FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

___***___

MIDTERM REPORT
GLOBAL MARKETING
Lecturer : Ms. Nguyen Thi Thu Thao
Group : 01
Class K60CLC7

FPT SOFTWARE MARKET

PENETRATION STRATEGY

Ho Chi Minh City, March 12

 STUDENT’S FULL NAME STUDENT ID

Nguyễn Tuệ Mẫn 2113153037

Nguyễn Bích Vân 2112153187

Tạ Phương Lam 2113153032

Lê Phan Bảo Trân 2113153063

Nguyễn Ngọc Thiên Trang 2112153174

Trần Thị Thu Trà 2012256023

Phạm Kim Ngân 2113153041

Lê Hoàng Anh 2113153004

TABLE OF CONTENT
1. Executive summary 4
2. Overview 4
2.1. Introduction 4
2.2. Global Overview of FPT Software background: 4
3. International market selection 6
3.1 Criteria 6
a) General characteristics/Macro-segmentation 6
b) Preliminary Screening 7
c) Fine-grained screening 7
3.2 Market Expansion Strategies and Market choice: 14
3.2.1 Marketing Expansion Strategy: 14
3.2.1.1. FPT Software Global Target: 14
3.2.1.2. Current strategy: 14
3.3. Entry mode: 15
3.3.1 Japan Market Expansion: 15
3.3.2 Japan Market Penetration: 16
3.3.3. US Market Expansion: 16
4. Japan market entry evaluation 16
4.1. Criteria: 16
a. Internal factors 16
b. External factors 16
4.2. Entry mode evaluation: 17
4.3. Possible objectives in the mid and long term 18
a. Short term objectives 18
b. Long term objectives in the next 3 years 18
5. Market strategy & tactics in Japan 18
5.1. Introduction: 18
5.2. Tactics on Products: 18
5.3. Tactics on price: 18
6. Recommendation for better performance 19
6.1. Investment 19
6.1.1 Human resources 19
6.1.2 Equipment, infrastructure 19
6.2 Merger and acquisition 19
6.3 Promote new market research. 19
7. Reference 20
LIST OF FIGURES
Figure 2.1: Total profit before tax (PBT) of FPT Corporation………………………5
Figure 2.2: Contribution form Global IT Services’ profit before tax of FPT
Corporation…………………………………………………………………………..6
Figure 2.3. Global Presence of FPT Software……………………………………….6
Figure 2.4. …………………………………………………………………………...7
Figure 3.1. Two-stage model (Gaston-Breton and Martin).........................................8
Figure 3.2. Selected Asian countries' ranking of English Proficiency Index released
today by the Swiss Education First (EF).....................................................................9
Figure 3.3. The number of Japanese Language learners in Vietnam in comparison
with the world ……………………………………………………………………...10
Figure 3.4. FPT MACS matrix investment ...……………………………………...19
Figure 3.5. Revenue and client companies by markets of FPT Software……..……20
Figure 3.6. Model illustrates the international market selection process of FPT
Software…………………………………………………………………….………21
Figure 3.7. FPT International Profit in 2022………………………………….……24
Figure 3.8. Waterfall Approach…………………………………………………….25
Figure 3.9. FPT Software Office Distribution in Japan……………….……………26
Figure 4.1. FPT Ecosystem visualization………………………………..…………29

LIST OF TABLES
Table 3.1. BERI assessment of business risks in the U.S. and Japan…………...….13
Table 3.2. Raw data for market attractiveness……………………………………...15
Table 3.3: Classification variables in the MACS model………………………...…16
Table 3.4. Classification variables in the MACS model - Competitive
Strengths…………………………………………………………………………....17
Table 3.5. Locating countries on the market attractiveness/competitive strength
matrix………………………………………………………………………….……18
Table 4.1 FPT entry mode evaluation………………………………………………32
1. Executive summary
This paper's objective is to investigate and evaluate different markets for FPT
to enter and expand its operations. Based on research into various market
characteristics, a marketing expansion strategy, and market penetration, the report
suggests FPT to enter Japan and the US. The findings demonstrate that both nations
have tremendous development potential with a competitive advantage. According to
that comparison, FPT had an appreciated method of entry and marketing strategies
to succeed in the Japanese market.

