Mongolia as an Export Market for Russian Companies

Mongolia is a country with which Russia shares many ties.

This includes not only a sufficiently long common border but also intensive economic and socio-cultural relations. Therefore, despite its small population and weak production potential, Mongolia is a significant importer of Russian products. The opportunities and prospects of working with this country will be discussed below.

Established Practice of Trade between Russia and Mongolia

According to the results of 2021, the Russian Federation exported goods worth over 492 billion US dollars. Mongolia ranks 45th in the list of importers of Russian goods, with a volume of 1.8 billion US dollars. This is a relatively small amount in absolute terms. But it is important to emphasize here that the Mongolian market is objectively small.

Mongolia is a unique country in terms of geography and settlement system. It ranks 19th in the world in terms of area, but its population is just over 3 million people. Almost half of the population (1.4 million people) lives in the capital, Ulaanbaatar. The second-largest city, Erdenet, has only 100,000 people. Its city-forming enterprise is a copper-molybdenum plant. Hence, the global "leadership" among all states in terms of uninhabitedness – 2 people per square kilometer.

The main specialized industries in Mongolia are mining, agriculture (livestock farming on natural pastures, with the country being a world leader in livestock per capita), and the transport sector (primarily based on railways).

The 1.8 billion USD of Russian exports account for 30% of the total volume of goods imported into the country, making Russia the second-largest exporter to Mongolia, with China only slightly ahead of our figures at 2.1 billion USD.

Speaking about the commodity structure of Russian imports, roughly half consists of raw energy groups, another 106 million USD is iron and steel. But beyond that, raw materials in leading positions end.

Approximately 78 million USD (3rd place) is Russian exports of railway rolling stock, which is due to the significant length of railways, the presence of two main lines (one connecting Russia and China), and the joint participation of Mongolian and Russian sides in the activities of the national railway carrier in Mongolia. Recent years have been characterized by rapid development of the transport system in the country, including the construction of new lines and modernization of old ones.

The fourth place in exports from Russia to Mongolia is occupied by cereals (approximately 63 million USD). Overwhelmingly, this is wheat, as well as rice, barley, and corn. Crop farming is practically absent in the country, especially noticeable for grain crops. Russia, on the contrary, is a major exporter of this product group, with grain-specializing regions of Southern Siberia located relatively nearby.

The fifth and sixth places in Mongolian imports from Russia are occupied by engineering products (44 million USD) and electrical equipment (42 million USD), which is associated with established technological ties (for industrial goods) and, to a certain extent, persistent consumer preferences for mass-market goods.

Among other product groups imported into Mongolia from Russia in large volumes, one can note chocolate and other cocoa processing products, flour and flour products, fertilizers, animal and vegetable fats and oils, pharmaceutical products, meat (pork and poultry), plastics, dairy products, wood and wood processing products, beverages (each item amounts to at least 15 million USD annually).

As can be seen from the list, Russian food products are in good demand in Mongolia, especially those produced from scarce raw materials in the country. Wood and wood products, fertilizers, and pharmaceuticals are also in demand.

Thus, it can be said that Russian producers of completely different industry profiles – from heavy and transport engineering to the food industry – can achieve success in Mongolia. In general, interest in Russian products remains high in Mongolia. And in some markets, one can even speak of a high dependence on products from Russia, which simplifies market entry with alternative offers.

The Importance of Marketing Research of Mongolian Commodity Markets

Although Russian products are well known in the Mongolian market, this does not at all guarantee that every export project will necessarily be successful. Still, competition, including between domestic producers, is present. To increase the likelihood of success in the Mongolian market, it is necessary to carefully calculate the business model, for which a certain amount of information is required, i.e., to conduct marketing research.

Analysis of commodity markets in Mongolia has certain features that are well known to specialists and marketing companies that have accumulated some experience working with this country.

The first thing one encounters when researching Mongolian markets is the limited volume of available information. Official sources are quite scarce; the statistical system in the country is poorly developed. Internet surfing also often has low effectiveness, as the Mongolian segment of the World Wide Web is not distinguished by high-quality content. A more or less decent level of websites is characteristic only of large companies; they also often have an English translation. In the B2C segment, one will more often have to deal with Internet resources in Mongolian, which, although written in Cyrillic, is difficult to perceive, and specialists speaking Mongolian are usually not available in Russian companies. Automatic translation offered by search engines contains many inaccuracies. If using it for express assessments and brief desk research, it is better to translate from Mongolian to English; this will improve the applicability and quality of information.

Another interesting point is the proximity of the Mongolian and Buryat languages. It is no coincidence that companies from the Republic of Buryatia and some neighboring regions (for example, Irkutsk Oblast), where speakers of the Buryat language reside in large numbers, traditionally interact quite effectively with Mongolian companies. Therefore, certain accumulated experience and connections of the business community from these territories can help gather useful information about how certain commodity markets in Mongolia and Mongolian business in general function.

The standard of living in Mongolia, although growing, still remains quite low. As a result, for the Mongolian consumer, the price of the product is very important as a factor determining their choice. If the offer for the Mongolian market is not interesting in terms of price, it will be difficult to overcome this problematic situation through other parameters. At the same time, as noted above, the representation of information about the country's internal market on the Internet is very low. It is unlikely that collecting information through internet surfing in sufficient volume to calculate the optimal product price on the shelf will be possible.

