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Licensing as a Market Entry Strategy

Research for Mongolian Oil Mining Industry

Study of Licensing as a Market Entry Strategy

Mongolian economy has always been considered as a traditionally agricultural economy, with major source of livelihood being breeding livestock. The first oil drilling was launched in Mongolia in the year 1997 and since then it has acted as a main pillar of Mongolian economy. The first Mongolian oil company was “Magnai Trade”. Most of the Mongolian oil deposits are located on the border between Mongolia and China. Mongolia is considered to be a country which is rich in its natural resources and has booming industry based on oil and coal.
The research is primarily focused on Mongolian oil mining industry. The oil mining in Mongolia is facing serious challenges regarding technology, laws etc. and hence the study will be cover all the issues as to how licensing can be a used as a strategy for market entry by oil mining companies in Mongolia.
The report studies the current opportunities and challenges associated with oil mining industry and its licensing and how the Mongolian government is constantly framing and reframing its laws regarding licensing in oil mining. The research aims to study how profitable is the oil mining industry. This research has significance in the area of oil mining industry of Mongolia and the ample scope lying in that area for mining companies.

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INTRODUCTION

All the natural resources of a country are the property of the state and to mine in that country one has to obtain licenses from the government. A mining license is the contract between the government of the country and the company who wants to mine in that country. Generally mining licenses are for a specific term and specific area fixing the boundaries for that particular miner. These licenses are renewable and it is at the discretion of the government to grant or reject the licenses based on certain criteria which the ministry prescribes.
Mongolian economy has been a traditionally agricultural economy, their major source of livelihood being breeding livestock. The first oil drilling was launched in Mongolia in 1997 and since then it has been one of the main pillars of Mongolian economy. The first Mongolian oil company was “Magnai Trade”. Majority of Mongolian oil deposits are located on the border between Mongolia and China. Mongolia is a country which is rich in its natural resources and has booming industry based on oil and coal. If experts are to be believed, the pace of oil production in Mongolia will surpass the revenue of other Mongolian industries (Amarsanaa, 2010).

Background of the Study

The growing mining trade has made Mongolia as one of the fastest rising economies of the world. Industry experts quote that there are fortunes to be made in Mongolian Oil Mining industry. The harvesting of Mongolia’s other natural resources is done at a much higher rate than the harvesting of oil. Many of the international companies are eyeing the huge fortunes hidden under the earth of Mongolia. The government of Mongolia is encouraging foreign investment and participation in mining activities in their country. Mongolian laws for the mining industry are young and thus needs continuous amendment and focus. In order to achieve a sustainable growth for the Mongolian economy, a proper legislation is required to regulate its natural resources. There are many agencies in Mongolia which are working together to regulate the legislation for the country’s natural resources. The Office of Geological and Mining Cadastre (OGMC) in Mongolia is responsible for issuing licenses, collecting the fees and resolving disputes.
This research is aimed at studying that, is licensing a market entry strategy to enter into oil mining in Mongolia. This research is aimed at ensuring that should the companies be issued licenses to start mining in Mongolia and will the foreign investment be beneficial for the overall economic growth of Mongolia.

Research Background

The research is primarily focused on Mongolian oil mining industry. The oil mining in Mongolia is facing issues regarding technology, laws etc. and hence the study will be conducted on all these issues as to how licensing and entry of new companies in this field can change the scenario to a more promising one. The basic aim of Mongolian government is to slowly transform the industry into a more organised one.
The research will be a combination of primary and secondary research. Every information collected will be adding some value to the topic of the research and will give an insight as to what are the prospects of this industry and how further development can be done. There has been lot of deals going on between Mongolian and Non Mongolian companies to seek entry into the markets of the country which has a promising future.

Rationale for the chosen topic

Oil mining industry of Mongolia has a huge untapped potential. Since the mining laws and regulations are still new, a lot of companies are looking for opportunities to enter into the oil mining in Mongolia. Mongolian government has been reviewing the list of companies to issue or terminate licenses (Levin, 2012). The current research aims at exploring the licensing issues associated with the oil mining industry. It aims to study that will licensing attract foreign investment in this particular field and lead to improvement in the overall growth of the industry.
The report studies the current trends and problems associated with oil mining industry and its licensing and how the Mongolian government is constantly framing and reframing its laws regarding licensing in oil mining. The research aims to study how lucrative is the oil mining industry. This research has significance in the area of oil mining industry of Mongolia and the ample opportunities lying in that area for mining companies.

Purpose for undertaking the research

The purpose of the research is to study whether licensing can be used as a market entry strategy by oil mining companies in Mongolia? Mongolian oil industry faces a lot of issues like obsolete technology, unskilled workers etc (Amarsanaa, 2010). This research aims at finding out whether the entry of new companies in the market will be able to overcome all of the above problems. The study is carried out to see if licensing can be resorted to in order to access the rich mineral wealth of the country.
The licensing authority also makes sure that the companies who have been issued the licenses for mining are not destroying the environment beyond the prescribed limit in order to increase their revenues. There are different views on oil mining licensing in Mongolia. A lot of people are of the view that increased mining is giving rise to materialism and harming their traditional way of life and is also doing a lot of harm to the environment of the country. Thus this study is focusing on all these problems related to oil mining and brings out the best possible strategy to be followed.

