NLGF Business Plan 2016

THE THAI LOGISTICS INDUSTRY

Thailand Operational Risks

Relative to other Southeast Asian countries, Thailand's labour market competitiveness is slipping. Due to a shortage of
technical skills and unskilled labour, combined with rising labour costs, the country is losing appeal as a manufacturing
destination. Meanwhile, weakness in the education sector is preventing the evolution of a knowledge-based economy, and
poor foreign language skills prevent investment in international services. Rising labour costs are the greatest element of labour
market risk in the Thai economy, while a shortage of skills in key areas is another area of concern commonly cited by investors.
This results from misalignment between industry and the education system, although education policy has improved
significantly in the last decade. These elements combine to give Thailand a Labour Market Risk score of 5 7.5 out of 100,
ranking 11th out of 38 Asian countries.

As Thailand looks to make the transition from a middle income to a high income country, skills shortages are proving to be a
major constraint. Investors have reported difficulties recruiting technical skills, IT skills, foreign language skills, as well as soft
skills such as leadership and creativity. The shortage of technical skills is attributed to a misalignment of the education and
industry requirements. This has prompted action from the Ministry of Education, which has successfully improved access to
education at all levels in the last decade. The next challenge is to improve the quality for education to meet the needs of the
labour market. Thailand scores 62.4 out of 100 in the Education Pillar of the BMI Labour Risk Index, ranking 11th out of 38
countries in Asia. Public services in Thailand have improved greatly over the past 20 years, yielding significant gains in health
and education delivery. This has improved overall availability of labour in a country that relies heavily on unskilled and semi-
skilled workers for economic growth.

Thailand scores 50.5 out of 100 for Availability of Labour, placing 15th out of 38 Asian countries in the regional comparison,
below Malaysia, Taiwan and Vietnam. This score is relatively low for an industrialised county, and authorities and investors
have expressed concern about labour shortages and inadequate skills levels. Thailand has relied on low cost labour to drive
economic growth and foreign investment in the country. Over the last two decades, an ample supply of affordable unskilled
and semi-skilled labour has attracted large-scale investment form Japanese manufacturers. However as a middle income
country, labour costs in Thailand are rising and the employers face a higher regulatory burden as worker rights are better
represented. As a result, Thailand scores 59.5 out of 100 in the Labour Costs Pillar of the BMI Labour Market Risk Index, ranking
19th out of 38 countries in Asia behind Cambodia in 18th place, but ahead of Vietnam and Laos in 31st and 30th places
respectively.

Global Shipping Outlook

Fitch Ratings has revised the global shipping sector outlook for 2016 to negative from stable in 2015. We expect muted global
trade growth and the economic slowdown in emerging markets to exacerbate overcapacity, leading to declining and volatile
freight rates. But performance will vary across the segments, with dry-bulk and container shipping under pressure, while
tanker and LNG shipping fare better. China's slower growth and economic transition will pose particularly significant risks for
the shipping sector due to its key role in global trade, accounting for two-thirds of global iron ore imports and 20% of world
coal imports.

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Weaker demand growth will increase overcapacity, the key factor blighting the shipping sector's recovery prospects and
putting pressure on freight rates. We expect container shipping capacity to rise 6% in 2016 on top of a 9% increase in 2015,
easily outpacing demand growth of 2% this year and 3%-4.5% in 2016. Shipping companies will continue to implement
defensive measures including cost-cutting, which will be helped by lower bunker prices, slow steaming, idling and the
cancellation of sailings to achieve profitability. But we believe these measures are insufficient to lead to a protracted recovery
in the sector. Rigorous capacity discipline along with a pick-up in demand would be necessary to reach a sustained equilibrium.

We (Fitch) expect larger container shipping companies that successfully implemented cost-containment measures to remain
profitable in 2016. But the financials of smaller, unrated, especially dry-bulk shippers will remain stretched, which will probably
lead to more bankruptcies. Tanker shipping companies will outperform their peers in other segments due to more moderate
fleet growth and healthy demand resulting from oil stockpiling and high refinery throughput due to low oil prices.

Opportunities in Thailand’s Logistics Market

The country’s emerging role as ASEAN’s logistics hub drives the demand for value-added logistics services.

With its well-developed infrastructure and central location within the Greater Mekong Sub-region (GMS), Thailand is emerging
as a key logistics hub for those multinationals setting up production bases and sales networks in Indochina. In addition, the
formation of the ASEAN Economic Community (AEC) by end-2015 is expected to lead to further trade and service liberalisation.
This will result in more robust intra-regional trade, while boosting demand for more sophisticated and comprehensive logistics
services, especially on the part of those foreign companies with a presence in multiple locations across the region.

Although logistics costs in Thailand have been reducing over the past decade, they are still high (about 15% of GDP compared
with about 8% in the US), with road transport continuing to dominate the logistics sector. As a result, advanced logistics
solutions and supply chain management are in demand among companies looking for greater cost efficiency. In this regard,
Hong Kong logistics companies may find a considerable number of opportunities when it comes to providing integrated
shipping and freight forwarding services for those manufacturers and exporters targeting the ASEAN markets.

A Regional Logistics and Management Hub:

In view of the relatively competitive production costs and fast growing consumer markets in ASEAN, an increasing number of
multinational companies are setting up manufacturing, retail and commercial operations in the region. Between 2010 and
2013, foreign direct investment (FDI) inflow to ASEAN grew by 22%, reaching US$122 billion, with Japan and the EU being the
major FDI sources. In order to achieve better cost savings and enhance risk diversification, many foreign retailers, electronics
and automotive manufacturers prefer to outsource transportation to third-party logistics companies (3PLs).

Thailand has become a popular base for those logistics companies looking to better serve clients with a presence in ASEAN
markets. According to industry sources, Thailand’s logistics industry is dominated by foreign companies, with its major players
- including DHL, DB Schenker, Yusen Logistics and Kerry Logistics - offering a wide range of freight forwarding and supply chain
services. In Thailand, several logistics multinationals are accustomed to subcontracting transportation and logistics activities
to 3PLs, with the outsourced logistics parties or agents handling the various customs and declaration procedures in the
multiple markets within ASEAN.

In addition to further tariff reductions (particularly Cambodia, Laos, Myanmar and Vietnam), the AEC is also expected to
accelerate the harmonisation of the customs systems among ASEAN members. These developments are expected to boost
cross-border trade in light of Thailand’s transportation and business links with its GMS neighbours, something than many
benefit logistics services providers along the relevant supply chains. In view of the growing business potential, many foreign
and local corporations have established logistics operations in countries neighbouring Thailand. In 2013, one Thai
conglomerate, Loxley, through a joint venture with Japan’s NTT Docomo, for example, established Mobile Innovation in
Vietnam as a provider of GPS fleet tracking and management services.

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Improving Business Environment Attracts Foreign Logistics Service Providers:

Thailand has well-developed road and highway networks across the country, while its two largest seaports connect to
international shipping routes. It has six international airports, with Suvarnabhumi Airport, the largest and busiest airport,
being served by more than 100 airlines and freight operators. In addition, more than 10 highways connect Thailand with its
neighbours, while there are major routes linking other GMS countries within the ‘East-West Economic Corridor’, ‘North-South
Economic Corridor’ and ‘Southern Economic Corridor’. (See more details in the article “Thailand: ASEAN’s Key Logistics Hub”.)
Leveraging on its favourable location at the centre of the GMS, Thailand has allocated significant budgetary provision for
transport infrastructure development with the aim of developing into ASEAN’s premier logistics hub. (More details are
provided in the article “Thailand: Infrastructure and Construction Services Opportunities”.)

Over the past decade, the Thai government has devoted considerable effort to alleviate the country’s trade and logistics
inefficiencies. Its initiatives include simplifying customs procedures and introducing the ‘e-Customs’ system. The latter
development provides a paperless and more fully integrated customs environment for traders, customs brokers and shipping
companies. The Thai government also offers various tax and non-tax incentives to foreign companies looking to invest in
logistics activities and facilities, including container yards or inland container depots, sea cargo loading facilities, rail, air and
maritime transportation services, cold storage and international distribution centres.

A member of the World Trade Organization (WTO) since 1995, Thailand has made some progress in liberalising foreign
investors’ access to a number of its service sectors. Restrictions remain on foreign ownership in the logistics and related
services sectors, however. According to Thailand’s WTO services commitments schedule, any foreign investment in freight
forwarding, storage and warehousing services is limited to an equity stake of 49%. Many foreign companies entering the Thai
logistics market have opted to form joint ventures with local partners who have well-established business networks and
market knowledge. Alternatively, a foreign company may choose to set up a representative office in Thailand for marketing
and networking purposes.