2. Overview
2.1. Introduction
FPT Software is a part of FPT Corporation, specializing in digital innovation, digital
consulting, and rebadging. The company was founded in 1999 and has since grown
significantly, expanding its operations to include over 50 offices and 22 development
centers in 26 countries & territories around the world.
2.2. Global Overview of FPT Software background:
Financial Overview:
FPT Corporation’s revenue increased from 4,255 billion in 2017 to 6,337 billion in
2021, representing a compound annual growth rate (CAGR) of 15.7%.

Figure 2.1. Total profit before tax (PBT) of FPT Corporation

Global Presence:

Figure 2.3. Global Presence of FPT Software

Industry Focus: digital transformation and IT outsourcing positions
Product of FPT software:
Akasuite - a set of platforms, solutions, products that helps SMEs solve
operational issues, create new values and enhance experience

Figure 2.4. Digital tools integrated in akaSuite

Consumer trend: Digital transformation will continue to be a significant trend
globally.
Global Digital Transformation spending is forecast to reach $3.4 trillion in
2026 with a five-year compound annual growth rate (CAGR) of 16.3%.
 The United States will be the largest geographic market for DX spending
throughout the forecast, accounting for nearly 35% of the worldwide total and
surpassing the $1 trillion mark in 2025.
The Cloud technology segment will double in the next three years; AI will
increase seven times within 7 years.

3. International market selection

Figure 3.1. Two-stage model (Gaston-Breton and Martin)

3.1 Criteria
a) General characteristics/Macro-segmentation
● Political: Vietnam has established a strategic relationship with Japan and a
comprehensive relationship with the US.
Vietnam has close ties with Japan based on economic development and foreign aid.
Vietnam's stance on Russia's invasion of Ukraine disappointed the USA, affecting bilateral
relations.
● Economy
Tokyo sees Vietnam as the gateway for projecting its influence in Southeast Asia,
especially after Vietnam’s reputation improved due to its promotion of ASEAN centrality
during its 2020 term as ASEAN chair.
The US is currently Vietnam’s second-largest trading partner after China, while Vietnam is
among the top ten trading partners of the US. In terms of foreign direct investment,
America is Vietnam’s 11th biggest investor.

● Technology
Vietnam hopes for Japanese investment in tech, energy, and green and digital
transformation. Japan considers Vietnam for the Indo-Pacific 'Quad' arrangement. The US
supports Vietnam's digital transition with WISE, providing up to $2 million..
 b) Preliminary Screening

(*) 0, unacceptable; 1, poor; 2, average conditions; 3, above average conditions; 4, superior conditions.
Table 3.1. BERI assessment of business risks in the U.S. and Japan

Overall, Japan and the USA are developed countries with strong economies.
EIU predicts a slowdown in US GDP growth in 2023 and inflation remaining above
historical levels. Meanwhile, the Japanese yen is expected to recover against the US
dollar due to stabilizing interest rate differentials.

c) Fine-grained screening
* Market attractiveness

Table 3.2. Classification variables in the MACS model - Market Attractiveness

 Table 3.3. Raw data for market attractiveness

Table 3.4. Grading market attractiveness for FPT in Japan and USA market

* Competitive strength

Table 3.5. Classification variables in the MACS model - Competitive Strengths

 Table 3.6. Raw data for market competitiveness

Table 3.7. FPT's assessment of two main competitors in two markets

Table 3.8. Grading market competitive strength for FPT in Japan and USA market
* In conclusion:

Table 3.9. Total target market attractiveness/competitive strength matrix

We have 2 points: Japan (4; 4.4) and USA (3.2 ; 3.9). Putting these two points
into the matrix, we can sort Japan and USA into the matrix shown below:
 Figure 3.3. FPT MACS matrix investment

Japan is in higher position in comparison with USA, but both 2 markets are
on the Invest/Grow zone
Japan is considered a market with higher market attractiveness and higher
competitive strength compared to the US for FPT because this country offers the
best opportunities for long-term strategic development. In addition, at present, the
Japanese market is still an important market of FPT Software in the world.
 Figure 3.4. Revenue and clients of FPT in global market

In contrast, the US has many advantages compared to the Japanese market,

but for an Asian technology company, the competition level of FPT is still quite
small. This is where opportunities are identified, but there are still many potential
risks. The fact that FPT once failed when trying to enter this market with the
presence of technology giants such as Apple, IBM, Microsoft, Google, Intel, .. in
2000.
Overall, FPT should directly invest in Japan and the U.S. by direct
investment. From the data analyzed above, the following model represents the
general international market selection process of FPT Software.
 Figure 3.5. Model illustrates the international market selection process of FPT
Software.

