MONGOLIA NASCAR PROFILE

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1 MONGOLIA NASCAR PROFILE 5/5/2015 By Patrick Flannigan A profile, report and recommendation for NASCAR on international expansion to Mongolia

2 Executive Report Mongolia Overview Mongolia is a northern Asian country located between China and Russia. The country spent a long time under the control of both China and the Soviet Union, but in 1990, Mongolia founded their first democratic government. Since that time, Mongolia has been on a steady incline of growth, marked by recent spikes in economic growth and country development. While the economy and culture of Mongolia is still transitional, many experts believe Mongolia will continue this rapid evolution. Overall, the near future is bright for Mongolia. NASCAR Overview NASCAR is currently looking to expand their international presence, with the hope of increasing revenue and viewership. While many international initiatives have already begun, Mongolia is being scouted as a possible destination for NASCAR. In order to satisfy NASCAR s needs, Mongolia will need to demonstrate the ability to provide partnerships and sponsor which are necessary to holding NASCAR events. In addition, Mongolia must provide adequate interest from fans. If this is possible, NASCAR may consider international expansion on an appropriate level to Mongolia. Economic Outlook The economic growth of Mongolia may be the most appealing aspect of the country. Over the last few years, Mongolia has ranked in the top few countries in terms of GDP growth. This trend doesn t show signs of stopping, and if it continues at this rate, Mongolia could soon be very important in the Asian market. With that said, there are concerns to Mongolia s economy. A lack of diversity in the economic area could be threatening, as the two main sectors are agriculture and natural resources. To stabilize the economy and continue the growth of the country, Mongolia should look to enhance other economic areas. Demographic Overview Mongolia s demographic numbers are changing quickly, as are most aspects of the country. Geographically, the country features large mountain ranges and the famous Gobi Desert, but is landlocked from any oceans. More citizens are abandoning nomadic, tribal life for urban, city lifestyles. In most cases, the citizens are flocking to the country s capitol, Page 1

3 Ulaanbaatar. Currently, Ulaanbaatar contains almost 50 percent of the country s population. Ethnically, a vast majority of the population are Mongols, with a small portion of Chinese, Russian and Kazakh citizens. Opportunities for NASCAR While Mongolia currently doesn t boast Asia s strongest market or economy, it has many other potential benefits. The sports and entertainment sector in Mongolia is barren, leaving a wide-open opportunity for an organization to make their mark. In addition, the economy is growing so rapidly that industry growth is practically guaranteed if NASCAR was to expand to Mongolia. In addition, the people of Mongolia seem perfectly suited for NASCAR expansion. The average age in Mongolia is near 26 years old, with almost one-third aged below 14. This means the populations, who have been growing up in a technological and industrial setting, will also be persuadable. Recommendations for NASCAR Following the research for this project, it seems that there may be a real opportunity for NASCAR to expand to Mongolia. However, this process would have to be done a certain way to be successful. Because Mongolia hasn t reached its peak in terms of market and economy, too extensive of an investment could be very risky. Currently, there just aren t enough potential sponsors to validate a large-scale initiative. However, the opportunity for NASCAR lies in small-staged integration into Mongolian culture. This will allow NASCAR to enter the market at a low level, and ride the rapid growth until becoming relevant. Building a small scale track and including a lower-series race could entice the Mongolian people to participate in the sport. While viewership can be expected early, sponsorships may have to wait. However, if the track was built in Ulaanbaatar, it would have the potential to reach over half of the population of Mongolia, living in one city. Summary Overall, Mongolia looks to be on a short track to success in the Asian and eventually world markets. Tapping into the growing population and economy could yield positive results in the long run for NASCAR. In addition, establishing the brand now would make NASCAR more influential once Mongolia inevitably becomes a booming economy and culture. The challenge for NASCAR will be finding a small-scale but effective implementation, which will be low-risk but still attract the impressionable and growing population in Mongolia. Page 2