Cold-chain Logistics Services in Demand:

As a major exporter of agricultural produce and marine products, Thailand is seeing increasing demand for climate-control
transportation and cold-chain logistics. In recent years, Thailand’s agricultural exports have risen significantly. Thai exports of
fruit, meat and fishery products increased, on average, by more than 10% annually during the period 2009-2014. Meanwhile,
the expansion of the middle-class, the rise in the size of the expatriate community and higher tourism numbers have all
boosted demand for imported food and pharmaceutical products. Thai imports of these items have more than doubled over
the past decade.

The transportation and storage of perishable goods requires proper packaging, temperature control and monitoring in order
to ensure food safety and quality. Only about 30%-40% of fruit and vegetables in Thailand, however, are shipped through cold-
chain logistics, compared to around 80% in developed countries. In this regard, there is considerable development potential
for cold-chain logistics and related facilities, such as temperature-controlled warehouses and distribution centres. Japan’s
Konoike Transport is among the many foreign investors that have established cold storage facilities and temperature
controlled warehouses in Thailand, with the company now operating across a total area of more than 20,000 square metres
in central Thailand. Several logistics multinationals, including DHL and UPS, are also providing temperature-controlled freight
forwarding services.

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In Thailand, there is a limited supply of professional logistics service providers offering integrated one-stop services. The
logistics industry in Thailand is highly fragmented, with many small- and medium-sized companies each handling a part of the
supply chain operation. This fragmentation often results in spoilage or quality deterioration of the goods in transit. Given the
region’s rising demand for fresh produce, amid growing consumer expectations, cold-chain logistics services, climate-control
warehouses, related management techniques and equipment are all increasingly important to the Thai logistics sector. Foreign
logistics companies may find good opportunities when it comes to offering integrated cold-chain logistics services, as well as
supplying refrigerated trucks and related equipment.

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Logistics and Supply-chain Expertise | Meeting the Need:

Thailand is known for its manufacturing prowess, with many multinational companies operating production plants within its
borders. To facilitate Thailand’s continual upgrade of its capacity to manufacture higher value-added goods, more reliable and
efficient transportation is needed. Additionally, in order to develop into a regional logistics hub, Thailand’s logistics sector will
require not only infrastructure and financial capabilities, but also technical and management expertise across a wide variety
of logistics services, including cargo handling, customs clearance, warehousing and supply chain management.

At present, the country only has access to a limited number of logistics professionals with experience in supply chain
management, as well as industry experts capable of adopting advanced logistics technology. As a result, Thailand is extremely
welcoming to those foreign logistics companies that can bring knowledge and expertise in specific supply-chain processes in
partnership with their Thai counterparts. Currently, one-stop logistics solutions are highly sought after by many of the
multinationals operating in Thailand and the rest of the ASEAN region, where rules and regulations are often more complicated
and less transparent than in the more developed countries. Hong Kong logistics companies may find considerable
opportunities to provide value-added services, most notably supply chain management, the introduction of advanced IT
systems and customised logistics solutions.

Thailand | ASEAN’s Key Logistics Hub:

Now emerging as a regional supply chain management hub, overseas companies will find considerable opportunities in
Thailand’s logistics market.

Centrally located in Indochina or Mainland Southeast Asia, Thailand is one of the key ASEAN transport and logistics hubs. More
than 30 Thai provinces share borders with Myanmar, Laos, Cambodia and Malaysia. With production costs surging in China
and some of the more developed ASEAN countries, foreign manufacturers are increasingly looking to set up bases in countries
with lower production costs in the Greater Mekong Sub-region (GMS), particularly in Vietnam and Myanmar. The search for
alternative manufacturing bases in Southeast Asia, however, has not diminished Thailand’s role as a regional manufacturing
powerhouse, while it also fulfils the role of a key logistics hub for Indochina.

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Exports account for more than half of Thailand’s GDP, while the manufacturing sector accounts for more than 80% of the
country’s total exports. Apart from being the largest automotive producer in ASEAN, Thailand is also the trade bloc’s leading
supplier of electronic parts and components destined for further processing in other ASEAN or Asian countries. It is also a
major producer of electrical appliances. In essence, electronics is the largest export category for Thailand, with its output
consisting mainly of computers parts, integrated circuits and parts, and related electrical items.

As the second largest exporter in ASEAN, Thailand plays a key role in the increasingly sophisticated regional supply chain,
especially in terms of meeting the rising demand for cross-border logistics services. These services encompass transporting
machinery and parts and components, as well as managing supply chain functions, from sourcing through to distribution.
Thailand’s exports to other ASEAN countries grew by an annual average of 12% during the period 2009-2014, with a more
rapid growth in exports to neighbouring GMS countries (Myanmar, Cambodia and Laos), which expanded by 20% annually
over the same period.

In view of the emerging opportunities in Thailand’s logistics industry, many foreign logistics companies, such as DHL, UPS and
Hong Kong’s Kerry Logistics, have already made inroads into Thailand. With the country’s political situation continuing to
stabilise in 2015, Thailand’s prospects as a destination for market diversification and expansion have also improved recently.

With continual transport infrastructure development and improving customs efficiency, the cost of logistics in Thailand has
been decreasing over the past decade. Costs went down from about 16%-18% of GDP during the period 2001-2008, to 14%-
15% for the 2009-2012 period. In the 2014 World Bank’s Logistics Performance Index (LPI), Thailand was ranked 35th out of
160 countries and third among the ASEAN countries, outperforming most of its ASEAN peers, particularly neighbouring
Cambodia, Laos and Myanmar. In particular, Thailand showed a significant improvement in the sub-indicator of trade and
transport-related infrastructure over the previous 2012 LPI.

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GMS Economic Corridors:

Thailand’s logistics sector is dominated by road transport, which accounts for about 80% of total freight volume. Road
infrastructure is the most developed mode of transport in Thailand, with about 98% of its highway networks having been
paved. Within the ASEAN highway network, there are 13 highways connecting Thailand with its neighbours, the highest
number among the ASEAN bloc. Currently, the major highways linking Thailand to other GMS countries are routes within the
‘East-West Economic Corridor’, ‘North-South Economic Corridor’ and ‘Southern Economic Corridor’. These corridors form the
backbone of the GMS transportation infrastructure.

Currently the most frequently used route by cross-border logistics companies is the East-West Economic Corridor (EWEC),
which connects Myanmar's Mawlamyine Port in the west, through Central and Northeastern Thailand and Laos, to Vietnam’s
port city of Danang in the east. This route allows faster access to the seaport in Vietnam from Thailand and Laos, hence
reducing transportation costs by allowing land-sea multimodal transport. Currently, more than half of the 800-kilometre
Thailand section of the EWEC is a four-lane highway, which is largely maintained in a good condition.

Opportunities Arising from Further Regional Integration:

Due to its proximity to the emerging manufacturing bases in ASEAN, Thailand is a major sourcing hub of parts and components
for the assembly plants scattered around the region. Thailand is ASEAN’s largest exporter of automotive parts, for instance,
with more than 2,300 automobile parts suppliers in the country. Half of the output of these suppliers is exported to other
production bases in Southeast Asia. While Thailand is the most developed GMS economy, its capital, Bangkok, is also a key
metropolis and commercial centre in Southeast Asia.

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The city is renowned as a major sourcing platform for lifestyle products, having attracted a host of international traders
targeting the regional consumer market. Leading logistics companies interviewed during a recent HKTDC Research trip to
Thailand said that an increasing number of Chinese and ASEAN buyers and exporters – in particular those from Vietnam,
Myanmar and Laos – have a preference for concluding sourcing deals in Bangkok, where logistics companies can be
conveniently appointed to manage product shipments to markets in the region.

Further regional integration by way of the ASEAN Economic Community (AEC) will create fresh business opportunities.
Scheduled to be established by the end of 2015, the AEC aims to create a single market and production base in ASEAN, allowing
for the free flow of goods, services, capital and skilled labour. In particular, there will be further tariff cuts for Cambodia, Laos,
Myanmar and Vietnam (CLMV), where such barriers will be largely removed by end-2015.[1] Along with simpler and more
harmonised customs procedures, the AEC is expected to boost trade between Thailand and the rest of ASEAN. Thanks to the
increasingly complex intra-regional trade patterns and industrial development, there is also growing demand for more
sophisticated and integrated logistics services, especially by MNCs expanding their reach to ASEAN markets. In this regard,
Hong Kong logistics companies may find growing opportunities in providing customised supply chain management services
for foreign manufacturers and exporters targeting the ASEAN markets.

