition, Bellamy's Organic products are certified
organic by the National Association for Sustainable Agriculture of Australia
(NASAA) which is the leading provider of organization and supply chain standards
for organic farming in Australia.Therefore, it is a challenge for Zen Xin as a new
entrant of this market and Zen Xin need to consider more on the development of
marketing strategy to win customers from different types of competitors.

3.5 Financial Analysis

According to IMF News (2019), Mongolia has managed to halt the increase in public
debt and create some fiscal space in recent years. The government consistently
reduced the dependence on foreign loans as a key move to lead Mongolia becomes a
middle-income country. Mongolia’s public debt hit the lowest since 2015 at 58.4% of
the GDP as of the end of 2018.The more favorable fiscal position provides the
authorities with the means to step in should downside risks materialize (IMF
News,2019). Conversely, if growth is beyond expectation, existing debt could be paid
down at a faster pace and provide more stable economic environment. Hence,
Mongolia had provide more financially stable environment to Zen Xin to expand the
business.However, Mongolian government may reduce the public debt through
raising of taxes and this lead to the increase of cost of business and reduce the profit
of Zen Xin. Other than that, the pressure on domestic interest rates has eased as
central banks in many countries are no longer pursuing tight monetary policies. State
Bank of Mongolia decided to cut several key interest rates by 0.25 percentage points
from 16 Sep 2019 would help credit institutions access more affordable capital from
the Bank of Mongolia. As the result, it is much more beneficial for Zen Xin to get
loans to invest in the expansion of business.

T
Strengths Weaknesses
1. Strong corporate orange 1. Not advertise extensively in

O color image in consumers’

mind
Malaysia

W 2. Strong support from parent

brand
3. Commitment to providing
S healthy menu items
2. Outdated website and
social network
3. Inconsistent service and
food quality

Opportunities SO Strategies WO Strategies

1.Growing health trends
among consumers
2. Growth of organic food
ingredients
3. Technological advances
for ordering food
4. Diversification of food
concepts
Opportunities
1.Perspective on “Rising
food prices” due to GST
implementation
S1O1: Penetrate into healthy
menu choices
S2O2: Combination of amino
collagen with high
antioxidants and food
S3O3: Innovations such as
apps and online ordering
systems for ease of acquiring
food
S4O4: Shifts towards natural
and beauty concept
SO Strategies
S1T1: Increase awareness of
GST
W1O1: Introduce healthy
lunch meal to target consumers
W2O3: High visibility in
Facebook and Twitter and
create a website for online
ordering
W3O4: The company is
inexperienced in different food
concepts and would need to
develop a sound plan before
starting a new concept
WO Strategies
W1T1: Expanding operations
and promotions creates the
need for more sales
2.Ease of entry into the
market
3.Impact of economic
downturn from recovering
economy
4. Change in consumer tastes
and preferences
W2T2: Intensive research and
development (R&D) and
market research
S1T4: Maintain customer
loyalty would increase sales

Table 1.0: TOWS Analysis

4.0 BUSINESS OPPORTUNITES AND RISKS ANALYSIS

4.1 Identification of business potential in Mongolia (i) Strong Economic Growth in

Mongolia According to one of the articles in The World Bank website, it was said
that Mongolia has facing rapid economic growth in past 30 years, transforming from
world’s poorest nations into a lower middle-income country. It was stated that
between 2002 and 2018, the poverty rates were declined sharply from 70% to below
6% now, and GDP per capita increased by 2.5 times in the year of 2018. Overall, it
was said that Mongolia’s economic outlook is positive in the medium-term (The
World Bank, 2019). 6 As a result, it is predicted that the consumer income will
increase, leading to higher living standards and greater purchasing powers. Therefore,
the demand for higher quality products will be increased, indicating a business
opportunity for Zen Xin in reaching a larger potential market for their organic
products in Mongolia .