4 B Y P A T R I C K F L A N N I G A N Introduction NASCAR has welcomed a strong audience and revenue stream in the United States for years, but the next steps of the growth require international involvement. NASCAR has been proactive in finding possible locations for international expansion. While some countries offer larger established markets, developing countries could be great landing spots as well. With that in mind, Mongolia shows signs of growing rapidly, and ranks amongst the top promising countries by many experts. To consider Mongolia as a potential expansion site, a number of factors need to be evaluated. This may include cultural, economic, developmental, and financial considerations. Most importantly, Mongolia has to have the sponsors to support NASCAR facilities. This report will profile the country of Mongolia and examine its potential for NASCAR expansion. Page 3

5 Demographics and History Mongolia is a northern Asian country, located between Russia and China. Its landscape contains vast mountain ranges and miles of farm land. The climate can range from very warm to very cold, and often crops are destroyed by harsh winters. A third of the population lives in the capitol city, Ulan Bator. This is emblematic of the progressive urbanization that is occurring across the country. However, outside the cities, many people still live the rural, nomadic lifestyles that have characterized Mongolia for ages. Mongolia has a long history, but after years of occupation, it is only recently writing its own. The part of history most commonly associated with Mongolia is Genghis Khan and the powerful Mongols. However, following this era, Mongolia spent many years occupied by China, and later the Soviet Union. This meant that Mongolia spent decades as a communist nation. After the fall of the Soviet Union, Mongolia was a free country, and has transitioned to a democratic process. Demographically, Mongolia has similar statistics to neighboring Asian countries. Current censuses count the total population at near 2.9 million citizens. Ethnically, 94 percent of the country is of Mongol descent, with small percentages of Chinese, Russian and Kazakhs also being present. 50 percent of Mongolians are Buddhist, which constitutes the majority of the country. However, 40 percent of the country has no religious affiliation. The remaining citizens are mostly Muslim, with that figure decreasing steadily, due to most Muslims migrating from Mongolia to Kazakhstan in recent years. Overall, the population is experiencing a growth rate of close to 2 percent over the last 6 years. An interesting feature of the Mongolian population is the country s relatively young age, with the average citizen being 26 years old. Page 4

6 Political and Economic Environments As was stated earlier, beginning in 1990, Mongolia embraced a democratic process. The country also uses a parliament to work with political issues. This parliament is known as the Great State Khural. The people have embraced their new political structure, and actively participate. However, the country s democratic process is young, and encounters small issues occasionally. Currently, Tsakhiagiin Elbegdorj serves as President of Mongolia. Since 1990, Mongolia has also worked to develop stronger international relations. While they maintain strong ties with China and Russia, they have also built diplomatic ties to countries like the United States, Egypt, Canada, Japan and both North and South Korea. Economically, Mongolia is one of the most intriguing countries in the world. After stepping out of the shadow of their communist past, growth and development have been prominent in Mongolia s economy. During 2011 and 2012, Mongolia experienced some of its strongest economic growth, leading many people to believe that Mongolia could soon become a major player in Asian economy. However, some experts are still concerned for Mongolia s potential. Much of Mongolia s economy is made from agriculture and natural resources. Agriculture stems from the vast areas of farmland, and Mongolia has an abundance of natural resources in its mountainous regions. Some economists feel these are only temporary gains for Mongolia, because agriculture is unreliable due to harvest threats, and natural resources like copper and gold are finite. Experts recommend that Mongolia look towards converting their vast urbanization into stronger technological and industrial fields. However, most economic forecasts agree that Mongolia will remain one of the fastest growing countries in the world for years to come. Page 5

7 Media and Legal Frameworks The use of media in Mongolia is undergoing swift changes each year. Having been a Soviet Satellite nation for many years, most channels of media were controlled and difficult to access. As many other aspects of Mongolian culture change from that era, Mongolian media follows the trend. In 2005, a law was passed which changed the staterun TV providers to a public service provider. In addition, radio station and TV broadcasters are now available to private owners. Newspapers are purchased often, but there is no real centrally circulated paper. Mongolian citizens now have choices between over 10 widely publicized newspapers, and all sell relatively well. However, these transitions are still a work-in-progress. Much of the corruption that was common in the communist and state-run media era still exists, though much progress is being made to eradicate the corruption. In 2012, Secretary of State Hillary Clinton visited Mongolia and publically commended Mongolian President Tsakhiagiin Elbegdorj on his success in helping to remove corruption in Mongolian media. The legal system in Mongolia is set up similarly to the legal system in the United States; however the Judicial Branch of the government is considered a separate section. After the end of the totalitarian regime, the new Mongolian government focused on creating a legal system with more modern values. Some of these values included democratic values, human rights and the market economy. Recently, Mongolia has added environmental concerns to one of their core values. This comes as a response to criticism from around the world about Mongolia s high levels of pollution and lack of regard to climate change issues. Despite these criticisms, Mongolia has been one of the most active countries in the effort to reduce harmful emissions and preserve the environment. Page 6