Using Thailand as a Hub for Cross-border Road Transportation

Thailand’s positive prospects as a regional hub for land transport prompted Hong
Kong-based Kerry Logistics to establish a cross-border transportation division – Kerry
Asia Road Transport (KART) – in the country in 2007. With more than 150 container

trucks, KART provides long-haul trucking services from Thailand to Malaysia,
Cambodia, Laos, Myanmar, Vietnam, Singapore and China (Kunming and Shenzhen).
Headquartered in Bangkok, KART leverages on Thailand as a transportation hub to

connect major seaports and airports in the region, helping reduce logistics costs
through more efficient distribution solutions.

Flourishing Trade with Neighbouring Countries:

Mega Home branch in Mae Sot – providing retail and wholesale distribution of construction materials, furniture and electrical
appliances targeted at Thai locals and buyers from Myanmar. The increased level of manufacturing activities and the growing
consumer markets in the GMS are fostering trade between Thailand and its GMS neighbours. Thailand’s border trade with its
four neighbours reached some THB 900 billion (US$ 27.6 billion) in 2014. Malaysia was its largest border-trade partner,
accounting for about half of Thailand’s total border trade, followed by Myanmar (21% share), Laos (15%) and Cambodia (11%).
Cross-border trade by road has also become an important part of Thailand’s logistics industry. Many leading local and foreign
logistics companies provide cross-border logistics services between Thailand and its bordering countries. Well Transportation
Myanmar Ltd, a subsidiary of Sinotrans (HK) Logistics, was founded in 2010 to provide land haulage and trailer services across
the borders of Thailand-Myanmar. Additionally, Sumisho Global Logistics (Thailand), a subsidiary of Japan’s Sumitomo
Corporation, offers land transport services via Thai-Laos-Vietnam and Thai-Cambodia routes. With the continual economic
liberalisation of Myanmar and Laos, Thai border trade with these two countries is expected to flourish. In view of the formation
of the AEC, many retailers and distributors are expanding border trade areas in the north and northeast of Thailand to
capitalise on the opportunities arising from greater economic integration between Myanmar and Laos, a development that
will stimulate demand for cross-border logistics services.

Thailand Economy

Government spending revived economic growth in Thailand in 2015, while private sector activity and exports lagged. Growth
is seen picking up in 2016 and 2017 if planned infrastructure investment proceeds as scheduled. Lower farm incomes from
drought and weak agricultural prices are weighing on private consumption. Consumer prices, having declined in 2015, are
forecast to nudge up. Falling imports are leaving sizable trade and current account surpluses, while exports remain weak.

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Strengths:

 Diversified and efficient agricultural and industrial production
 Regional hub open to its dynamic neighbours
 Strengthened banking system

Weaknesses:

 Recurrent political instability since 2006
 Thai external trade dependent on the Chinese economy
 Business climate marked by persistent links between the private sector and political circles
 High household debt

After rebounding in 2015, growth is expected to stabilise in 2016. The economy will continue to benefit from the stimulus
package rolled out by the authorities in 2015. This involves an infrastructure investment programme spread over 8 years and
representing 15% of GDP, aimed at modernising the country's land transport and logistics systems. However, despite a more
stable political situation, the steps taken by the government to restore investor confidence are likely to remain modest.
Moreover, the Chinese economic slowdown, the poor health of the Japanese economy and low commodity prices will continue
to put pressure on the country's exports. Household consumption is expected to rebound slightly. Farmers will benefit from
subsidies, the government has introduced incentives for house purchases and inflation is likely to remain modest. However,
household debt will continue to put pressure on retail sales.

Moreover, despite the bombing in August 2015, political stabilisation and the end to the coronavirus epidemic should enable
the tourism sector, which represents 10% of GDP, to rebound. After the drought of 2015, agricultural harvests are expected
to recover. Nevertheless, Thailand is set continue to be penalised by structural constraints and substantial overcapacity, as
the country suffers from a lack of skilled labour and investments in R&D. In addition, the recurrent political instability has
worsened the business climate.

Despite the government's introduction of budget stimulus policies, the deficit will remain stable and the public debt
sustainable in 2016. The public debt, over 95% of which is held by residents, will remain below the 60% cap fixed under the
Constitution. Externally, the current account balance is expected to worsen slightly in 2016 but will remain in surplus. Lower
oil prices will help keep the country's energy bill under control. However, exports of goods will be hit by the Chinese economic
downturn. Despite the recurrent political crises, Thailand will continue to be a preferred manufacturing base for the
automotive and electronic industries. The precariousness of the political stability and the decline in available liquidity, due to
the tightening of US monetary policy, makes the country vulnerable to a crisis of investor confidence. Nevertheless, the level
of foreign exchange reserves is comfortable (7 months of imports), providing the country with a satisfactory ability to resist
sudden capital flight.

Elections postponed until 2017 due to delays in drafting the Constitution. Following the removal of Yingluck Shinawatra on 7
May 2014, the army declared martial law on 20 May 2014 citing the risk of civil war. On 22 May, the head of the army, General
Prayuth, announced a Coup d'état, a curfew, the suspension of the Constitution and the creation of the National Council for
Peace and the Maintenance of Order. On 21 August, he was appointed as Prime Minister by the Parliament and he then
formed a government, one third of which is composed of military officers. He has also indicated that no elections can take
place until the necessary reforms have been implemented. Initially scheduled for the end of 2015, the elections have been
postponed on several occasions.

The National Reform Council rejected another draft Constitution in September 2015, so the parliamentary elections cannot
take place before mid-2017. The government wants to hold a referendum on the future Constitution before fixing a date for
parliamentary elections, the results of which remain uncertain. Indeed the pro-Thaksin candidates have won all the polls since
2001 due to their popularity in rural areas. However, the policy conducted by the military government is likely to gain the
support of the rural population and the provisions of the new Constitution could limit the role of the elections to determine
the parliament and the government. New bouts of political instability can be expected, as Thai society is deeply divided and
the succession of the King, a symbol of continuity and political stability, remains uncertain.

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THE GLOBAL ECONOMY

Major Disruptive Global Trends (That Will Impact All Industries)

In the Industrial Revolution of the late 18th and early 19th centuries, one new force changed everything. Today our world is
undergoing an even more dramatic transition due to the confluence of four (4) fundamental disruptive forces – any of which
would rank among the greatest changes the global economy has ever seen. Compared with the Industrial Revolution, we
estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact. Although
we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second- and
third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and
influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends
are producing monumental change.

Beyond Shanghai | The Age of Urbanisation:

The first trend is the shifting of the locus of economic activity and dynamism to emerging markets like China and to cities
within those markets. These emerging markets are going through simultaneous industrial and urban revolutions, shifting the
center of the world economy east and south at a speed never before witnessed. As recently as 2000, 95 percent of the Fortune
Global 500 – the world’s largest international companies including Airbus, IBM, Nestlé, Shell, and The Coca-Cola Company, to
name a few – were headquartered in developed economies.

By 2025, when China will be home to more large companies than either the United States or Europe, we expect nearly half of
the world’s large companies – defined as those with revenue of $1 billion or more – to be headquartered in emerging markets.
“Over the years, people in our headquarters, in Frankfurt, started complaining to me, ‘We don’t see you much around here
anymore,’” said Josef Ackermann, the former chief executive officer of Deutsche Bank. “Well, there was a reason why: growth
has moved elsewhere – to Asia, Latin America, and the Middle East.”

Perhaps equally important, the locus of economic activity is shifting within these markets. The global urban population has
been rising by an average of 65 million people annually during the past three decades, the equivalent of adding seven Chicago’s
a year, every year. Nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets –
95 percent of them small- and medium-size cities that many Western executives may not even have heard of and couldn’t
point to on a map. Yes, Mumbai, Dubai, and Shanghai are familiar. In 2010, we estimated that the GDP of Tianjin was around
$130 billion, making it around the same size as Stockholm, the capital of Sweden. By 2025, we estimate that the GDP of Tianjin
will be around $625 billion – approximately that of all of Sweden.

