Proposal to G2000 Apparel Limited Jane Lam Jason Chen Roger Gao Roy Ng Stanley Tsui October 2009 How can Thailand Merchandise Purchase Volume be Increased by 30% in One Year through the Increase in Sales by the Existing Franchisee?

2 The Story Line Situation G2000 has been employing franchise mode of operation in Thailand for the past 10 years. Complication However, in recent years, merchandise purchase volume has seen no growth. G2000 management would like to achieve a 30% increase in purchase volume within one year. Question How can this growth target be achieved? Answer We can increase the sales performance by increasing shop/counter spaces Rationale Increasing shop/counter spaces Shop space growth in past 3 years is flat, subsequently the purchase volume remains flat. Open new shops in strategic location, expand existing shops/counters size to gain market share Comparison between opening shops and counters. (estimate profit) –Cost structure / Higher Conversion rate in counters / Opening speed More merchandise needs to be purchased from G2000 if shop/counter sizes are increased More merchandise needs to be purchased from G2000 if additional shops/counters are opened

3 Relation of Shop Space and Sales growth 26% 26% To achieve 30% growth, Franchisee need to increase X% shop space.

4 Sales Performance of shops in different locations Source: Based on Thai franchisee internal statistics Opening shop in high traffic location yield better Sales Sales (Per Square Feet Per month) Shopper Flow Rate (Per Month)

5 Comparison of Profit Margin of Shops and Counters Counters has higher profit margin vs Shop did. Source: Based on Thai franchisee internal statistics

6 Capital Requirement to Setup Shops and Counters Counters need less CAPEX to setup. Source: Based on Thai franchisee internal statistics.

7 Lead time to Setup Shops and Counters Shop lead time 12mths average size 3000 sq.ft. Given 12mths, increase 3000 sq.ft. Counter lead time 1mth average size 600 sq.ft. Given 12mths, increase 4800 sq.ft. Source: Based on Thai franchisee internal statistics and estimations

8 Compare of conversion rate between G2000 Thai and Thai industry average We already do a good job. Source: Based on Thai franchisee internal statistics and estimations

9 Compare of conversion rate between shops and counters Counters has higher conversion rate. Source: Based on Thai franchisee internal statistics and estimations

10 Market Position of G2000 in Thailand The market is not captured. Captured it ASAP or other competitors will come in.

11 Profit forecast if shop space increased by X% in 1 years

12 Other Initiatives to Encourage Franchisee’s new shop opening Sponsor Advertisement and Promotion for new shops Longer payment period for first order of each new shops

13 Appendix 1: Interview Schedule Interview 1: Time:The interview will be arranged to be carried out on next week (28-Sept ~ 6-Oct). (The actual date and time is pending) Venue:via the phone Interviewer:Jane Lam, Stanley Interviewee:G2000 Franchisee in Thailand - Ms Sung of C Trading, Thai. *************************************************************************** Interview 2: Time:The interview will be arranged to be carried out on next week (28-Sept ~ 2-Oct). (The actual date and time is pending) Venue:via the phone Interviewer:Jane Lam, Roger Interviewee:G2000 Franchisee in Thailand - Ms. Alicia (Fashion Buyer). *************************************************************************** Interview 3: Time:The interview will be arranged to be carried out on next week (28-Sept ~ 6-Oct). (The actual date and time is pending) Venue:via the phone Interviewer:Stanley, Jason Interviewee:Thailand Retail Association - Mr. Kong *************************************************************************** Interview 4: Time:The interview will be arranged to be carried out on next week (28-Sept ~ 6-Oct). (The actual date and time is pending) Venue:via the phone Interviewer:Jason, Roy Interviewee:Thailand Retail Association - Mr. Tum *************************************************************************** Interview 5: Time:The interview will be arranged to be carried out on week 28- Sept ~ 6-Oct. (The actual date and time is pending) Venue:Face-to-face Interviewer:Roy, Roger Interviewee:G2000 HK – Ms. Jane Lam *************************************************************************** Questions on staff motivation: Will G2000 set the salary range for different grade of Franchisee’s frontline store staff? Giving a example that McDonald has McDonald's University for training their Franchisee’s employees (though this is a different industry than G2000 Apparel industry), will G2000 consider to set up such centralized training institute to cultivate the G2000's culture and best practices to each of its Franchisee especially for Thailand ? Any staff motivation scheme has been put in practice in Thailand? e.g. Monthly Best Store Staff etc. How G2000 provide the channels for customer to complain or reflect their ideas/comment towards to frontline staff service? How regular is the frontline staff training? In what format / modes the training is provided? Any web-based online training? Questions on selling locations arrangement: How long does it take to expand an existing shop / counter? How much would it cost to expand an existing shop / counter? Comparing to similar regions, is there any shop/counter in Thailand appear to have reached its limit in sales per foot? How long does it take to open a new shop / counter? How much would it cost to pen a new ship / counter? Has G2000 / franchisee done any study on shop expansion / relocation? How many shops/counters do G2000 currently have in Thailand? In which cities? Questions on advertisement & promotion: What is the target market segment of G2000 in Thailand? How price sensitive the target customers are? Is there data available to measure customers' price sensitivity? In your opinion, how G2000's customers within the target segment perceive the brand? High end or low end? Who are the major competitors in Thailand? What are the franchisee's A&P activities in the previous years? Please provide frequency of such activities. Which type of A&P and also which channel has proved to be more effective? Is there data available to measure effectiveness of historical A&P activities? (like sales volume reaction after a period of A&P) Are you willing to spend money to do more advertising this year (like TVC)? If so, how much budget is available? Questions on new corporate client business: Do you think if other apparel co. will join the market as well? Will Thai franchisee willing to invest in IT to handle customer requirement of corp. market? What is the view of general Thai on HK brand (brand equity)? Will you think a lot of fix cost investment involved if franchisee joins this new market? Is there any other company in Thai do Corporate Apparel? Will it be a practice for corp./school to produce event uniform in Thai? Will it be a practice for big corp. in Thai to sponsor their executive clothing? If it is not, will you think it is a possible new market? Is bargaining power of corp. customer high? What about the expected profit margin of corp. client market? Do you thing they are price sensitive?