3.3.2. FPT in Japan market:

Japan is one of the most challenging countries for market entry. Japan obtains
different regulatory hurdles and cultural factors and makes foreign companies some
barriers to penetrating this market.
Cultural Differences: The World Cultural Diversity Index shows Japan
ranked 37th and Vietnam ranked 24th, indicating cultural differences that may
challenge FPT's entry into Japan. Japanese business culture values hierarchy and
formality, while Vietnamese culture is more informal.
Competition: Japan's IT services market is highly competitive with
established players. Japanese customers have different tastes and high expectations.
Local competitors compete hard against new entrants.
Language Barrier: Japanese is essential for business communication in
Japan. Language barriers may arise for FPT due to low English proficiency in both
countries. Korea and China have similarities that make Japanese proficiency easier.
Regulatory Environment and Natural Disasters: Japan has strict
regulations, bureaucracy, and natural disaster risks, posing significant risks for FPT.
Careful planning and local partnerships can mitigate these risks.
3.3.3 FPT in the USA market:
The US IT services market is highly competitive, with established players
like IBM, Accenture, and Infosys, holding over 40% of the market share. FPT must
compete and overcome high barriers to entry due to regulatory compliance and legal
requirements.
Cultural Differences: FPT must navigate cultural differences to succeed in
the US market, with Vietnam being a collectivist culture and the US being an
individualist culture.
Legal and Regulatory Risks: Entering the US market poses legal risks due
to strict intellectual property laws that FPT must comply with.
Economic Risks: US market has opportunities for FPT despite competition
and legal challenges with major players like IBM, Microsoft, AWS.
3.2 Market Expansion Strategies and Market choice:
3.2.1 Marketing Expansion Strategy:
3.2.1.1. FPT Software Global Target:
FPT Software aims to increase its revenue to $350-400 million by expanding
operations in foreign markets such as Japan, US, Singapore, and developing
countries.

Figure 3.7. FPT International Profit in 2022

3.2.1.2. Current strategy:

The reason for choosing “waterfall strategy” for FPT Software is its
expansion and international adapting strategies towards products in international
countries including: Japan, USA, Germany, Singapore and other countries.
 Figure 3.8. Waterfall Approach
3.3. Entry mode:
3.3.1 Japan Market Expansion:
FPT Software has 9 offices and about 1,600 employees in Japan, but its
revenue is still small compared to the market size. Japan is the world's fourth-largest
software market, but foreign providers only reach about $55 million of the over
$130 billion spent annually in the field, according to Chairman Hoang Nam Tien [1]
 Figure 3.9. FPT Software Office Distribution in Japan

3.3.2 Japan Market Penetration:

FPT Software can enhance its competitiveness by expanding into Japan. Partnering
with local companies will reduce risks. Price penetration method shows potential for
higher profits.
3.3.3. US Market Expansion:
Starting a business in the US is easy, but FPT is a small fish in a big pond. To
limit risk and leverage strengths, FPT exports or forms joint ventures before
establishing company-owned branches.

4. Japan market entry evaluation

4.1. Criteria:
a. Internal factors
- Firm size
FPT had a competitive advantage over near sourcing outsourced companies
because of the geographical distance between Vietnam and Japan.
- International experience
FPT has long international experience in distributing and modifying
computers into Vietnam. Until now, FJP has operated for approximately 18 years
operating in the Japanese market and has capability of expanding their businesses.
- Product/Service
FPT mostly provides software services for international customers and this
poses a requirement for the presence of the soft-service provider since the 1st day of
foreign operation.

Figure 4.1. FPT Ecosystem visualization (Source: FPT)

 b. External factors
- Sociocultural distance between the home country and host country
Although the general educational level of Japan is higher than that of
Vietnam, in the field of computer engineering, the educational level is somewhat
similar.
- Country risk/Demand uncertainty
The good relationship between Vietnam and Japan lowers the risks of
political problems for Vietnamese companies to invest in Japan and vice versa.
- Market size and growth
The expanding needs of digital transformation across all the industries and
the legal corridor expanded paved the way for all companies like FPT to grow and
invest in.
- Direct and indirect trade barriers
Due to the close relationship between Japan and Vietnam, there are 4 trade
treaties between the two countries to help create a free trade environment.
- Intensity of competition and small number of relevant intermediaries available
According to Mordor Intelligence, Japan's ICT market is rather fragmented -
highly competitive without dominant players.

