Mongolia market

1. Introduction to Mongolia

Mongolia has a land area of 1.56 million km². The population of Mongolia was estimated at 3.06 million in 2015. According to Asian Development Bank, poverty remains widespread, with about 21.6% of the population living below the national poverty line. Major exports are mineral products (87% in 2015) followed by textiles. Exports of coal, copper, iron ore and crude oil have a total weight of 74% of total exports. Leading export destination is China which accounted for 84% of total exports in 2015. It is reported that China is also the leading foreign investor in Mongolia. It also has a relatively weak industrial base and need to rely on imports for consumer goods. This country imports are consumer goods (29% of total imports), capital goods such as machinery, equipment & electrical appliances (38%) and fuels (19%). Major source of imports are China (37% of total imports in 2015) and Russia (27%). Table 1 shows the economic data of Mongolia, GDP growth slowed further in 2016 as household consumption declined despite more government consumption and capital formation. The GDP (per capital) was $ 4,044 in 2016 while the economic growth varied by 1.1%, and the unemployment ratio was 7.9%. However, the economy will remain vulnerable to commodity price swings and potential political and regulatory instability. Focus Economics panelists see 4.1% growth in 2018, up 0.3 percentage points from last month’s forecast, and 6.6% in 2019. Per capita GDP was US$3,999 in 2015. Unemployment rate stood at 7.9% in the last quarter of 2016. Stable food and fuel prices contributed to a low inflation at in 2016. It is generally expected that a main driver of growth will be the development of the second phase of the Oyu-Tolgoi copper and gold mine. The Asian Development Bank (ADB) is forecasting Mongolia economic development to grow by only 1.4% in 2017.

2. WDIRC selling

The forecast of WDIRC selling can be shown in Table 2 during the first ten years since product launched. Here the assumptions of households, occupancy ratio, initial sale, selling price, and manufacture cost are 713,800, 0.0040%, 29, 250 and 200, respectively. The first year is set as the baseline for comparison with the following years, the sale volume, year penetration, revenue, cost and profit are 29 (sets), 40 (ppm), 7,138 (USD), 5,710 (USD) and 1,428 (USD), respectively. As we think, the growth rate with years will be 1, 2.31, 4.76, 6.08, 8.31, 9.91, 10.71, 11.08, 12.67 and 14 times over the first year. The year penetration of WDIRC will be from 40 ppm to 559 ppm at the end of tenth year, the totally ownership (penetration) is close to 0.322%, it still is a low penetration ratio in Mongolia even WDIRC listed in market for ten years. However the revenue, manufacture cost and profit these three also present an ascending trend, the profit earned from Mongolia is about $ 0.019 million at the tenth year in an exclusive market, it owns a huge market and profit in this market. Totally according to our prediction and assumption, the selling in Mongolia will be up to 2,303 sets, even this; the penetration ratio is still lower than other consumption electric products such as TV, Refrigerator, Air conditioner, and Wash machine.

How about the annual growth rate for selling WDIRC in Mongolia market? Fig. 3 shows the result. Here the calculation of revenue can use this equation as “WDIRC’s Revenue = Annual growth rate * Year + Baseline”, the formula can be written in a mathematic equation in Figure. According to this regression by data simulation, the annual growth rate it take about 10.235k per year (r² =0.9756), in other words, by averaged the annual revenue is $10.235k in Mongolia market for selling WDIRC products during the first decade.

3. Rice selling

A ten-years forecast to WFR sale, after WDIRC launched in Mongolia market, is presented in Table 3. The first year since the marketing of WDIRC, online/offline deals for WFR sale are 37 kg, here the assumptions of population, rice consumption, sharing of WFR, online buying rate and market sharing are 3,006,444, 5.0, 0.01%, 5.00%, and 50%, respectively. How to calculate the WFR volume by online/offline sale, Eq. 1 is the equation for calculating the WFR sale volume.

Eq. 1 SaleVolume=Population x RiceConsumption x WFRratio x On/OffBuyingRatio x MSharingRatio

(eg. 37 = 3,006,444 x 5.0 x 0.0001 x 0.05 x 0.5)

The use rate of WFR is set as 0.00001 kg/person-year. Based on this, we can get the annual revenue is $ 19 (WFR priced as $0.5), and the profitability is set to 10%, so the profit that will earn $ 2. Changing with the time, the ratio of WDIRC in kitchens will increase and cause the use of WFR increasing. We assumed the series of growth rate (G.R.) by years is 1, 0.98, 1.44, 2.92, 5.44, 5.56, 6.23, 8.32, 10.25 and 12.82. G.R. it is based on the prediction of WDIRC’s growth. By this series of G.R., both revenue and profit, they will also be presented like this serial when the dealing cost of WFR through online/offline transaction is keeping constant. Whatever the cost of online/offline transactions depends on the volume of WFR’s selling, so if the volume with time is scaling up, the dealing cost will be significantly lowered, in other words, the profitability with time will increase more than our prediction. If all hypotheses are true, the profit in tenth year will approach to $ 24. Eq. 2 calculates the penetration of WFR which to be used in this country by people. From this indicator (URate of WFR), we can see the level of penetration of WFR, even at the tenth year, the level of WFR use rate in Japan is still underestimation, that’s meaningful for us to optimistically think, the use rate of WFR can be easy completed and it will be grew up more than our prediction.

Eq. 2 URate of WFR = SaleVolume of WFR / Population

(eg. 0.00001 = 37 / 3,006,444)

Regarding the revenue of WFR selling in Mongolia, Fig. 4 shows the result. This is a prediction by data simulation according to our assumption, the regression could be calculated as “WFR’s revenue = Annual growth rate * Year + Baseline”. The result shows the annual growth rate is $24.2 per year (r²=0.95), in other words, the increasing of revenue of WFR selling in Mongolia is $24.2 dollar per year.

4. To summarize the revenue and profit

Here according to the estimations above, we summarize the incomes from sales of WDIRC and WFR in Mongolia. Both revenues and profits are presented in Table 4. In the first year, the products of WDIRC and WFR are unfamiliar with Mongolia people; namely the recognition and acceptance aren’t well to local consumers, so on the beginning (1^st year) sales would be not good and the totally revenues and profits will be $ 7,157 and $ 1,429, respectively. Both of them will increase with years when selling with good experiences and promotions. Through our forecast, at the end of tenth year, the profits of WDIRC and WFR will be up to $ 19,950 and $ 24, and the totally profit will be $ 19,974, this is a huge profit which be created in Mongolia market by our novel products and services.

Totally the revenue of WDIRC and WFR (2W) selling in Mongolia market can be shown in Figure 5. The 2W revenue in first year is $7.157k dollars, after that the growth rate of revenue is $10.259k per year, this is a simple regression by mathematic model to predict the revenue on product selling. In practice, there are other factors that need to be considered much more, it could be higher than this or lower. Whatever by this calculation let us to trust that the market it always be there.