The Tip of the Iceberg | Accelerating Technological Change:

The second disruptive force is the acceleration in the scope, scale, and economic impact of technology. Technology – from the
printing press to the steam engine and the Internet – has always been a great force in overturning the status quo. The
difference today is the sheer ubiquity of technology in our lives and the speed of change. It took more than 50 years after the
telephone was invented until half of American homes had one. It took radio 38 years to attract 50 million listeners. But
Facebook attracted 6 million users in its first year and that number multiplied 100 times over the next five years. China’s
mobile text- and voice-messaging service WeChat has 300 million users, more than the entire adult population of the United
States. Accelerated adoption invites accelerated innovation. In 2009, two years after the iPhone’s launch, developers had
created around 150,000 applications. By 2014, that number had hit 1.2 million, and users had downloaded more than 75
billion total apps, more than ten for every person on the planet. As fast as innovation has multiplied and spread in recent
years, it is poised to change and grow at an exponential speed beyond the power of human intuition to anticipate.

Processing power and connectivity are only part of the story. Their impact is multiplied by the concomitant data revolution,
which places unprecedented amounts of information in the hands of consumers and businesses alike, and the proliferation of
technology-enabled business models, from online retail platforms like Alibaba to car-hailing apps like Uber. Thanks to these
mutually amplifying forces, more and more people will enjoy a golden age of gadgetry, of instant communication, and of
apparently boundless information.

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Technology offers the promise of economic progress for billions in emerging economies at a speed that would have been
unimaginable without the mobile Internet. Twenty years ago, less than 3 percent of the world’s population had a mobile
phone; now two-thirds of the world’s population has one, and one-third of all humans are able to communicate on the
Internet. Technology allows businesses such as WhatsApp to start and gain scale with stunning speed while using little capital.
Entrepreneurs and start-ups now frequently enjoy advantages over large, established businesses. The furious pace of
technological adoption and innovation is shortening the life cycle of companies and forcing executives to make decisions and
commit resources much more quickly.

Getting Old isn’t what it Used to Be | Responding to the Challenges of an Aging World:

The human population is getting older. Fertility is falling, and the world’s population is graying dramatically. While aging has
been evident in developed economies for some time – Japan and Russia have seen their populations decline over the past few
years – the demographic deficit is now spreading to China and soon will reach Latin America. For the first time in human
history, aging could mean that the planet’s population will plateau in most of the world. Thirty years ago, only a small share
of the global population lived in the few countries with fertility rates substantially below those needed to replace each
generation – 2.1 children per woman. But by 2013, about 60 percent of the world’s population lived in countries with fertility
rates below the replacement rate. This is a sea change. The European Commission expects that by 2060, Germany’s population
will shrink by one-fifth, and the number of people of working age will fall from 54 million in 2010 to 36 million in 2060, a level
that is forecast to be less than France’s. China’s labor force peaked in 2012, due to income-driven demographic trends. In
Thailand, the fertility rate has fallen from 5 in the 1970s to 1.4 today. A smaller workforce will place a greater onus on
productivity for driving growth and may cause us to rethink the economy’s potential. Caring for large numbers of elderly
people will put severe pressure on government finances.

Trade, People, Finance, and Data | Greater Global Connections:

The final disruptive force is the degree to which the world is much more connected through trade and through movements in
capital, people, and information (data and communication) – what we call “flows”. Trade and finance have long been part of
the globalization story but, in recent decades, there’s been a significant shift. Instead of a series of lines connecting major
trading hubs in Europe and North America, the global trading system has expanded into a complex, intricate, sprawling web.
Asia is becoming the world’s largest trading region. “South-south” flows between emerging markets have doubled their share
of global trade over the past decade.

The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012. Global capital flows
expanded 25 times between 1980 and 2007. More than one billion people crossed borders in 2009, over five times the number
in 1980. These three types of connections all paused during the global recession of 2008 and have recovered only slowly since.
But the links forged by technology have marched on uninterrupted and with increasing speed, ushering in a dynamic new
phase of globalization, creating unmatched opportunities, and fomenting unexpected volatility.

These four disruptions gathered pace, grew in scale, and started collectively to have a material impact on the world economy
around the turn of the 21st century. Today, they are disrupting long-established patterns in virtually every market and every
sector of the world economy – indeed, in every aspect of our lives. Everywhere we look, they are causing trends to break
down, to break up, or simply to break. The fact that all four are happening at the same time means that our world is changing
radically from the one in which many of us grew up, prospered, and formed the intuitions that are so vital to our decision
making. This can play havoc with forecasts and pro forma plans that were made simply by extrapolating recent experience
into the near and distant future.

Many of the assumptions, tendencies, and habits that had long proved so reliable have suddenly lost much of their resonance.
We’ve never had more data and advice at our fingertips – literally. The iPhone or the Samsung Galaxy contains far more
information and processing power than the original supercomputer. Yet we work in a world in which even, perhaps especially,
professional forecasters are routinely caught unawares. That’s partly because intuition still underpins much of our decision
making.

Our intuition has been formed by a set of experiences and ideas about how things worked during a time when changes were
incremental and somewhat predictable. Globalization benefited the well-established and well connected, opening up new
markets with relative ease. Labor markets functioned quite reliably. Resource prices fell. But that’s not how things are working
now – and it’s not how they are likely to work in the future.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 61

If we look at the world through a rearview mirror and make decisions on the basis of the intuition built on our experience, we
could well be wrong. In the new world, executives, policy makers, and individuals all need to scrutinize their intuitions from
first principles and boldly reset them if necessary. This is especially true for organisations that have enjoyed great success.

While it is full of opportunities, this era is deeply unsettling. And there is a great deal of work to be done. We need to realize
that much of what we think we know about how the world works is wrong; to get a handle on the disruptive forces
transforming the global economy; to identify the long-standing trends that are breaking; to develop the courage and foresight
to clear the intellectual decks and prepare to respond. These lessons apply as much to policy makers as to business executives
and the process of resetting your internal navigation system can’t begin soon enough.

There is an urgent imperative to adjust to these new realities. Yet, for all the ingenuity, inventiveness, and imagination of the
human race, we tend to be slow to adapt to change. There is a powerful human tendency to want the future to look much like
the recent past. On these shoals, huge corporate vessels have repeatedly foundered. Revisiting our assumptions about the
world we live in – and doing nothing – will leave many of us highly vulnerable. Gaining a clear-eyed perspective on how to
negotiate the changing landscape will help us prepare to succeed.

TRENDS AND BEST PRACTICES IN MARKETING

Global Trends in Internet Advertising

Global Internet Access Trends:

 Internet access will generate more consumer spend than any other media product or service in the next five years. Total
Internet access revenue will grow at an impressive 9% CAGR from US$413.8 billion in 2013 to US$635.5 billion in 2018.
Growth will be driven by both developed and developing markets, with only Japan seeing a decline in consumer spend.

 More than 300 billion app downloads will be made in 2018. The number of downloads globally every year will increase at
a CAGR of 29.8%, from 82 billion in 2013 to 303 billion in 2018, with the increasing availability of affordable smartphones
and tablets driving adoption in both emerging and mature markets.

 Mobile will generate six out of every ten dollars spent on Internet access in 2018. Mobile Internet access revenue will
soar at a CAGR of 13.0% from US$208 billion in 2013 to US$384 billion in 2018, as the number of subscribers passes
two billion in 2014. Fixed broadband revenue will rise at a CAGR of 4.1% from US$205 billion to US$252 billion.

 3G will drive global mobile Internet growth, despite 4G grabbing the headlines. The availability of 4G mobile Internet will
boost ARPU in developed markets, but 3G services will drive the majority of growth as operators in emerging markets
move subscribers from 2G services.

 China and India will account for nearly half of new mobile Internet users in the next five years. These two countries alone
will account for 47% of net new mobile Internet access subscribers between 2013 and 2018, but will come with significant
cultural, commercial and political challenges.

Global Internet Advertising Trends:

 Internet advertising is closing in on TV advertising to become the largest Entertainment and Media advertising segment.
In 2013, total Internet advertising revenue was US$117.2 billion. The figure will increase to US$194.5 billion in 2018, a
10.7% CAGR meaning that it is closing in on TV advertising revenue as the largest advertising segment. This is a significant
advance from 2009, when total TV advertising revenue was US$132.0 billion and total Internet advertising revenue just
US$58.7 billion.

 Mobile advertising will overtake classifieds in 2014. Global mobile Internet advertising revenue is forecast to leapfrog
classified advertising to become the third largest Internet Advertising channel. But after Four particularly strong years
between 2010 and 2013, driven by the launch of the iPad, annual mobile revenue growth is falling back to the levels seen
before the iPad’s introduction and advertisers must do more than simply migrating large-screen banners to handhelds.