4.2. Entry mode evaluation:

FPT has pursued a hierarchical strategy for the Japanese market via
subsidiaries. As a result, FPT has more power and influence over local marketing.
The table below outlines the advantages and disadvantages of FPT’s entry mode.

HIERARCHICAL MODE

PROS CONS

Better control in potential markets: Lack of market understanding at the

- Long-term lower operational beginning and cultural distance:
costs and increased profit - FPT frequently needs to redesign
and enhance its products and
services to better suit regional
interests and preferences.

Being closer to the customer: Stability of the government as well as

- FPT Software is present in 10 bureaucratic delays:
locations in the US and 14 cities - New entrants are prevented from
in Japan. competing with established
sectors by these stringent
 regulations.

Access to the newest trends in software High risk of competitors:

industry which are in high demand - In 2004, the Japanese software
from customers: market had a value of $131,773
- Gaining access to the most million USD.
cutting-edge, including robots,
artificial intelligence, big data,
and digital transformation.

Table 4.1 FPT entry mode evaluation

4.3. Possible objectives in the mid and long term

a. Short term objectives
In the short-term, FPT will continue to widen its sales channels and release
sophisticated solution packages utilizing breakthrough technologies including
blockchain, cloud computing, and artificial intelligence (AI).
b. Long term objectives in the next 3 years
FPT's strategic development and governance process is based on evaluating
strategy implementation and analyzing macroeconomic context, market trends, and
customer needs. FPT's current focus is on a data-driven and customer-centric
strategy for excellent digital experiences.

5. Market strategy & tactics in Japan

5.1. Introduction:
FPT Software focuses on product strategy and pricing advantages to
differentiate itself from competitors and stay innovative in the technology industry..
5.2. Tactics on Products:
FPT Software's product strategy is a key element in its international market
expansion. The company has developed akaSuite, an integrated suite of innovative
tools, which is designed to be cloud-native, easily adaptable, and provide a proven
return on investment for small and medium-sized enterprises (SMEs). The 4Es
benefits model, which includes evolving, effective, economical, and efficient aspects,
is utilized to ensure the success of akaSuite. FPT continues to upgrade their products
to stay up-to-date and conducts road tests with prominent clients. Japan, with its
high proportion of SMEs, is a potential market for FPT to innovate its products and
boost its economic growth. By converting into true digital businesses, Japanese
SMEs can achieve greater efficiency and competitiveness.
 5.3. Tactics on price:
FPT Software benefits from Vietnam's low labor costs and stable
macroeconomic conditions, resulting in lower manufacturing costs than other
overseas organizations. The company utilizes a Dynamic Pricing Strategy to adjust
prices based on supply and demand in a short period of time, offering clients
advantageous pricing with high-quality products. Japan, known for its high-quality
products, presents a significant market opportunity for FPT Software due to its large
consumption capacity and growing domestic consumption, which not only drives the
Japanese economy but also provides export benefits for businesses entering this
market.

6. Recommendation for better performance

6.1. Investment
6.1.1 Human resources
- Consistently attracts talents from different countries by focusing on
company’s recruitment, noticing on his staff's creativity.
- Organize internal competition and regular trainings for staff and manager
teams
6.1.2 Equipment, infrastructure
Increase investment in construction of technical infrastructure in order to
scale up the business.
6.2 Merger and acquisition
With M&A, FPT can take benefits from existing resources of collaborators
such as R&D, human infrastructure,... thus minimizing barriers relating to foreign
regulations.
6.3 Promote new market research.
Having thorough understanding about the current and new markets helps the
company to build up tactical strategies and successfully internationalize
6.4 Assessment
FPT has flexibly adapted to dynamic environments whose factors change
rapidly. Not only in Vietnam but the company has successfully extended their
business to India, China,.. and especially Japan, all thanks to either specialized
knowledge and appropriate internationalization strategy.
7. Reference
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