XYZ Company Market Opportunities in China Final Report Date Download the full document at: www.gazhoo.com

ABC has estimated that the market will reach US$ 86 million by 2002. To capture the opportunities and create market demand, XYZ should take two strategic steps: new product introduction and customer base expansion. Demand Creation Introduce new products Expand customer base 1998 DI market US$ 18 Mn 2002 DI market US $86 Mn XYZ share XYZ share No strong market pull Simple product portfolio Low DI awareness Limited customer base Technology limitation (e.g. OCR) Weak channel capabilities HURDLES Channel Customer Government Marketing Differentiation Low End Mid Range High End Strategic Thrusts Only with such parallel efforts, can XYZ overcome the DI development hurdles and create a sustainable marketplace for itself. Download the full document at: www.gazhoo.com

No strong market pull

Simple product portfolio

Low DI awareness

Limited customer base

Technology limitation (e.g. OCR)

Weak channel capabilities

Demand creation is strongly driven by value-based segmentation. XYZ should adopt distinctive strategies to position itself appropriately, and emphasize three areas: brand image , quality , and delivery of customer service . Overall strategy Product strategy Marketing strategy Channel strategy Customer service Government strategy World class technology Customized solution Premium products & brand image High quality products Good price/ performance ratio Scalability & reliability Cost effective Easy to operate Retain leadership in high-end products Ride the wave of digital and defend micrographics Introduce mid- to low-end products Digital leads the way; micrographics follows Work with customers to move up Introduce low- to mid-end products Digital takes the priority Enter the market aggressively Work with customers to grow Convey XYZ’s willingness to help customers in a digital transition Aggressively push the idea of “Y2K” XYZ takes the main responsibility Raise DI awareness through market education programs XYZ and channel share marketing responsibilities Emphasize XYZ products’ good performance/price ratio Stress “easy to operate” Channel takes the main responsibility Partnering with channels having industry knowledge and solution capability Training on XYZ’s new products Identify channels with expertise in target industries Increase geographical and industrial coverage of channels Provide marketing support Consistent, responsive customer service Customer training XYZ takes the main responsibility Deliver standard and adequate service XYZ and channel share responsibilities Guarantee cost effective, basic-level of service Channel takes the main responsibility Long-term relationship building Promote the whole concept of DI Indoctrinate DI into the government’s program of digital economy Cultivate specific, project based relationship Offer concrete benefits Partnering with MNCs and domestic system integrators Segmentation Approach Segment A Major banks Segment B Other users w/ financial capability Segment C Other users w/ less financial capability Download the full document at: www.gazhoo.com

World class technology

Customized solution

Premium products & brand image

High quality products

Good price/ performance ratio

Scalability & reliability

Cost effective

Easy to operate

Retain leadership in high-end products

Ride the wave of digital and defend micrographics

Introduce mid- to low-end products

Digital leads the way; micrographics follows

Work with customers to move up

Introduce low- to mid-end products

Digital takes the priority

Enter the market aggressively

Work with customers to grow

Convey XYZ’s willingness to help customers in a digital transition

Aggressively push the idea of “Y2K”

XYZ takes the main responsibility

Raise DI awareness through market education programs

XYZ and channel share marketing responsibilities

Emphasize XYZ products’ good performance/price ratio

Stress “easy to operate”

Channel takes the main responsibility

Partnering with channels having industry knowledge and solution capability

Training on XYZ’s new products

Identify channels with expertise in target industries

Increase geographical and industrial coverage of channels

Provide marketing support

Consistent, responsive customer service

Customer training

XYZ takes the main responsibility

Deliver standard and adequate service

XYZ and channel share responsibilities

Guarantee cost effective, basic-level of service

Channel takes the main responsibility

Long-term relationship building

Promote the whole concept of DI

Indoctrinate DI into the government’s program of digital economy

Cultivate specific, project based relationship

Offer concrete benefits

Partnering with MNCs and domestic system integrators

Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? What Should XYZ Do To Expand Business? Growth Drivers and Market Size Scenarios Regulatory Environment Customer Behaviors Competitive Dynamics Channel Insights Value Proposition Government Strategy Product Strategy Marketing Strategy Channel Strategy Strategic Path/ Implementation Risk Management Download the full document at: www.gazhoo.com

Growth Drivers and Market Size

Scenarios

Regulatory Environment

Customer Behaviors

Competitive Dynamics

Channel Insights

Value Proposition

Government Strategy

Product Strategy

Marketing Strategy

Channel Strategy

Strategic Path/ Implementation

Risk Management

Table of Contents What Is the Potential of China’s DI Market? How Does and Will the DI Market Look? What Should XYZ Do To Expand Business? Growth Drivers and Market Size Scenarios Regulatory Environment Customer Behaviors Competitive Dynamics Channel Insights Value Proposition Government Strategy Product Strategy Marketing Strategy Channel Strategy Strategic Path/ Implementation Risk Management Download the full document at: www.gazhoo.com