 Search will retain its dominant position. Global paid search Internet advertising has the largest share of total Internet
advertising revenue, at US$48.4 billion in 2013. While its overall share of the market will diminish as video and mobile
advertising become increasingly important, continued growth will see search pull further ahead of the other categories
of Internet advertising in terms of revenue generated, hitting US$73.8 billion in 2018.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 62

 Within Internet advertising, video will see the sharpest growth. Global video Internet advertising revenue will increase at
a 23.8% CAGR to 2018, ahead of mobile’s 21.5% CAGR. The largest video service, YouTube, spent years perfecting its pre-
roll ad format. Now TrueView ads are deployed widely and new consumer devices are multiplying distribution.

 Advertisers are looking to programmatic and native advertising to improve display ad performance. While search offers
spend and targeting efficiencies, advertisers have grown frustrated with the worsening performance of online display
ads. In response, many are moving toward programmatic ad-trading platforms that offer greater planning control, while
others are adopting native advertising formats, so named because they match the form and function of the user
experience.

 Tracking users in a multi-device world presents new challenges. Targeting users of the first generation of Internet devices
was relatively straightforward, thanks to Web cookies. But many new mobile devices do not feature cookie tracking, while
the use of multiple devices by individual consumers further complicates targeting. In a more splintered world, efforts are
under way to help advertisers improve their targeting of consumers.

Word-of-Mouth Marketing

Research Source8

While there is no generally accepted recipe for achieving positive word-of-mouth campaigns, valuable insights are available
from experts in the field. Emotional attachment lies at the heart of vibrant word-of-mouth activity. Loyal customers talk, and
research has found the affective (emotional) component of customer satisfaction to be a better predictor of customer loyalty
than the cognitive component. The term share of heart is often used in the field of word-of-mouth marketing to express the
degree of emotional attachment and passion that satisfied consumers experience in relation to a particular brand. Word-of-
mouth marketers strive to get consumers to love their brands and to develop emotional bonds with the products.

Word of mouth will only grow in importance as the postmodern consumer becomes sceptical of misleading advertising
messages. Advice from friends and information available via online social networks and blogging sites are trusted more as
unbiased sources of product information. Past studies emphasise that word of mouth can be planned. It is not only a
spontaneous consumer response. There are ways to ignite the consumer into further stages of spontaneous action. This study
has developed a few pointers to guide such a process, as explained below.

1. Have the Right Product: Only special products will inspire consumers to talk about them. People who stand out from the
crowd always seem to have some kind of charisma; likewise, it has been shown that one of the more successful ways to
build a strong brand strategy and win share of heart is to create a charismatic personality for the brand. Products that
are innovative and exciting are more easily sensed as charismatic and attractive for word of mouth – the more exciting,
the better. The product should also be contagious, a term used for a product that is likely to be widely used and much
talked about. Ultimate share of heart is reached when a product name becomes distinctive and memorable in the minds
of consumers. It is as if the consumer takes ownership of the brand. Google is a good modern-day example.

8 Brand-Building: A Telling Story. By Marthinus van Loggerenberg and Frikkie Herbst, University of Stellenbosch Leaders’ Lab Journal, Volume 4
Number 2, 2010. The University of Stellenbosch Business School (USB) is a leading provider of internationally accredited postgraduate management
degrees and executive education in South Africa. If you want to prepare yourself for a rewarding journey through your career, this is the place to be.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 63

2. Choose the Right People: The next step in building a successful word-of-mouth campaign is to find people who can bond
with the product and spread the message. First one has to keep in mind the market segment at which the product is
aimed. Different audiences have different propensities for talking naturally about products. Some of these differences
may be cultural; some may be based on age. Younger people, for example, socialise more and are more likely to be
influenced by peers, whereas older people tend to rely less on advice from others. In order to launch word of mouth as a
company strategy, influencers are needed. They are people with a strong standing in their social networks who can be
exposed to new products with the intention that they recommend these in their spheres of influence. Another term, one
defined by the UCT Unilever Institute, is igniters. The word is used to denote positive-minded, ambitious individuals with
influence over large personal networks of friends. Marketers should get out of their offices and into the field where the
company’s product is consumed family and business contacts.

The chances of sparking active word of mouth among consumers are much greater when igniters are identified and
targeted in a marketing strategy. Finding influencers can be tricky and tedious. Companies can, for example, start with
the existing customer base as long-term relationships with the product on the part of some customers may already exist.
Good prospects may also be people who are regular trade magazine readers, or who are active as chat hosts on a topic
related to the product in the online world. The company could approach them via these media. However, it is not only
about finding the influencers, but also about understanding their context. Marketers should get out of their offices and
into the field where the company’s product is consumed. Time should be spent in these customers’ environments. By
understanding their cultures, the marketer could align the campaign better with the context of people’s lives, needs and
desires.

3. Develop the Right Message: Another important factor is having a powerful message, which is carefully developed and
blended into the broader marketing campaign. The key word here is buzz. To get strong word of mouth going, provocative
ads are needed to create buzz. The ad or message must be simple and concise; if customers cannot articulate the main
message, they will not be able to pass it on. News that is crisp, and also interesting and exciting, travels much more
quickly.

4. Activate and Maintain the Campaign: Lastly, it is time to start the word-of-mouth campaign. Influencers need to be
introduced to the product, properly informed about it, and motivated to spread the word. Some companies allow
consumers to be co-creators in the development stages. This involves letting them in on in-house information, not only
about product development matters, but also about the marketing process; involving them to contribute and feel part of
the process. Such an individual must be persistent and brave enough to be innovative and ignore conventional channels,
and must work hard at creating sales blitzes to get the product and message moving. Ongoing communication should be
encouraged. People have a natural longing to be liked and to receive attention. Research shows that many companies
lose customers because they feel neglected. Brand managers should therefore nourish ongoing relationships. Companies
should develop tools that allow the customer to give feedback and to make it easier to tell a friend, for example, creating
forums and engaging with social networks. It has been shown that the higher the degree of connectivity among the
company’s customers, the more likely it is that word of mouth will accelerate. Companies may find it fruitful to investigate
how they can support issues and causes close to people’s hearts, as this could help to spread word-of-mouth messages.
Such support should, however, be genuine and devoid of deceptive tactics.

Global Trends in Marketing

It’s been said that there are three kinds of marketers and how they deal with trends, i.e. those who let it happen, those who
make it happen, and those who wonder what happened. Paying attention to what looms ahead is the wisest move one can
make. 2016, and the future it will bring, will soon be upon us. Brand Keys – who reviewed more than 150,000 predictive loyalty
and engagement assessments – identified future trends in the marketing sphere. These are:

1. Everyone of a Kind: Consumers will crave more and expect more customised and personalised products, services and
experiences. This will be fueled by ‘Magnified Human Technology’ (Digital and mobile in all forms will fuel the sense of
empowerment and possibility for consumers).

2. Non-Fiction Storytelling: Storytelling is fine, but the stories brands tell must reflect real brand values and category
realities that differentiate and meet consumers’ believability criteria, otherwise marketers will end up entertaining rather
than engaging.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 64

3. Real Brand Engagement: With awareness a given, marketers will link “engagement” to how well the brand is perceived
versus their category’s ideal, rather than just counting “likes” or leveraging imagery.

4. The ‘Everything’ Expectation: The ability for brands to measure real, unarticulated, and constantly expanding emotional
consumer expectations will provide advantages to engage, delight, and profit.

5. Real-Time Becomes Real Important: Increased real-time brand expectations will spread to product availability, delivery,
and customer service. Increased consumer expectations will increase perceptions of products/services as commodities.
Brands will need to differentiate and stand for something meaningful, emotional, and important to consumers.

6. High-End Shoppers Expect High-Tech Shopping Experiences: Retail will include a seamless transition from human-only
service to digital assistants and virtual valets. Watch for more RFID, beacons, and touchscreens to supercharge the retail-
shopping experience.

7. Much More Multiculturalism: As ethnic groups grow, brands and retailers will integrate a sense of culture and culture-
specific brand experience with all forms of outreach.

8. Brands Will Get Emotional: Successful brands will need to identify emotional values in their categories and use them as
a foundation for meaningful positioning, differentiation, and authentic storytelling.

9. The Closing of the Showroom: The consumer will use 5+ online sources to facilitate actual purchase decisions, reducing
reliance on traditional brick-and-mortars retail.

10. Online Authenticity: As ‘The Internet of All Things’ matures, consumers will expect greater security as regards personal
purchase data, which will act as a confidence builder for online sources and the brands using them.

11. Category is King: To engage those smarter, high-expectation consumers, brand will need to be smarter about category-
specific emotional values that they can leverage and believably own.

12. Dead-On Digital: Brands will shift their digital platform question from “should I be here?” to “what should I do now that
I am here?” with success linked not to just outreach alone, but contextual relevance.