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Statement of the topic

The purpose of the research is to find out the opportunities that can be obtained if licensing is used as a strategy to enter the oil mining industry in Mongolia. Mongolia has been emerging as the new frontier for mining and will grow to be the most important market of the industry in the years to come. A substantial amount of deposits have been explored only in 25% of the exploration of the country (The most exciting new market for the world’s mining industry, 2012). Many programs such as Mining Mongolia 2012 and Building and Construction Mongolia 2012 are being undertaken by the government and concerned authorities to promote and attract companies towards the very lucrative oil mining market of Mongolia. Under these programs, the companies are invited to show the latest technologies they have in mining and construction in a specialised industry fair. This report is intended to show that will licensing be useful as a market entry strategy to enter the oil mining industry of Mongolia.

Research Question

The research question is the guideline for carrying out the research with a proper focus and in a correct direction which provides the researcher with the desired results. The research question helps in bringing out the aims and objectives of the research to be carried out. In this particular research the question basically concerns the issues which the oil mining industry in Mongolia is facing and how it can be developed further. More precisely, it talks about licensing as a market entry strategy for oil mining companies in Mongolia.

1.8 Research Objective

The main objective of the research is to evaluate the current trends of oil mining in Mongolia. In this reports the research will be conducted keeping in mind the following objectives:

  • To study the overall oil mining industry of Mongolia and the problems it is facing.
  • To find out how the oil mining industry has developed from its start up till today.
  • To find out the major companies involved in mining in Mongolia and what are their strategies for further development.
  • To study if licensing can be used as a market entry strategy by oil mining companies in Mongolia.

Literature Review

According to the surveys conducted, Mongolia has huge fortunes for oil mining companies with huge oil deposits under their land. A large number of international players are keen on entering the oil industry of Mongolia with their latest technologies and huge manpower. There are companies currently operating in Mongolia which have grown substantially over the years and are further looking for licenses to explore further. Wolf petroleum is one of them. It is an unlisted public company which focuses on oil and gas exploration in Mongolia (Wolf petroleum, 2012).
It is continuously seeking new opportunities to explore the market further. Strzelecki Metals is looking to enter into Mongolian oil market by acquiring Wolf Petroleum as the company will bring with itself the latest technologies and ideas and resolve the licensing issues. The laws and regulations concerning the Mongolian Oil Market are still new and thus companies face trouble in keeping up with legal compliances. There are bodies governing the licensing issues but it further needs to be polished so that companies can enter into the economy and further develop the mining industry as well as aid in the development of the country.

Research Methodology

Research methodology is a means to an end. It is a method used in making systematic observations and obtaining information (Taylor, and et al, 2006). In this report, secondary data collection method as well as primary research will be done and for this various books, journals, articles will be used. All the latest websites and forums relating to the topic will be accessed in order to have latest information on the topic. Also questionnaires will be used in order to have the latest idea and trends going on in the industry. The research is focused on Mongolian oil market and the researcher will take care to explore the market with respect to all the factors that influence the oil industry of Mongolia. It will be made sure that all the ethical procedures required during the research will be followed and the information and data collected will be kept confidential.

Data Collection Methodology

Data collection means gathering information from a range of sources in order to cover each and every aspect of the research conducted. In this study, data will be collected from primary as well as secondary sources. Secondary sources will include books, articles, journals, forums and websites of certain companies and Mongolian ministry. For primary data, information will be collected through questionnaire method.

Sampling Method chosen

Sample means a group from the population which is a representative of the population intended to be studied. For this research, a random sample will be selected for gathering information. The sample will include marketers for oil mining companies, senior personnel, lower level workers, industry experts and also some government officials as all of them will be able to give a different insight to the study with their inputs and information.

Data Analysis

The data collected for conducting the research is useful only if it is studied systematically. ‘Data Analysis’ is the step in which all the data so collected is transformed into useful information which the researcher can further use. It is at this step that all the data so gathered is compiled which adds value to the research topic. In this report, there will be a qualitative analysis done of the responses collected from the questionnaires. As far as secondary sources are concerned, the researcher will make sure that only information relevant to the topic is used to avoid any confusion.

Resource Requirement

Any research requires resources for effectively carrying out the research so that it is actually useful for the one who wants to use that particular study. Resources requirement will include time, funds, co-operation from the organisation and officials, access to records etc.

Timescale

Timescale is one of the very important factors to conduct a research is sufficient time is required to do a research but still completing it within the prescribed timeframe. For this research the time required will be a period of 45-50 days.

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References

  • Andexer, T., 2008. Analysis and evaluation of Market Entry Modes into the Asia- Pacific region. GRIN Verlag.
  • Babbie, R. E., 2010. The Practice of Social Research. 12th ed. Cengage Learning.
  • Badke, W., 2011. Research Strategies: Finding your way through the information fog. iUniverse.
  • Battersby, J. G., and Grimes, W. C., 2001. License Agreements: Forms and Checklists. Aspen Publishers Online.
  • Beiske, B., 2003. Research methods: Uses and Limitations of questionnaires, interviews and case studies. GRIN Verlag.
  • Boyatzis,E. R., 1998. Transforming Qualitative Information: Thematic Analysis and Code Development. SAGE.
  • Dattalo, P., 2008. Determining Sample Size: Balancing Power, Precision and Practicality. Oxford University Press.
  • Dratler, J., 2006. Licensing of Intellectual Property. Law Journal Press.
  • Ethridge, D., 2004. Research methodology in applied economics: organizing, planning, and conducting economic research. 2nd ed. Wiley-Blackwell.;
  • Gill, J., and Johnson, P., 2002. Research Methods for Managers. 3rd ed. London: SAGE Publications Ltd.
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