(ii) Increasing Demand for Organic Food in Mongolia

According to an article from Organicity website, it was stated that the FIBL 2018
Report shows that in 2017, the market for organic agricultural products in Mongolia
indicated a stable increase, supported by increased consumption and government
policy (Organicity, 2019). In addition, one of the articles from the Xin Hua Net
mentioned that Mongolia are opting for organic products due to being more health-
conscious, environmentally-conscious, and socially conscious, leading to boom of
shops specialized in organic items. The article also mentioned that based on a survey
regarding to customers' behaviors conducted in 2015 by a company, Nielsen,
Mongolia shoppers are deeply concerned about the food's origin. In particular, 77
percent of the respondents said that fresh, natural and organic ingredients have either
a "very heavy" or "heavy" influence on their purchasing decisions (Xuan, 2018).
These survey results can be supported by another statistic result done by Ella Zoe
Doan. These survey results strongly indicating that there is a business opportunity in
Mongolia for the company.
(iii) Government inMongolia Supports for Agricultural Development and Food Safety
According to one of the articles in Mongolia News website, it was said that the
Ministry of Agriculture and Rural Development plans to promote activities aiming at
a sustainable and comprehensive agricultural value chain. In order to do so, the
ministry is actively engaging participants from private sector under Public-Private
Partnership (PPP) model to set up information system and encourage dialogues
among foreign businesses, domestic firms, and agricultural associations (Mongolia
News, 2017). Furthermore, the ministry also said that Mongolia hopes to create
connectivity between foreign and domestic firms so that they are able to share
information and experiences in 7 business efficiency and green that agriculture
development (Mongolia News, 2017). This information shows that the government is
encouraging agricultural development in the country, create an opportunity for Zen
Xin to emerge in the Mongolia market. Moreover, Mongolia also takes proactive
steps in an attempt to enhance the food labelling system for locally produced organic
products. The Ministry of Science and Technology has officially issued a framework
to regulate organic agricultural products (Fresh Plaza, 2018). Since there are
frameworks in regulating the organic products, it means that the market for organic
products in Mongolia is big and can gives Zen Xin a business opportunity to expand
in the Mongolia market.

4.2 Identification of business risk in Vietnam

(i) Unpredictable climate change Based on a report that published by the Food and
Agriculture Organization of the United Nations (FAO), the natural disasters which
between 2005 and 2015 cost the agricultural industries of developing country
economies a stunning $96 billion in damaged or lost crop and livestock production.
Mongolia is among the five countries likely to be worst-affected by climate change
(GFDRR, 2011). Since the climate of Mongolia central land is relatively harsh, which
mainly influenced by the heavy rainfall, storms and hot dry southwest wind,
sometimes in the rainy season will come with storms and tropical cyclones
characterized by heavy rainfall and strong winds. Therefore this indicated that there is
a possible chance that an unexpected undulation in the climate of Mongolia . Thus
there will be some unpredictable natural disaster occurs which bring undesirable
impact toward the lowland of central Mongolia . When the climate of Mongolia
change, there will be an increase in the strengths and frequencies of extreme weather
and disasters, and the sea level will rise, land erosions and slides. The farmers will
suffer some lost in crop and received a poor yield due to the natural disaster either to
floods arriving inexpertly or to the inadequate flood control structures. Besides that,
based on a research in 2017, it was said that the natural disasters caused heavy losses
toward the agriculture industry in Mongolia which lead to a negative growth rate of
0.18% in the first six months of the year 2016 (Long, 2017). In such, Zen Xin must
possess some precaution to confront and solve the climate risk which to avoid the
undesirable lost in profit if tend to expand the business in Mongolia .

(ii) Lack of of skilled labor

According to the national survey in 2016, the average age of a labor in agriculture
sector has rose up by 38.54% to 40.16% from 2011 to 2016. In 2016, there were a
sum of 31.02 million people of working age in Mongolia ; however 65.9% of them
are inexperienced. By the way, there was 18.3% of workers have accepted short-term
training, and only 15.9% (accounting for 4.91 million people) have either tertiary
education or vocational education. Only 4% have a college or university education
(GSO, 2018b). As a result, the agriculture industry in Mongolia may encounter the
circumstances of shortage in high skilled labor. Moreover, due to the strong economic
growth in Mongolia , the need of additional labor keep increasing and the cost of
labor also rise up simultaneously. However, the workers that last in the agriculture
sector of Mongolia are majorly older households and unskilled people. In such, it is
hard to improve the productivity level in Mongolia agriculture due to the low level
skilled labor make the further application of modern technology difficult to apply.
Therefore, if to expand business in Mongolia , Zen Xin may incur additional training
cost and also the wastage of time in training skilled labor. Moreover, since to cultivate
high skilled labor need a plenty of time, thus there is maybe a potential risk in low
productivity in the agriculture manner when Zen Xin first initial the business in
Mongolia . As a result, Zen Xin may incur deficit profit when running business in
Mongolia initially.
5.0 IMPLEMENTATION
5.1 Strategy
(i) Market Entry Strategy The strategy for Zenxin to enter into Mongolia ’s market is
by exporting its organic products produced in Malaysia to Mongolia . As compared to
other ways of entering the market, exporting is an optimal strategy for Zenxin to
penetrate into Mongolia ’s market in the first stage of business expansion as it has
lower costs, lower risks, simpler and quicker process. Firstly, the cost of exporting
strategy are relatively lower because Zenxin is not required to set up farming,
processing and packaging operation in Mongolia , while it can continue producing its
organic products in Malaysia and exporting them to Mongolia upon completion. This
can provide cost savings on labor training and supervision in Mongolia as well.
Moreover, the increase in production level in Malaysia might enable Zenxin to gain
economies of scale (“The Pros and Cons of Exporting”, n.d). In addition, the trade
barriers and international transportation costs from Malaysia to Mongolia are
relatively lower than from other countries like Japan and Australia. This can provide
competitive advantages to Zenxin because Zenxin is able to offer its organic products
at a lower price than other Mongolia ’s imported organic products. Furthermore,
exporting strategy can reduce the exposure of business risks mentioned in to Zenxin,
which is the risk of unstable climate change and lack of skilled labor in Mongolia.
The process of exporting from Malaysia to Mongolia is considered simple since
Malaysia is recognised as one of the certified countries that can export agri-based
product to Mongolia without going through a complicated process (Mohd Zaffrie,
Mohd Hafizudin and Nik Rozana, 2017).
(ii) International Business Strategy
The international business strategy to be implemented by Zenxin’s business in
Mongolia is International Strategy which has low cost pressure and low local
responsiveness. Since the Malaysia External Trade Development Corporation
(MATRADE) stated that Malaysian food products are highly accepted by Mongolia
consumer, there is minimal customization required to be made in Zenxin’s organic
products to be sold in Mongolia (MohdZaffrie, MohdHafizudin and NikRozana,
2017). The cost pressure faced by Zenxin is also considered low due to the low
transportation costs, low trade barriers, low operation costs as mentioned in
paragraphs above.
5.2 Structure
(i) Business structure The organic products exported from Malaysia to Mongolia are
to be sold in a newly set up distribution centre of Zenxin. The distribution centre to be
set up is in the form of a limited liability company which is suitable for establishing a
small or a medium-sized enterprise (SME) in Mongolia (“Legal Entities in Vietnam:
Which One to Choose?”, 2018).