13. Going Native: Content marketing will continue to become a specialty unto itself. Tools like Digital Platform GPS can
optimise placement and resolve issues related to native advertising and shorter consumer attention spans. Metrics will
move away from counting the number of views, sharing, and likes, toward real engagement.

Key Marketing and Brand Development Programs

1. Build a ‘Loyalty Ladder’ and Creating ‘Raving’ Fans: Loyal customers are ideal customers. They bring you repeat business
and once they’re at the point of being ‘raving fans’, they can’t stop talking about your business, so they end up sending
you referral business too. Building a loyalty ladder means coming up with some sort of formal loyalty programme,
whether that’s offering a loyalty card or VIP membership, and then incentivizing your preferred customers in some extra
way to make them feel special. You then move people along this loyalty chain by ensuring each interaction with you is
superb and exceed their expectations, and rewarding them for repeat business so that they begin to be cheerleaders for
your business.

2. Identify a Target Market for a Clever Direct Mail Campaign: People don’t often get ‘snail’ mail anymore, so if you can
make your mail interesting (i.e. it shouldn’t look like a spam advert or a bill), direct mail can be very effective. Direct mail
campaigns work best for reaching a specific consumer demographic, rather than a ‘spray and pray’ approach where you
send out thousands of mails to anyone or everyone, and hope for a response. Unlike broad methods of advertising that
hit everyone within a given geographic area, direct mail works best when it arrives at the doorstep of those consumers
who are already known to be great candidates for your product or service. For example, if you run a management
consulting company, you probably need to be targeting people who would benefit from your services, which means the
decision-makers in a business, rather than entry-level employees.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 65

Direct mail should be short, to the point and include a call to action, whether it’s ‘bring this voucher into the store for a
15% discount on your next purchase’ or ‘take advantage of this special offer available until XX date’. It’s also important
to only send out as many mails as you can follow up on, and then to do follow ups.

3. Create a Formal Referral Programme: Design a referral programme that rewards customers for bringing others into the
customer base. For example, if your business is a restaurant, you could offer your client R100 off their next meal if they
bring in a friend with them (the friend pays the normal rate). Referral rewards can be in the form of discounts, gifts,
invitations to special events, or ‘closed door’ sales events where only certain customers are invited to participate and
take advantage of savings, exclusive products, or other preferred customer perks.

4. Get rid of your Worst Clients and Cate for Top Clients: Many business owners hesitate at the thought of letting go of any
customers. Yet most could benefit from weeding out their worst clients (the ones who are difficult, don’t pay on time,
always complain and give you 80% of your headaches, but only 20% of your income) and focusing on doing more business
with their top clients. Rank your clients from A to D (with A being the best and D the worst), get rid of the Ds and you’ll
have more room for A clients. Start by identifying who the best customers are by applying the ‘80-20’ rule (Pareto
Principle), which states that 80% of a company’s business comes from 20% of its customers. Treat those customers
particularly well and invest extra energy in satisfying their needs while extending service above and beyond the call of
duty. Figure out ways to move your C and B clients towards becoming A clients and ditch the Ds (either by suggesting that
if they are unhappy they consider doing business with a competitor, or by sitting down and discussing the fact that the
business relationship is not working and seeing whether the issues can be resolved or deciding it’s better to part ways).

5. Create Strategic Business Alliances: Many business owners say they do this, but don’t actually formalise the alliances. By
partnering with other businesses with which there is a common customer demographic but no direct competition, a
company can expand its customer base quickly and easily. Those customers who trust other businesses and have proven
their loyalty to them will be inclined to follow their recommendations or perceived endorsements of an alliance partner.
As an example, a stock broker and a luxury car dealer may share a similar target market, and can send each other referral
business. The stock broker might be able to send his top clients an invitation to the exclusive launch of a new vehicle,
while the car dealer could offer his top clients a free first consultation with the stock broker. Both are offering value to
their clients and sending the partner potential business leads.

6. Train and Support your Employees to improve their Skills: Business owners say they spend time training and up-skilling
employees, but many don’t do as much as they could without much extra effort. It can be as simple as changing the words
your sales people speak when customers arrive in your shop. Instead of opening with, ‘Can I help you?’ (To which the
response is often, ‘No I’m just looking’) you might get them to ask, ‘Have you been in the shop before?’ The answer then
guides the sales person in the direction the conversation can take. If it’s ‘yes’, the response might be, ‘Thanks very much
for coming back to visit us again. Is there anything particular you’re looking for?’ A ‘no’, on the other hand, leaves room
for something along the lines of, ‘Welcome then! It’s lovely to have a new visitor. Let me quickly point out where all the
different sections are.’ Of course, it might require more time, money and effort to get your employees more effective in
growing your business. They might profit from attending sales or marketing workshops, for instance. Wine reps for major
wineries often travel to Cape Town to learn more about wines at the company’s expense.

7. Improve the Conversion Rate for Leads and Contacts: The best way to grow your business is to quickly convert new leads
into customers. To do this, you need to measure your current conversion rate by looking at the number of leads you have
over a set period (say, a week or a month), and then how many of those are generating actual business sales. Let’s say
you sell tyres. Every time someone calls or walks in, make a note of what they wanted and whether they ended up buying
tyres or not. You may be dismayed to learn that your conversion rate is lower than you think – perhaps one in five. Once
you know this rate, work on improving it – it takes less work to convert a lead (someone who is already interested) into
a customer than it does to find new leads. If the current conversion rate is 20% for every 100 contacts or leads, that
translates into 20 new customers a month. Boost conversions to 30% and that represents a 50% increase without doing
any extra marketing or advertising.

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 66

8. Make use of Digital Marketing: Create a website and focus on using your digital presence to drive people to your physical
location (if you don’t offer the option of online purchases). Your website acts as a shop window that never sleeps and a
business presence that extends around the entire world almost overhead-free. Give site visitors something valuable in
exchange for more information about themselves. They sign up on the site or visit the store, for example, and are
rewarded with a discount, contest entry, or a free consultation or service upgrade. Make incentives irresistible and
continue to emphasize a call to action, otherwise Internet surfers will never convert into useful leads and real customers.

9. Increase your Visibility: Brand recognition is powerful. That means you need to ensure your brand is consistently
portrayed on every platform and that it’s recognizable and professional. Maybe you had limited budget for corporate
identity when you started out and did it on the cheap. Now may be the time to invest in a quality logo and brand design,
and then use it at every opportunity. Don’t use generic shopping bags when it is possible to put a business logo and tagline
on them. If you’re planning on gifting your clients, make sure the gift is branded. Have your staff wear uniforms with logos
on them and brand your delivery vehicles.

Customer Loyalty Strategy

Although we now have at our fingertips a whole range of electronic gadgets to capture and keep customers – from online
services (Internet and e-mail) to smartphones, iPods, iPads, tablets, etc. – growing and ensuring sustainable customer loyalty
remains a challenge. Regardless, each stage of the customer lifecycle (i.e. suspect, prospect, first time customer, repeat
customer, client, and advocate) presents unique possibilities to increase the customer loyalty base. The following are a
synopsis of the best practices for each of the six (6) stages of customer loyalty:

1. Attract the Best Suspects (Potential Clients): Research shows that with the growth in social media, a customer relies
heavily on information from peers, rather than traditional media sources or from the brand or seller, itself. This means
that in order to attract quality suspects, you, as the business owner, must find ways to spread positive word-of-mouth
through existing customers and supporters and turn them into advocates or evangelists of your products/services. Three
key elements drive this process: simple ideas, word-of-mouth friendliness, and tools that facilitate online customer
conversations such as social media networks.

2. Convert Prospects: A key challenge facing any business owner is how to find high-value prospects and nurture them into
customers. Lowering sales costs and increasing closing rates are paramount to winning the loyalty game. However, to
weed out high-potential prospects from so-so suspects, it is critical that a company’s online search campaign be as spot-
on as possible in addressing three areas: who to target, how to position products and services, and how to effectively
qualify prospects.

3. Perform Well for First-Time Customers: Loyalty research has consistently confirmed the importance of a seller’s accuracy,
reliability and responsiveness in transacting with first time customers. This is important because first time customers are
“trying” out a new product and their perception of the value they receive from their first purchase will drive their repeat
purchase decisions. And with the popularity of social media, customer feedback (be it positive and/or negative) is a sure
way to get the message out there instantly.

4. Anchor Repeat Customers: Repeat customers expect to be known and their preferences remembered. Truly empowering
the front line with this capability is an often arduous, on-going challenge in many businesses. So digital social loyalty
could serve as a very helpful and advantageous tool to create a “wow” customer experience and make repeat customers
happy and loyal.