8 Level of Development The current level of development in Mongolia reflects the transitional state that the country has been in for the last fifteen years. Especially in the last 5 years, the development in Mongolia has been monumental. In addition, the projections for Mongolia moving forward are equally optimistic. To evaluate the level of development in Mongolia, a number of aspects should be analyzed. This should include poverty levels, GDP growth, and environmental quality. These segments can help give a stronger assessment of Mongolia s development over recent years, and help project the growth or declination of the country for the future years. Looking at the poverty levels in Mongolia, there are many reasons for optimism. From 2010 to 2012, poverty in Mongolia dropped from 38.7 percent to 27.4 percent. The rates are even lower in the city of Ulaanbaatar, which contains nearly half of the population. This signifies that the main reason the poverty level is still seemingly high is due to the remaining nomadic people living in rural areas. Next, when evaluating the GDP, more positive results are found. Mongolia boasts a GDP growth of 11.7 percent, which ranks as the sixth highest country on the GDP growth rankings. Mongolia s environmental quality currently leaves much to be desired. As the growth of the country boomed, environmental concerns were pushed aside to focus on development. Much of this is due to the mining industry being a top revenue producer for the Mongolian GDP. Mining, when not regulated well, can have negative environmental effects. Now, despite Mongolia s recent efforts to increase environmental awareness, there is still much ground to be made to reach the necessary levels. Page 7

9 Cultural Metrics and Comparisons Mongolia, like many other Asian countries, ranks as a high-context culture. Highcontext indicates that the Mongolian people place value in prior relationships when communicating. This is an important aspect to consider if further involvement in Mongolia begins. Unlike many other Asian countries, Mongolia ranks very highly in individualism. This may seem surprising, because many Mongolians have recently converted from tribe-based nomadic lifestyles. However, these tribes were much more individualistic than tribe lifestyles around the world, even featuring outcast or runaway children. A very important feature of Mongolian cultural metrics is the high levels of masculinity. This means that the Mongolian society values assertiveness and achievements over nurturing and social support. Mongolian culture also features a low power distance. This indicates that the power distribution across business or societal structures is more evenly dispersed. Finally, Mongolia ranks highly in uncertainty avoidance. High uncertainty avoidance suggests that Mongolians take fewer chances and prefer the known or positive solution. Comparing these metrics to the communication styles of the United States allows for more cohesive conducting of business topics. The United States is a lower-context culture than Mongolia, meaning Americans are more forthright with their communication techniques. Mongolia and the United States share similar levels of individualism, so not much consideration is needed in that area. The United States is considered a moderately high country in terms of masculinity, however Mongolia ranks far higher. Power distance is similar between the two countries, with the United States featuring a slightly higher rating. In terms of uncertainty avoidance, Mongolia ranks far higher than the United States. Page 8

