MIDTERM REPORT GLOBAL MARKETING FPT SOFTWARE MARKET PENETRATION STRATEGY

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 Nguyễn Tuệ Mẫn Nguyễn Bích Vân Tạ Phương Lam Lê Phan Bảo Trân Nguyễn Ngọc Thiên Trang Trần Thị Thu Trà Phạm Kim Ngân Lê Hoàng Anh TABLE OF CONTENT Executive summary Overview 2.1 Introduction 2.2 Global Overview of FPT Software backg International market selection 3.1 Criteria a) General characteristics/Macro-segmentation b) Preliminary Screening c) Fine-grained screening 3.2 Market Expansion Strategies and Market choice: 3.2.1 Marketing Expansion Strategy: 3.2.1.1 FPT Software Global Target: 3.2.1.2 Current strategy: 3.3 Entry mode: 3.3.1 Jap 3.3.2 Jap 3.3.3 US Market Expansion: Japan market entry evaluation 4.1 Criteria: a Internal factors b External factors 4.2 Entry mode evaluation: 4.3 Possible objectives in the mid and long t a Short term objectives b Long term objectives in the next years Market strategy & tactics in Japan 5.1 Introduction: 5.2 Tactics on Products: 5.3 Tactics on price: Recommendation for better performance 6.1 Investment 6.1.1 Human resources 6.1.2 Equipment, infrastructure 6.2 Merger and acquisition 6.3 Promote new market research Reference LIST OF FIGURES Figure 2.1: Total proft before tax (PBT) of FPT Corporation………………………5 Figure 2.2: Contribution form Global IT Services’ proft before tax of FPT Corporation………………………………………………………………………… Figure 2.3 Global Presence of FPT Software……………………………………….6 Figure 2.4 ………………………………………………………………………… Figure 3.1 Two-stage model (Gaston-Breton and Martin) Figure 3.2 Selected Asian countries' ranking of English Profciency Index released today by the Swiss Education First (EF) 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 Proft in 2022………………………………….……24 Figure 3.8 Waterfall Approach…………………………………………………….25 Figure 3.9 FPT Software Ofce 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: Classifcation variables in the MACS model……………………… …16 Table 3.4 Classifcation 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 Executive summary This paper's objective is to investigate and evaluate diferent 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 fndings 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 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 signifcantly, expanding its operations to include over 50 ofces 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 proft 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 signifcant trend globally Global Digital Transformation spending is forecast to reach $3.4 trillion in 2026 with a fve-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 years 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, afecting bilateral relations ● Economy Tokyo sees Vietnam as the gateway for projecting its infuence 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-Pacifc '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 infation remaining above historical levels Meanwhile, the Japanese yen is expected to recover against the US dollar due to stabilizing interest rate diferentials c) Fine-grained screening * Market attractiveness Table 3.2 Classifcation 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 Classifcation 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 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 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 ofers 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 identifed, 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 diferent regulatory hurdles and cultural factors and makes foreign companies some barriers to penetrating this market Cultural Diferences: The World Cultural Diversity Index shows Japan ranked 37th and Vietnam ranked 24th, indicating cultural diferences 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 diferent 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 profciency in both countries Korea and China have similarities that make Japanese profciency easier Regulatory Environment and Natural Disasters: Japan has strict regulations, bureaucracy, and natural disaster risks, posing signifcant 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 Diferences: FPT must navigate cultural diferences 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 Proft 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 ofces 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 feld, according to Chairman Hoang Nam Tien [1] Figure 3.9 FPT Software Ofce 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 profts 3.3.3 US Market Expansion: Starting a business in the US is easy, but FPT is a small fsh in a big pond To limit risk and leverage strengths, FPT exports or forms joint ventures before establishing company-owned branches 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 feld 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 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 infuence over local marketing The table below outlines the advantages and disadvantages of FPT’s entry mode HIERARCHICAL MODE PROS Better control in potential markets: - Long-term lower operational costs and increased proft Being closer to the customer: - FPT Software is present in 10 bureaucratic delays: locations in the US and 14 cities in Japan from customers: - Gaining artifcial and digital transformation 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 artifcial intelligence (AI) b Long term objectives in the next 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 Market strategy & tactics in Japan 5.1 Introduction: FPT Software focuses on product strategy and pricing advantages to diferentiate 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 benefts model, which includes evolving, efective, economical, and efcient 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 efciency and competitiveness 5.3 Tactics on price: FPT Software benefts 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, ofering clients advantageous pricing with high-quality products Japan, known for its high-quality products, presents a signifcant 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 benefts for businesses entering this market Recommendation for better performance 6.1 Investment 6.1.1 Human resources - Consistently attracts talents from diferent countries by focusing on company’s recruitment, noticing on his staf's creativity - Organize internal competition and regular trainings for staf 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 benefts 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 fexibly 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 Entering the U.S Market for High Technology Companies (n.d.) Available at: https://assets.fenwick.com/legacy/FenwickDocuments/Entering_US_Market.pdf ‌Gartner (n.d.) Gartner Forecasts Worldwide IT Spending to Grow 2.4% in 2023 [online].Available at: https://www.gartner.com/en/newsroom/pressreleases/2023-01-18-gartner-forecasts-worldwide-it-spending-to-grow-2percent-in-2023#:~:text=Worldwide%20IT%20sp ending%20is%20projected [Accessed Mar 2023] country.eiu.com (n.d.) The Economist Intelligence Unit [online] Available at: https://country.eiu.com/united-states ‌country.eiu.com (n.d.) The Economist Intelligence Unit [online] Available at: https://country.eiu.com/japan www.mordorintelligence.com (n.d.) US IT Services Market Analysis Industry Report - Trends, Size & Share [online] Available at: https://www.mordorintelligence.com/industry-reports/united-states-itservices-mark et#:~:text=and%20its%20growth%3F- www.mordorintelligence.com (n.d.) Japan ICT Market Analysis Industry Report - Trends, Size & Share [online] Available at: https://www.mordorintelligence.com/industry-reports/japan-ict-market [Accessed Mar 2023] techbehemoths.com (n.d.) Top 10+ IT Companies in United States (2022) - TechBehemoths https://techbehemoths.com/companies/united-states FPT https://www.fpt-software.com/contact-us/ baochinhphu.vn (2022) FPT doanh thu ký từ thị trường nước tăng mạnh, đạt gần tỷ USD [online] baochinhphu.vn Available at: https://baochinhphu.vn/fpt-doanh-thu-ky-moi-tu-thi-truong-nuoc-ngoai-tangmanh-d at-gan-1-ty-usd-102221218144031997.htm [Accessed Mar 2023] 10 fpt.com.vn https://fpt.com.vn/vi/ve-fpt/lich-su 11 Entry Barriers of Small and Medium-sized Software Firms in the Japanese Market Available at: https://www.academia.edu/1110470/Entry_Barriers_of_Small_and_Medium_sized_ Software_Firms_in_the_Japanese_Market 12 iGenZ, Q.A.- (2022) Phân Tích chiến Lược marketing FPT shop, iGenZ Available at: https://igenz.net/phan-tich-chien-luoc-marketing-cua-fpt-shop/ (Accessed: March 12, 2023) Softwa