5. Maximize Existing Clients: Clients are buyers who feel a real commitment to buy from you and prove it by buying every
product or service of yours they can reasonably use. If a customer is buying something from a competitor that they could
be buying from you, consider that buyer a repeat customer rather than a client.

6. Make Good Use of Advocates/Evangelists: There’s an important difference between a client and an advocate. In simple
terms, advocates do more than simply buy from you. Advocates are engaged customers who demonstrate their vendor
loyalty through such activities as spreading positive word-of-mouth, recruiting new potential customers and helping
their vendors improve.

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STATEMENT OF CONFIDENTIALITY

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FINANCIAL STATEMENTS
Sales Projections | Monthly | Year 1-2

2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($)
Month 300 600 1,500 1,050 2,400 3,000 5,400 7,500 12,000 16,500 12,000 11,100
Airfreight Exports 1,000 2,000 5,000 3,500 8,000 10,000 18,000 25,000 40,000 55,000 40,000 37,000
Yield per Kilogram 1,500 1,050 2,400 12,000 16,500 12,000 11,100
Units 300 600 3,000 5,400 7,500
Net sales 1,500 1,050 2,400 12,000 16,500 12,000 11,100
Cost of goods 300 600 3,000 5,400 7,500
Gross profit 1,600 1,200 2,800 14,000 12,000 9,000 10,000
Airfreight Imports 1,000 1,400 8 6 14 5,000 9,000 12,000 70 60 45 50
Yield per Shipment 5 7 25 45 60
Units 1,600 1,200 2,800 14,000 12,000 9,000 10,000
Net sales 1,000 1,400 5,000 9,000 12,000
Cost of goods 1,600 1,200 2,800 14,000 12,000 9,000 10,000
Gross profit 1,000 1,400 5,000 9,000 12,000
Seafreight Exports 6,000 4,200 5,400 10,500 12,000 15,600 15,000
Yield per TEU 600 3,000 100 70 90 6,000 6,600 8,400 175 200 260 250
Units 10 50 100 110 140
Net sales 6,000 4,200 5,400 10,500 12,000 15,600 15,000
Cost of goods 600 3,000 6,000 6,600 8,400
Gross profit 6,000 4,200 5,400 10,500 12,000 15,600 15,000
Seafreight Imports 600 3,000 6,000 6,600 8,400
Yield per Shipment 1,500 1,200 2,250 7,200 6,300 6,000 5,250
Units 750 1,200 10 8 15 3,900 5,250 6,000 48 42 40 35
Net sales 5 8 26 35 40
Cost of goods 1,500 1,200 2,250 7,200 6,300 6,000 5,250
750 1,200 3,900 5,250 6,000
Gross profit 1,500 1,200 2,250 7,200 6,300 6,000 5,250
750 1,200 3,900 5,250 6,000
Overall total sales
Total net sales 2,650 6,200 10,600 7,650 12,850 17,900 26,250 33,900 43,700 46,800 42,600 41,350
Total cost of goods 2,650 6,200 10,600 7,650 12,850 17,900 26,250 33,900 43,700 46,800 42,600 41,350
Total gross profit

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 69

2018 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($)
Month 8,951 9,448 5,967 8,288 6,962 7,127 7,956 9,282 6,796 7,293 9,282 10,774
Airfreight Exports 27,000 28,500 18,000 25,000 21,000 21,500 24,000 28,000 20,500 22,000 28,000 32,500
Yield per Kilogram 10,774
Units 8,951 9,448 5,967 8,288 6,962 7,127 7,956 9,282 6,796 7,293 9,282
Net sales 10,774
Cost of goods 8,951 9,448 5,967 8,288 6,962 7,127 7,956 9,282 6,796 7,293 9,282
Gross profit 19,890
Airfreight Imports 8,840 7,735 8,840 11,050 13,260 12,155 13,260 15,470 15,470 14,365 17,680 90
Yield per Shipment 40 35 40 50 60 55 60 70 70 65 80
Units 19,890
Net sales 8,840 7,735 8,840 11,050 13,260 12,155 13,260 15,470 15,470 14,365 17,680
Cost of goods 19,890
Gross profit 8,840 7,735 8,840 11,050 13,260 12,155 13,260 15,470 15,470 14,365 17,680
Seafreight Exports 20,367
Yield per TEU 13,140 13,140 11,498 8,213 9,855 8,541 9,855 13,140 13,140 16,425 17,739 310
Units 200 200 175 125 150 130 150 200 200 250 270
Net sales 20,367
Cost of goods 13,140 13,140 11,498 8,213 9,855 8,541 9,855 13,140 13,140 16,425 17,739
Gross profit 20,367
Seafreight Imports 13,140 13,140 11,498 8,213 9,855 8,541 9,855 13,140 13,140 16,425 17,739
Yield per Shipment 11,498
Units 4,928 4,106 4,928 7,391 8,213 7,391 4,928 7,391 8,213 9,855 10,676 70
Net sales 30 25 30 45 50 45 30 45 50 60 65
Cost of goods 11,498
Gross profit 4,928 4,106 4,928 7,391 8,213 7,391 4,928 7,391 8,213 9,855 10,676
11,498
Overall total sales 4,928 4,106 4,928 7,391 8,213 7,391 4,928 7,391 8,213 9,855 10,676
Total net sales
Total cost of goods 35,858 34,429 31,232 34,941 38,289 35,215 35,999 45,283 43,618 47,938 55,377 62,528
Total gross profit 35,858 34,429 31,232 34,941 38,289 35,215 35,999 45,283 43,618 47,938 55,377 62,528

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Income Statement | Monthly | Year 1-2

2017 VAT % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($) 2,650 6,200 10,600 7,650 12,850 17,900 26,250 33,900 43,700 46,800 42,600 41,350
Month 2,650 6,200 10,600 7,650 12,850 17,900 26,250 33,900 43,700 46,800 42,600 41,350
Revenue on Operations
Total Sales 300 300 300 300 300 300 300 300 300 300 300 300
Cost of Goods Sold 15 15 15 15 15 15 15 15 15 15 15 15
Gross Profit 93 93
Operating Expenses 150 150 150 150 150 150 150 150 150 150 150 150
General & Administrative 150
Accountant and Auditors Fees 75 75 75 75 75 75 75 75 75 75 75 75
Water 65 65 65 65 65 65 65 65 65 65 65 65
Cleaning Expenses 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500
Electricity and Water 500 500 500 500 500 500 500 500 500 500 500 500
Immigration, Work Permits and Visas 100 100 100 100
Repairs and Maintenance 165 165 165 165 165 165 165 165 165 165 165 165
Printing and Stationery 33 33 33
Rental 10 10 10 10 10 10 10 10 10 10 10 10
Unexpected, Sundries and Contingency 50 50
Staff Training and Development
Telephone, Cellphone, and Related 15,519 15,519 15,519 15,519 15,519 15,519 15,519 15,519 15,519 15,519 15,519 31,038
Office Supplies 841 841 841 841 841 841 841 841 841 841 841 841
Postage and Courier
Stamp Duties 200 200 200 200 200 200 200 200 200 200 200 200
Personnel 6,000 2,000
Salaries and Benefits
Payroll Burden (PAYE, UIF, etc.) 300 300 300 167
Promotion 30 30 30 30 30 30 30 30 30 30 30 30
Advertising and Public Relations 70 70 70 70 70 70 70 70 70 70 70 70
Membership and Subscription
Corporate Gifts 1,500
Internet and Website Hosting
Client Entertainment 50 50 50 50 50 50 50 50 50 50 50 50
Insurance 150 150 150 150 150 150 150 150 150 150 150 150
Business Insurance 650 650 650 650 650 650 650 650 650 650 650 650
Transportation
Travel (Local) 2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 71
Motor Vehicle Expenses
Vehicle Instalment Repayment

Total operating expenses 246,740 22,423 22,673 22,290 22,783 22,290 22,323 22,390 22,290 23,840 22,650 39,809
EBITDA -244,090 -16,223 -12,073 -14,640 -9,933 -4,390 3,927 11,510 21,410 22,960 19,950 1,541
Depreciation 565 565
Net profit / loss 565 565 565 565 565 565 3,363 565 565 565 565 977
Company tax -244,654 -16,787 -12,637 -15,204 -10,497 -4,954 10,946 20,846 22,396 19,386
Net business result 3,363 977
-244,654 -16,787 -12,637 -15,204 -10,497 -4,954 10,946 20,846 22,396 19,386
Break-even sales 22,323 39,809
246,740 22,423 22,673 22,290 22,783 22,290 22,390 22,290 23,840 22,650
Average expenses increase %
General & Administrative 8.0%
Promotion 4.0%
Insurance 8.0%
Transportation 4.0%