10 Sports History To help landscape Mongolia as a potential expansion zone for NASCAR, analyzing the sports in Mongolia can be beneficial. The sports climate in Mongolia could dictate the level of success an organization could find by introducing a new sport. Currently, sports in Mongolia are very limited and not well organized. Traditional sports such as soccer and basketball have nearly no prominence in Mongolia, and not many citizens participate or view these kind of activities. However, there is a strong role for the sports of wrestling, horseback riding and archery. All three of these traditional Mongolian sports are played during the festival of nadaam, which celebrates the history of sports in Mongolia. This festival annually draws huge numbers of Mongolians, and the three sports are the three most actively participated sports in Mongolia. The history of these sports is deeply rooted in Mongolian history, as it represents the warrior roles of the 16 th century Mongols. It is often described by foreigners as the manliest sport in the world. The only form of automobile racing that currently exists in Mongolia is the Mongol rally. This race is an endurance event, in which drivers start in London and drive through Europe, across Russia and end in Ulaanbaatar. The race is marked by harsh Siberian roads through Russia and tricky, mountainous passes and desert runs in Mongolia s portion of the race. The race doesn t have an official winner, and often occurs on highways where speeding is not encouraged. The race focuses on endurance and has many restrictions on car enhancements and budgeting. In addition, all participants are required to be sponsored by a charity, and all proceeds are donated to that organization after the race. Page 9

11 Opportunities in Mongolia After analyzing the various aspects of Mongolia, the next question is, what opportunities are in the country s future? Mongolia presents a great opportunity for NASCAR development, for a number of reasons. The three strongest reasons supporting this idea are the lack of sports in the culture, the booming economy and the potentially receptive audience. Sports entertainment in Mongolia is lacking, and shows signs of increasing. The existing sports are horseback riding, archery and wrestling, and there is room for more. As the rate of growth in Mongolia continues to increase, more and more citizens will have access to media sources. This will lead to more information and entertainment being spread across industrialized parts of the country, and an opportunity to carve a niche out of the entertainment sector for stock car racing. Next, the booming economy in Mongolia signals an opportunity to attract investors and partnerships that could be mutually beneficial. Business Insider listed Mongolia as its fastest growing country in the world, based on its GDP growth and national development. Mongolia looks to be a future player in the Asian market, and soon a world market player as well. Taking advantage of this impending growth could prove to be very profitable. Finally, the audience in Mongolia appears potentially receptive to a new and exciting sport being introduced. Mongolia s population is very young, with an average age near 26 years old. In addition, almost one-third of Mongolians are ages fourteen and younger. This new generation of Mongolians will grow up in a more urban, technologically advanced society, making them an influential group. By targeting and attracting this group, a new sport or entertainment could insert themselves as a staple in Mongolian Culture. Page 10

12 NASCAR s International Goals NASCAR has been open about their ambitions to increase their international presence, and has been working on multiple platforms to achieve their international goals. Presently, NASCAR s most successful international expansion was to Mexico. However, they have also had success with races in Canada and in cities across Europe. Asia, which is a burgeoning market, has not provided the same results. Exhibition races were run in Japan, but no sponsorships were accrued from the races, forcing NASCAR to move on. NASCAR Vice President Steve O Donnell claimed to receive at least 20 offers for races in China, but none came to fruition. The key aspect for NASCAR is the sponsorships. If NASCAR wants to have lasting influence in a country, they need to have sponsors and partnerships. NASCAR can be expensive to fund and the revenue has to match the costs for it to remain logical. This makes it a difficult situation, because there often aren t the funds or resources available immediately, and it could take time to attain them. Mongolia doesn t fit the conventional scheme for the NASCAR international expansion model. Being a young government and a transitional population makes Mongolia appear unstable, where other Asian countries like Japan and China are more developed and more reliable markets. However, Mongolia offers what many other countries can t, which is the opportunity to be a part of the growth of the country. O Donnell also believes that NASCAR should be international but grassroots. This is a specifically interesting point when referring to Mongolia, because the booming growth in Mongolia offers NASCAR the chance to enter the market at a small grassroots level, and grow into something bigger. If done right, this could yield the best results for NASCAR. Page 11

