Proposal to G2000 Apparel Limited

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

How can Thailand Merchandise Purchase Volume be Increased by 30% in One Year through the Increase in Sales by the Existing Franchisee?

October 2009

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 The purchase volume can target can be met by increasing store space.

Rationale What is the driver to open new stores?1.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.2. Competitors have been opening new stores and have sales growth, but C trading has no growth in number of stores and sales.3.By history record, more than x% of shops can gain profit within 2 years. The risk of opening new store is low indeed.4.The risk of opening store can be further reduced by opening counters instead of shops. The reason is counter requires lower CAPEX, and result higher profit margin and ROI.5.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.6.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.7.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

Total Thai Apparel Retail Market has grown fast while C Trading growth stalled

Source: Based on Market Research and Thai franchisee internal statistics

• 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!

Competitors are increasing sales and market share while C Tradinggrowth has stalled

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Total Thai Apparel Retai l Sal es Total Thai Apparel StoresG2000 Franchi see Sal es G2000 Franchi see Stores

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Competitors have grown fast while C Trading growth stalled

Source: Based on Market Research and Thai franchisee internal statistics

Competitors are increasing sales and market share while C Tradinggrowth has stalled

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Average Compet i tors Sal es G2000 Frachi see Sal esAverage Compet i tors Stores G2000 Franchi see Stores

• Competitors Store Opening Programs have directly lead to substantial increase in sales and profit!

• G2000 should compete aggressively by reinitiating Store Opening Program!

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Store Profit Ratio in Past 10 Years

Source: Based on Thai franchisee internal statistics

On Average 94% stores are with Net Profit

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1015

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3035

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Store w/ Profit Store w/ Loss

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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

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 Tradingstrategy:To be the brand conglomerate in Thai.

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Counter vs Shop

Counter Profit Margin is HIGHER

Source: Based on Thai franchisee internal statistics

Counter SPF is HIGHER

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Counter vs Shop

Counter Set Up Lead Time is SHORTER

Source: Based on Thai franchisee internal statistics

Counter Setup CAPEX is LESS

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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?

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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

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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