2018 VAT % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($) 35,858 34,429 31,232 34,941 38,289 35,215 35,999 45,283 43,618 47,938 55,377 62,528
Month 35,858 34,429 31,232 34,941 38,289 35,215 35,999 45,283 43,618 47,938 55,377 62,528
Revenue on Operations
Total Sales 324 324 324 324 324 324 324 324 324 324 324 324
Cost of Goods Sold 16 16 16 16 16 16 16 16 16 16 16 16
Gross Profit 100 100
Operating Expenses 162 162 162 162 162 162 162 162 162 162 162 162
General & Administrative 81 81 81 81 81 81 81 81 81 81 81 81
Accountant and Auditors Fees 70 70 70 70 70 70 70 70 70 70 70 70
Water 3,780 3,780 3,780 3,780 3,780 3,780 3,780 3,780 3,780 3,780 3,780 3,780
Cleaning Expenses 540 540 540 540 540 540 540 540 540 540 540 540
Electricity and Water 108 108 108 108
Repairs and Maintenance 178 178 178 178 178 178 178 178 178 178 178 178
Printing and Stationery 36 36 36
Rental 11 11 11 11 11 11 11 11 11 11 11 11
Unexpected, Sundries and Contingency 54 54
Staff Training and Development
Telephone, Cellphone, and Related
Office Supplies
Postage and Courier
Stamp Duties

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 72

Personnel 16,140 16,140 16,140 16,140 16,140 16,140 16,140 16,140 16,140 16,140 16,140 32,280
Salaries and Benefits 874 874 874 874 874 874 874 874 874 874 874 874
Payroll Burden (PAYE, UIF, etc.)
Promotion 208 208 208 208 208 208 208 208 208 208 208 208
Advertising and Public Relations
Membership and Subscription 6,240 2,080
Corporate Gifts
Internet and Website Hosting 312 312 312 174
Client Entertainment
Insurance 31 31 31 31 31 31 31 31 31 31 31 31
Business Insurance
Transportation 73 73 73 73 73 73 73 73 73 73 73 73
Travel (Local)
Motor Vehicle Expenses 1,620
Vehicle Instalment Repayment
Total operating expenses 52 52 52 52 52 52 52 52 52 52 52 52
EBITDA 156 156 156 156 156 156 156 156 156 156 156 156
Depreciation 676 676 676 676 676 676 676 676 676 676 676 676
Net profit / loss 29,924 23,516 23,774 23,372 23,893 23,372 23,408 23,480 23,372 25,046 23,755 41,592
Company tax 5,934 10,913 7,458 11,569 14,396 11,842 12,590 21,803 20,246 22,892 31,623 20,936
Net business result 565 565 565 565 565 565 565 565 565 565 565 565
5,369 10,348 6,893 11,004 13,832 11,278 12,026 21,238 19,681 22,327 31,058 20,372
Break-even sales
5,369 10,348 6,893 11,004 13,832 11,278 12,026 21,238 19,681 22,327 31,058 20,372

29,924 23,516 23,774 23,372 23,893 23,372 23,408 23,480 23,372 25,046 23,755 41,592

2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 73

Cash Flow | Monthly | Year 1-2

2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($) 41,115 27,588 14,493 5,016 1,418 5,104 17,251 35,437 57,762
Month -218,000 54,936 35,388 6,563 8,475 11,700 10,650 10,338
Beginning balance 1,913 3,213 4,475 12,163 10,925 30,325 34,325 33,000
Credit/Debit 663 1,550 2,650 6,850 6,475 8,338 17,600 23,513
Cash in 1,325 3,763 18,725 42,025 44,975 43,338
Cash sales -21,987 8,763 9,688 12,813 4,813 26,075 34,438 4,830 4,973 4,780
Collections from debtors 480,050 2,875 6,413 4,780 4,973 4,780 4,880 4,780
Sales tax in 458,726 16,360 16,360 16,360 16,360 16,360 31,879
Long term loans 4,913 4,863 16,360 300 16,360 16,360 300 467 2,300
Subtotal 4,930 16,360 16,360 300 600 300 850 300 300 850 850
Operating expenses 16,360 850 850 850 850 850 1,500
General & Administrative 300 600 22,323 850 22,650 39,809
Personnel 6,600 22,290 22,783 22,290 1,418 22,390 22,290 57,762 61,291
Promotion 850 850 27,588 14,493 5,016 5,104 17,251 23,840
Insurance 850 35,437
Transportation 22,423 -21,987
Capital investments 7,000 35,388 686
Buildings 13,500
Office equipment 41,115
Furniture & Fixtures 8,000
Vehicles 4,000
Non-depreciable assets 124,550
Other payments
Sales tax payments/refunds 185,790
Subtotal
Ending balance 54,936
Credit/Debit

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2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 75

2018 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
($)
Month 61,291 71,656 85,014 95,227 104,813 115,771 129,082 141,853 156,497 175,670 195,738 220,701
Beginning balance
Credit/Debit 8,965 8,607 7,808 8,735 9,572 8,804 9,000 11,321 10,905 11,985 13,844 15,632
Cash in 31,325 28,267 26,179 24,223 25,279 27,880 27,180 26,803 31,641 33,130 34,874 39,673
Cash sales 40,290 36,874 33,987 32,959 34,851 36,683 36,179 38,124 42,546 45,114 48,718 55,305
Collections from debtors
Subtotal 5,162 5,306 5,252 5,162 5,371 5,162 5,198 5,270 5,162 5,216 5,371 5,162
Operating expenses 17,014 17,014 17,014 17,014 17,014 17,014 17,014 17,014 17,014 17,014 17,014 33,154
General & Administrative
Personnel 6,864 312 624 312 624 312 312 312 312 312 486 2,392
Promotion 1,620
Insurance 884 884 884 884 884 884 884 884 884 884 884
Transportation 29,924 23,516 23,774 23,372 23,893 23,372 23,408 23,480 23,372 884 23,755 41,592
Subtotal 25,046
Ending balance 71,656 85,014
Credit/Debit 95,227 104,813 115,771 129,082 141,853 156,497 175,670 195,738 220,701 234,414

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2016 © All Rights Reserved. BUSINESS PLAN & FINANCIAL MODEL prepared for Netlog Global Forwarding by SHEHAN SENEVIRATNE P a g e | 77

The Writer – Shehan Seneviratne or any of his DISCLAIMER
associates, agents, contractors, member
companies, assignees or employees, do not or investment capital will be received by any
accept liability of any nature whatsoever for third-party, e.g. commercial banks, funding
any loss sustained by any person which makes specialists, government, VC’s, and or angel
use of the information contained herein and investors. Although every care was taken to
any person who uses it, does so entirely at his ensure the accuracy of the market research,
or her own risk. statistics, trends, conclusions, and so forth,
the Writer does not accept responsibility for
The business plan and supporting any act, omission, loss, damage or the
documentation has been prepared based on consequences thereof occasioned by a
the information received through secondary reliance by any person upon the contents
market research conducted. The accuracy hereof.
and validity of this information cannot be
guaranteed or confirmed by the Writer. All market research conducted is
secondary/desktop research, the information
Any information that has not been received of which is obtained from secondary sources
from NETLOG GLOBAL FORWARDING at the and/or primary research conducted by third-
time of compiling the business plan is omitted party institutions. The market and industry
from the final document. research contained in this business plan is
provided for general information purposes
Any decision made or action taken as a result only, and does not constitute the provision of
of the information contained herein (including legal or professional advice in any way. Before
any information contained in the financial making any decision or taking any action, a
statements, projections and models) is professional advisor should be consulted.
entirely at the Company's risk and the Writer
will not accept responsibility for any loss, No responsibility for loss to any person acting
damage or liability whatsoever in this regard. or refraining from action as a result of any
material in this document can be accepted by
Due to various unknown changing factors, the the Writer and any of his representatives. The
Writer cannot propose or warrant that all information in this document is provided “as
results are completely accurate in all respects is” with no assurance or guarantee of
or that reliance can be placed upon the results completeness, accuracy or timeliness of the
contained herein. The completion of this information, and without warranty of any
business plan by the Writer does not in any kind. In no event will the Writer be liable for
way whatsoever guarantee that funding and any losses arising from any decision made or
action taken in reliance on the information.

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