Lamb Export to China from Mongolia
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Transcript of Lamb Export to China from Mongolia
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.
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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 couldn’t 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)
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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 world’s
largest lamb buyer France in 2012.
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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.
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STP model
Segmenting
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 it’s 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.com’s 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
segment 1
RestaurantsSupermarketsWholesalersLocal shopsLocal markets
segment 2
Direct online consumersHouseholdsEmployeesIndividuals
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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
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.
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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.
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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 cultureChinese 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.
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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 China’s major shopping website;
2. Tmall, which concentrates on online sales of branded products and concerns
on China’s fast-growing middle class
3. Alibaba.com that connects Chinese exporters and importers with foreign
businesses anywhere in the world.
Alibaba is world’s biggest online commerce company not only in China. It is done
with 248 billion $ online shopping transaction in 2013. There are 80% of China’s
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 world’s 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.
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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 China’s fast growth, intermediary
goods and a large choice of commodities, including oil, iron ore, copper and cereals,
commonly leads their imports. China’s 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 China’s 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)
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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 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
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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.
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 company’s 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 China’s 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
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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 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 end-users 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.
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Recommendation
Importantly firm must consider following recommendations in process of
exporting to Mainland China:
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
China’s 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.
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Conclusion
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 company’s coming onto their market,
company’s product request in China, product demand’s rate of growth, a company’s
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 don’t
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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