In such a case, field research (census of the export market) can help, which will provide a complete picture of the situation in the commodity market, both in terms of price aspects and from the perspective of the parameters of products presented on the market, assortment breadth, main sales channels, and implemented promotional activities. That is, in aggregate, it will allow a potential Russian exporter to compose a marketing mix for effective work in Mongolia. Here, it is appropriate, especially with a lack of time, to use the services of marketing agencies that specialize in research of Mongolian commodity markets, have certain experience in such work, and connections with local partners (the market for marketing services in Mongolia, even advertising, is at a low level of development).

If we are talking about the B2B sphere, and as noted above, a significant part of the trade volume between Russia and Mongolia falls precisely on the industrial group of goods, then the importance of high-quality data collection on the state of the market and their processing for making certain management decisions increases many times over. Desk methods of marketing research in such a case will have little effect. The main source of information will be primary data obtained through a whole system of methodologies, including interviewing workers in the industry of interest and collecting expert assessments.

A priori, such marketing research cannot be fast and cheap, but the information collected and analyzed during its course will subsequently allow the exporting company to save a significant amount of internal resources, including financial ones. To competently enter the B2B markets of Mongolia, many of which are traditionally closely linked to administrative resources, not only a balanced and up-to-date commercial proposal is necessary but also correctly built communication with decision-makers, many of whom leave a small number of informational traces and are therefore difficult to identify from the outside without deep immersion in the life of the market, knowledge of decision-making processes, and the real statuses of key stakeholders. Thus, the correct and competent selection of partners and decision-makers in the country is the second and no less important than the commercial proposal itself component of a successful export project in Mongolia.

Searching for Mongolian Partners and Business Missions to Mongolia

Mongolia is a country with a rather pronounced specificity of culture and social life of society. For those foreigners who encounter residents of Mongolia for the first time, some norms of communication seem unusual and even strange. To a somewhat lesser extent, these features are also characteristic of business contacts.

Mongolia has a small population - almost all business circles are concentrated in Ulaanbaatar. Therefore, one way or another, "everyone knows each other." New people coming to Mongolia with cooperation proposals are treated, at a minimum, with caution. It is desirable to have a wide range of contacts in the reference environment so that barriers to communication are low and do not "slow down" the process. All of the above is especially pronounced if a new company, whose representatives have never worked in Mongolia, is trying to enter the market. Searching for partners in such a case can be difficult.

The next feature that reveals itself in the negotiation process is slowness and lack of haste. It stems from the traditions of communication of nomadic peoples who lived in a large territory, divided by pastures for feeding herds of animals, in small groups. Meetings did not occur often and therefore proceeded slowly with many rituals. Partially, this has been preserved in modern Mongolia, which has come a long way to a society of a new formation. So, it is not worth excessively rushing potential partners and increasing the pace of communication – this can negatively affect the result.

A separate issue is the language of communication. The entire population knows the state language – Mongolian. But it is rarely spoken by Russian exporters. The Buryat language is very close to Mongolian, but there are still some differences that can matter when discussing issues in detail. For establishing contact and communicating on basic topics, the Buryat language "suffices."

Older people – usually over 45-50 years old and holding certain managerial positions, especially in the industrial sector, know the Russian language, often at a good level, which allows for oral communication without an interpreter. Young businessmen, as a rule, studied abroad and speak conversational English. Thus, in many situations, knowledge of Russian and English allows for direct communication with Mongolian partners without an interpreter. This is especially characteristic when working with B2B markets.

For domestic companies wishing to conquer the markets of Mongolia, it is important to be oriented in another aspect of their functioning. Often, Russian exporters strive to reach buyers directly. However, the power of intermediaries in a number of countries is high. Mongolia is precisely an example of such a state. For example, if you want to supply equipment for industrial enterprises, it will be difficult to establish direct contacts. Initially, it is worth paying attention to trading companies that can represent your interests in Mongolia. As a rule, they work on a multi-brand principle and do not claim exclusivity. Therefore, one can look for not one, but several partners, each of whom has their own connections and capabilities in different areas. When market requests appear, they can respond to them and execute the supply much faster compared to a Russian company.

Of course, there are many more features of the partner search process in Mongolia than we could describe in this article. But in any case, this process requires significant time investment and the presence of certain competencies in the exporting company's team. It is always necessary to consider different options for solving this task, if necessary, attracting third-party contractors.

Considering the rather traditional way of life of Mongolian society, it is worth emphasizing the importance of personal contact and private communication when developing business projects and concluding deals. Therefore, companies that are seriously interested in entering Mongolian markets should consider the possibility of participating in business missions. Preparation for them is essential – forming a list of potential partners in advance, inviting them to meetings to discuss specifically prepared commercial proposals tailored to their individual requests and profiles.

Appealing for the corresponding service to an export support center in the region where the Russian company is registered can reduce the costs of such an event and increase its effectiveness. The best result is achieved when the efforts of the business and the companies acting as contractors for the export support centers in organizing business missions are coordinated. Then a trip to Mongolia will become not only a memorable journey but also the start of a new export project for the company.