13 Case Study on Premier League Deals A related case to NASCAR s interest in Mongolia is the English Premier League s pursuit of southeaster Asian countries. An initiative by the English soccer league to increase their brand in countries like Malaysia, Indonesia, Singapore and other Asian countries proved to be a huge success, and rewarded the EPL with massive profits. Their techniques could be applied to the way NASCAR can approach expansion to Mongolia, given the similarities of the economically booming Asian countries. The EPL recognized that there was an opening in the market in Southeast Asia, and that the potential was high because the countries were developing quickly. So as a result, they began preseason tours going through Malaysia, Indonesia and Singapore. This was a low-cost opportunity, but after years of touring began to gather massive amounts of fans. As the countries developed and the citizens gained more access to media sources, more TV deals were completed. Jersey sales in those areas skyrocketed as well. Businesses in the countries were growing rapidly as well, and found themselves with more resources to reach their customers. Soon after, large companies because endorsing and sponsoring EPL soccer teams, to get names on jerseys and commercials during games. The EPL made fantastic profits off these sponsorships. This is a fantastic outline for how NASCAR could approach expansion in Mongolia. By inserting their brand into the culture during the early stages of their economic growth, they can reap the benefits when the country develops fully. Ultimately, sponsorships are what drive NASCAR, and to get sponsorships, the branding must reach a large population. Page 12

14 Campaign Research Suggestions Based on the research, there are a variety of suggestions NASCAR should consider when decided whether or not to expand to Mongolia. The results show that Mongolia certainly has potential to host NASCAR events, and could yield results down the road. The most important suggestion involves the scale of involvement NASCAR should implement when expanding to Mongolia. Looking back at the section on Premier League tours of Malaysia and Indonesia, we can see the value of engaging in rapidly growing markets. It offers the opportunity to enter at a cheaper, less risky level, and ride the impending growth to prominence. Just as the Premier League teams engaged Malaysian citizens, a NASCAR event could engage Mongolian citizens. As the citizens were brought in, sponsors from Malaysia saw an opportunity and became active. This could be expected to go similarly in Mongolia. Because the population is so impressionable and the landscape features nothing like NASCAR, introducing the sport has a great chance of engaging the Mongolian people. Once engaged, Mongolian companies will see the opportunity to reach a large group of their own local customers, and want to be involved in sponsoring and partnerships. The big businesses capable of sponsoring and partnering with NASCAR in Mongolia are very few currently. However, most experts agree that this will change soon, as the economy continues to boom. In the next few years, NASCAR could be an established institution of Mongolian sports. Once it reaches that level, the Mongolian businesses will likely be ready to contribute to NASCAR s sponsorship, which will mutually help both parties. NASCAR will attain the sponsors and support that it requires, and the Mongolian businesses will have a platform to reach the people. Page 13

15 However, a large scale movement could prove disastrous, as the Mongolian market is still growing. The best recommendation would be building a small track and starting with one to two lower level races a year. During the rest of the year, encourage using the track for other events and races, to help pay for the costs. The quality of the drivers and cars will be irrelevant, because there is no competition of any sort in Mongolia. The location of the track should be the capitol city, Ulaanbaatar. The reason for this location is that nearly half of the population of the whole country lives in Ulaanbaatar. Also, considering the rapid urbanization, most of the citizens living outside Ulaanbaatar are still nomadic. The key for success in Mongolia will be patience and immersion. The only sport that Mongolians love presently is the nadaam which has cultural importance to the Mongolian people. NASCAR will need to wait, so they can immerse themselves in the culture to have the greatest impact. As more and more Mongolians are exposed to the sport, there will be more homegrown drivers being developed. Eventually, these Mongolian drivers will be able to hold the races themselves, and then NASCAR will have successfully founded an international expansion in Mongolia. Page 14

16 Conclusion Mongolia is a country with an exciting future, with huge economic and social changes on the horizon. Looking at the nation s history, it is truly remarkable how quickly it has developed into a relevant and competitive market. Businesses and investors should both pay attention to the growth Mongolia experiences over the next few years. For NASCAR s interest in international expansion into Mongolia, there are many reasons to believe it could be a mutually beneficial relationship. The people, economy, and culture are all important aspects of Mongolia s potential to be a great landing place for NASCAR. The best recommendation for NASCAR officials considering implementing business in Mongolia is to start small, and allow the brand to grow with the burgeoning economy. This will allow NASCAR to become a beloved sport in the culture of Mongolians, which will lead to revenue and sponsorships for years to come. Page 15

17 Bibliography Mongolian Cultural Overview: NASCAR article on International Expansion: Premier League Case Study: World Bank Mongolian Economy Profile: Mongolian Legal System Overview: Business Insider article on fastest growing economies: Page 16