Proposal to G2000 Apparel Limited

Jane Lam 97194890Jason Chen 08934099Roger Gao 08934166Roy Ng 08934233Stanley Tsui 08936463

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

Total Square Footage

30,000 30,000 30,000

37,800

20,000

25,000

30,000

35,000

40,000

2007Q3 2008Q3 2009Q3 2010Q3

Relation of Shop Space and Sales growth

26%26%

Total Merchandise Purchase

$3,000,000 $3,000,000 $3,000,000

$3,780,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

2007Q3 2008Q3 2009Q3 2010Q3

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

Profit Margin

0%5%

10%15%20%25%

Counters Shops

Comparison of Profit Margin of Shops and Counters

Counters has higher profit margin vs Shop did.

Source: Based on Thai franchisee internal statistics

6

CAPEX Required Per Square Feet

020406080

100120140160180200

Counters Shops

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

Comparison of SPF between G2000 Thai and Thai industry average

G2000 SPF already outperform Industry Average

0100020003000400050006000

2004 2005 2006 2007 2008 2009

Year

Sale

s pe

r sq

fpe

r ye

ar

G2000 I ndust ry Averagae I ndust ry Leader

Source: XX

9

Comparison of SPF between shops and counters

Average Counter SPF is better than average shop SPF

010002000300040005000

2004 2005 2006 2007 2008 2009

Year

Sale

s pe

r sq

fpe

r ye

ar

Average Counters Average Shops

Source: XX

10

Time to Grow Market Share – Competition is still low in Thailand

Grab market share when Thailand penetration is still low (No. ofstores per sq km at Shopping Districts)

100

50

200

300

250

300

600

650

Thai l and (Bankok)

Thai l and (Other ci t i es)

Bei j i ng

Shanghai

Si ngapore

Tai pei

Hong Kong

Tokyo

Source: XX

11

Market Position of G2000 in Thailand

The market is not captured. Captured it ASAP or other competitors will come in.

12

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

13

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

14

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 phoneInterviewer: Jane Lam, StanleyInterviewee: 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 phoneInterviewer: Jane Lam, RogerInterviewee: 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 phoneInterviewer: Stanley, JasonInterviewee: 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 phoneInterviewer: Jason, RoyInterviewee: 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-faceInterviewer: Roy, RogerInterviewee: 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?

15

Appendix 2: Work Plan (1)

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

Roy week 5 Not Started

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?

Client interview Industry research

Roy week 5 Not Started

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

Not Started

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

Roger week 4, data gathering; week 5, complete analysis

Not Started

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.

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

Roger week 3, data gathering; week 5, complete analysis

　

1.3.1.1 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 Not Started

1.3.1.2 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

Jason Week 4 obtain all required data. Week 5 complete analysis

Not Started

16

Appendix 2: Work Plan (2)

1.3.2.1 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. Google2. Thai fashion industry listing3. Client Interview

Stanley Wk 4 Market research finished

Wk 5 Analysis done

Not Started

Not Started

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 InterviewGoogle

Stanley Wk 4 Market research finished

Wk 5 Analysis done

Not Started

Not Started

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 interviewIndustry research

Stanley Wk 4 Market research finished

Wk 5 Analysis done

Not Started

Not Started