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

2. The Story Line Situation Complication Question Answer Rationale
G2000 has been employing C Trading as the exclusive franchisee for all the operation in Thailand for the past 10 years. C Trading itself is also carrying another 26 brands in Thai apparel industry.
Complication
However, in past 3 years, merchandise purchase volume from Franchisee has seen no growth. G2000 management would like to achieve a 30% increase in purchase volume within one year.
Question
How to motivate the existing franchisee to resume store open program?
Answer
Illustrate to franchisee that store open program has good financial return with low risk and growing G2000 brand can complement franchisee’s apparel brand portfolio.
Rationale
Thai apparel retail market has been growing, and is expected to growth fast, of which, foreign and business wear brands will be the fastest growing segment.
Competitors have been opening new stores and have sales growth, but C trading has no growth in number of stores and sales.
From historical data, more than 94% of shops can gain profit within 2 years. The risk of opening new store is low indeed.
The risk of opening store can be further reduced by opening counters instead of shops. The reason is counter requires lower CAPEX, and result in higher profit margin and ROI.
To solve the problem of low profit at the initial stage of new store, G2000 is willing to offer incentive program to franchisee. It includes special discount for the first order of the new store, reduce royalty for y years, etc.
G2000 represent a market segment. By growing the G2000 business in Thai, franchisee’s brand portfolio would be more diversity and can build a complete brand.
We offer estimation which show that the growth target is achievable by opening more counters rather than shops, in terms of higher profit margin, lower CAPEX, higher sales per square feet and shorter lead time to setup new store.

3. Foreign and business brands will grow at an even high rate!
Total Thai Apparel Retail Market has grown fast while C Trading growth stalled
Thai Apparel Retail Market is expected to grow at x% p.a. in next 5 years
Foreign and business brands will grow at an even high rate!
Source: Based on Market Research and Thai franchisee internal statistics 3

4. Competitors have grown fast while C Trading growth stalled
Competitors Store Opening Programs have directly lead to substantial increase in sales and profit!
G2000 should compete aggressively by reinitiating Store Opening Program!
Source: Based on Market Research and Thai franchisee internal statistics 4

5. Store Profit Ratio in Past 10 Years
On Average 94% G2000 stores in Thai are with Net Profit
Source: C Trading Financial Data given in Interview. 5

6. New Store Profit Margin is attractive after G2000 incentive program
Royalty is one of the biggest expense.
G2000 is willing to share the risk by reduce the initial investment of a new store.
E.g. Lower royalty,
E.g. Special discount for first order

7. There are few brands which is foreign and business, except G2000.
Develop G2000 brand = C Trading has a diversity and complete brand portfolio
There are few brands which is foreign and business, except G2000.
This fit C Trading strategy: To be the brand conglomerate in Thai.

8. Counter Profit Margin is HIGHER Counter SPF is HIGHER
Counter vs Shop
Counter Profit Margin is HIGHER
Counter SPF is HIGHER
Source: Based on Thai franchisee internal statistics 8

9. Counter Set Up Lead Time is SHORTER Counter Setup CAPEX is LESS
Counter vs Shop
Counter Set Up Lead Time is SHORTER
Counter Setup CAPEX is LESS
Source: Based on Thai franchisee internal statistics 9

10. Appendix 1: Interview Schedule
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)
Interviewer: Jane Lam, Roger
Interviewee: G2000 Franchisee in Thailand - Ms. Alicia (Fashion Buyer).
Interview 3:
Interviewer: Stanley, Jason
Interviewee: Thailand Retail Association - Mr. Kong
Interview 4:
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? 10

11. Appendix 2: Work Plan (1) 11 Issue No. Issue Hypothesis Analysis
Data Sources
Who?
Deadlines
Status?
1.1.1
Can sales be increased by selecting good attitude staff?
Good attitude staff can have better sales peformance
- customer satisfation survey towards staff service
customer satisfation survey
Roy
week 5
Not Started
1.1.2
Can 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
1.1.3
Can 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?
1.2.1
Can 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
Roger
week 4, data gathering; week 5, complete analysis
1.2.2
Can 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
1.2.3
Can sales be increased by opening more store/counter locations?
Sales can be increased on a pro-rata basis with increase in number of shops.
Historical shop / sales data for the past three years; G2000 stocking guidelines Thai economic data
week 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
Jason
Week 4
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
Week 4 obtain all required data. Week 5 complete analysis 11

12. 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 analysis
Historical data for sales promotion. Competitors analysis on sales promotion.
Jason
Week 4 obtain all required data. Week 5 complete analysis
Not Started
2.1.1
Is 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 Interview
Stanley
Wk 3 Market research finished Wk 5 Analysis done
Not Started Not Started
2.1.2
Is 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
Wk 4 Market research finished Wk 5 Analysis done
2.1.3
Is 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
2.1.4
Is 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 12