14 Appendix 2: Work Plan (1) Issue No.IssueHypothesisAnalysisData SourcesWho?DeadlinesStatus? 1.1.1Can sales be increased by selecting good attitude staff? Good attitude staff can have better sales peformance - customer satisfation survey towards staff servicecustomer satisfation survey Royweek 5Not Started 1.1.2Can sales be increased by above-the-market-rate salary package? Above-the-market-rate salary package will significantly increase the overall sales performance in a shop - Existing Market Rate? - How much percentage more in salary package is best for motivating staff? Client interview Industry research Royweek 5Not Started 1.1.3Can it be increased by having regular training per month? Regular monthly training will increase the front-line staff overall sales performance What type of training is needed? How many hours of training will be suitable? Client interview Industry research Royweek 5Not Started 1.2.1Can sales be increased by re- locating shop/counter to appropriate locations. Sales may be increased by moving the store to a more approperite location. Evaluate whether the current location(s) is in line with G2000 images (i.e. whether G2000 is located in an area where shops of similar position are located) Local commercial real estate publications Rogerweek 4, data gathering; week 5, complete analysis Not Started 1.2.2Can sales be increased by enlarging the shop/counter sizes? Sales can be increased on a pro-rata basis with increase in shop/counter space. Given market capacity, model increase in sales based on historical info. Historical space / sales data for the past three years; G2000 stocking guidelines Rogerweek 4, data gathering; week 5, complete analysis Not Started 1.2.3Can sales be increased by opening more store/counter locations? Sales can be increased on a pro-rata basis with increase in number of shops. Given market capacity, model increase in sales based on historical info. Historical shop / sales data for the past three years; G2000 stocking guidelines Thai economic data Rogerweek 3, data gathering; week 5, complete analysis Will Thai franchisee be motivated to conduct TVC campaign? Thai franchisee ask for 50% cost sharing from G2000 for above the line advertising Understand Franchisee and G2000's role and responsibilities Franchisee agreement, client interview JasonWeek 4Not Started Can sales grow by more than the cost of conducting TVC campaign? Sales can increase at least by Cost of Advertising / GP Margin Model increase in sales based on historical statistics and other similar cases (like competitors advertisements) Historical advertising statisitics. Advertising analysis on competitors. Advertising analysis from other countries. Thai franchisee's cost structure JasonWeek 4 obtain all required data. Week 5 complete analysis Not Started

15 Appendix 2: Work Plan (2) Can sales increase by conducting promotional events (lowering price) Sales volume increases by 30% if price is reduced by 10% during promotional event Price elasticity analysisHistorical data for sales promotion. Competitors analysis on sales promotion. JasonWeek 4 obtain all required data. Week 5 complete analysis Not Started 2.1.1Is there any threat of substitute products (and service) There is no or little product for substitution. - buyer propensity to substitute (If we do not wear cloth, wear leaves??) - relative price performance of substitutes - buyer switching costs - perceived level of product differentiation Client InterviewStanleyWk 3 Market research finished Wk 5 Analysis doneNot Started 2.1.2Is the threat of the entry of new competitors large? New competitor cannot enter the market within one year - the existence of barriers to entry - economies of product differences - brand equity - switching costs or sunk costs - capital requirements (e.g. IT system for entitlement/account management, but no need for inventory) - access to distribution (How to contact potential customer?) - absolute cost advantages (G2000 can leverage existing retail shop, existing inventory, exist admin structure) 1. Google 2. Thai fashion industry listing 3. Client Interview StanleyWk 4 Market research finished Wk 5 Analysis doneNot Started 2.1.3Is there any intensity of competitive rivalry? Is the market very competitive? - number of competitors - rate of industry growth - intermittent industry overcapacity - exit barriers - diversity of competitors - informational complexity and asymmetry - fixed cost allocation per value added Client Interview Google StanleyWk 4 Market research finished Wk 5 Analysis doneNot Started 2.1.4Is the bargaining power of customers high? The bargaining power of customer is high - buyer concentration to firm concentration ratio - degree of dependency upon existing channels of distribution - bargaining leverage, particularly in industries with high fixed costs - buyer volume - buyer switching costs relative to firm switching costs - availability of existing substitute products - buyer price sensitivity Client interview Industry research StanleyWk 4 Market research finished Wk 5 Analysis doneNot Started