(ii) Organizational structure

The type of organizational structure to be implemented in Zenxin’s business in
Mongolia is decentralised structure. This kind of organizational structure is suitable
for business located 10 in different geographical units as it can facilitate the growth
and expansion of Zenxin’s business by allowing the business entity in Mongolia can
operate independently and reacting quickly to domestic market’s needs if necessary
(“The Advantages of a Decentralized Organizational Structure”, 2019).

5.3 Operation
The key operations of Zenxin’s business in Mongolia include producing, processing
and packaging, exporting, warehousing and transporting and distributing. The
operation of each activity in elaborated as follows:
(i) Producing, Processing and Packaging
The organic products will be continually produced, processed and packaged in
Malaysia. Since there will be increase in the production level, Zenxin might need to
increase its labours in order to have a greater production efficiency. The supervision
and inspection processes also have to be increased to ensure the quality level. Upon
completion of these processes, the products will be delivered to the Federal ports in
Malaysia.
(ii) Exporting Before exporting the products, all of the export procedures and
submission the mandatory documents have to done. Zenxin will need to look for
international carriers’ services for shipping its products to Mongolia’s ports. The
organic food exported to Mongolia is subject to Mongolia Food and Agricultural
Import Regulations and Standards, thus, it is important for Zenxin to ensure its
compliance with the latest updated standards.
 (iii) Warehousing and transporting Zenxin can obtain services from international
logistics providers in Mongolia such as Twin Logistics Mongolia Co Ltd and T&M
Forwarding Ltd. The services provided usually include warehousing, custom
clearance, picking and transportation.

(iv)Distributing
As mentioned in Part 5.2, a distribution centre will be set up to distribute the organic
products imported in Mongolia. The distribution centre will be located in Erdenet
City, Mongolia as there are high organic food consumption and high development in
commerce in this city (Sophie, 2019).
In order to reach a wider customer base,Zenxin also can distribute its products
through hypermarket and supermarket chains in Mongolia, such as Aeon and Big C
supermarkets in Mongolia. The home delivery service that is being offered in
Malaysia and Singapore can be offered in major cities such as Erdenet, Darhan City
and Ulaanbaatar as well, since Mongolia is recognized as one of the fastest-growing
online grocery markets worldwide (Simon and Sarah, 2019).

6.0 CONCLUSION
Based on the analysis on various aspects of macro environment of Mongolia, it is
found that there are business opportunities in organic food industry as there are strong
economic growth, increasing demand in organic food and government’s supports in
agriculture development. However, there are business risks of unstable climate change
and lacked of skilled labor noted as well. By taking into consideration of the analysis
of macro environment, business opportunities and risks in relation to organic food
sector, the optimal option for Zenxin to expand its business to Mongolia is via
exporting strategy and international strategy. Exporting strategy is suitable for Zenxin
to penetrate into Mongolia market due to its lower costs, lower risks, simpler and
quicker process. Since there is low cost pressure and local responsiveness,
international strategy is the optimal strategy to be implemented. In order for Zenxin’s
business in Mongolia to success, it is important for it to plan and implement the four
primary operating activities, which are producing, processing and packaging,
exporting, warehousing and transporting and distributing