Growth Drivers and Market Size

Scenarios

Regulatory Environment

Customer Behaviors

Competitive Dynamics

Channel Insights

Value Proposition

Government Strategy

Product Strategy

Marketing Strategy

Channel Strategy

Strategic Path/ Implementation

Risk Management

The China DI market will experience huge growth over the next 4 years. To estimate the likely market size, we have taken into account multiple market growth drivers and have used a comparative proxy analysis to verify the results. Base Scenario DI Specific Drivers Macro-Factors Setback Scenario Favorable Scenario Market Estimate Approach Normal Conditions (industry drivers & macro-factors) Download the full document at: www.gazhoo.com Natural Growth of Demand Sellers’ Marketing Efforts Technology Maturity & Price Decline Other Natural Growth Drivers Specific to Industries Comparative Study on laser printer and videoconferencing Verification by comparison between China and world DI growth GDP/Macroeconomic Sino-US Relationship WTO Entry China Digital Economy Development Agenda

The base scenario incorporates all major drivers present under normal conditions, including selected industry-specific drivers. The result is an estimate of $86M by the end of 2002, with a CAGR of approximately 48%. Technology maturity and price decline Other natural growth drivers specific to industries Sellers’ marketing efforts Natural growth of demand 2000 1999 1998 2001 2002 Market size ($M) 60 70 80 Base Scenario Model (in US$M) 1998 1999 2000 2001 2002 XYZ estimate (HV only) 7.2 14 22 27 32 Natural growth of demand 18 23 30 43 60 + Impact of sellers’ marketing efforts 26 35 51 71 + Technology maturity & price decline 26 35 53 77 + Other factors* 11 17 26 37 High End (43.0%) Mid Range (21.5%) Low End (35.5%) 8 6 8 13 19 4 9 14 21 31 6 26 39 59 86 18 18 18 Source: XYZ, Essence, AC analysis US$86M Market size by product segment (in US$M) Download the full document at: www.gazhoo.com 37 19 31 0 20 40 60 80 100 1998 1999 2000 2001 2002 High End Mid Range Low End Natural Growth of Demand Without external forces, the DI demand grows by itself as the market emerges Sellers’ Marketing Efforts The collective efforts by the whole DI industry will accelerate the expansion of the DI market in terms of volume and number of penetrated industries Technology Maturity & Price Decline The price will drop gradually with maturity of the DI technology. The decline in price will prompt more purchases and thus increase sales Other Natural Growth Drivers Specific to Industries Specific drivers in the following industries can create significant demand to meet more complicated business needs Banking (credit card & loan growth) Government (tax reform, medical reform, & social security reform) Insurance (growth in policy holders)

Other Natural Growth Drivers Specific to Industries

Specific drivers in the following industries can create significant demand to meet more complicated business needs

Banking (credit card & loan growth)

Government (tax reform, medical reform, & social security reform)

Insurance (growth in policy holders)

The comparative “proxy” study shows that in China, IT products with characteristics similar to those of DI demonstrate a parallel lifecycle, but with an approximate four-year lag. Fragmented Unregulated Channel importance High price Low awareness Competition by sector Institutional Mission critical System compatibility Mature Comparable Product (Laser Printer) Emerging Comparable Product (Videoconferencing) DI, videoconferencing and laser printer are comparable IT products because they share the following characteristics: Assumption Penetration rate of laser printer in China is parallel to that of the world along time line China’s videoconferencing market is parallel to and 4 years behind the world’s. China’s laser printer market is 4 years behind The penetration rate of China’s laser printer will reach the level of the world in 2000 Our Findings For the IT products comparable to DI, once the market forms and enters the post-introductory period, the penetration rate in China will be approximately 4 years behind the world Our Conclusion Source: CCID-MIC, Frost & Sullivan Market Intelligence, International Monetary Fund, China Statistical Yearbook, CBI Research Computer Market & Industry Report for China 1996-1997, AC analysis Comparative Study Download the full document at: www.gazhoo.com 0.000% 0.005% 0.010% 0.015% 0.020% 0.025% 1993 1994 1995 1996 1997 1998 1999 2000 World China Market size/GDP 4 years 0.000% 0.010% 0.020% 0.030% 0.040% 0.050% 1993 1994 1995 1996 1997 1998 1999 World China Market size/GDP 4 years 2000 2001

Fragmented

Unregulated

Channel importance

High price

Low awareness

Competition by sector

Institutional

Mission critical

System compatibility

China’s videoconferencing market is parallel to and 4 years behind the world’s.

China’s laser printer market is 4 years behind

The penetration rate of China’s laser printer will reach the level of the world in 2000