Market Penetration Strategy: A Tool for Optimizing Market Share for FDI Enterprises in Vietnam

Are you running a foreign-invested enterprise (FDI) in Vietnam? Is your business looking for opportunities to penetrate and succeed in the Vietnamese market? To optimize market share in a highly competitive environment, it is essential to develop an appropriate market penetration strategy.

According to a NielsenIQ study, 78% of FDI enterprises in Southeast Asia face difficulties in expanding their current market share due to a lack of systematic strategy. This analysis provides practical solutions supported by case studies of multinational corporations that have successfully entered the Vietnamese market.

What is a Market Penetration Strategy?

A market penetration strategy is the process by which a company seeks to increase its market share by leveraging existing products in new markets. This strategy helps bring a company’s products/services into new markets through marketing efforts with the primary goal of increasing market share.

Put simply, a market penetration strategy refers to the process whereby a company successfully sells a product/service in a new market. It includes activities such as increasing advertising budgets, expanding the sales force, enhancing promotional campaigns, or boosting public relations (PR) efforts.

4 Methods to Measure Market Penetration Effectiveness

To accurately evaluate the effectiveness of a market penetration strategy in a new market, businesses can apply the following metrics:

Practical Context: Lessons from Coca-Cola & Japanese Enterprises

To better understand how a market penetration strategy works, here are two case studies from Coca-Cola and a Japanese company entering the Vietnamese market.

Case Study 1: Coca-Cola in Rural Vietnam

Challenge: Saturated urban market (2018)

Penetration Solutions:

1. 1. Introduced a 250ml PET bottle priced at VND 5,000 to suit consumer budgets
   2. Distributed through 15,000 small grocery stores
   3. Provided free display shelves to agents

Result: 37% increase in rural sales after 18 months (Nielsen 2020)

Case Study 2: Japanese Automotive Parts Company

Challenge: Competition from Korean firms in Bac Ninh

Solutions:

1. 1. Advised on transfer pricing structure
   2. Developed tier-based discount policy for dealers
   3. Optimized VAT on output sales

Result: 22% increase in market share within just two quarters of operation

3 Core Benefits for FDI Enterprises from a Successful Market Penetration Strategy

Successfully entering and approaching a new market delivers outstanding benefits, including:

• Revenue Stream Diversification: Penetrating new markets allows businesses to diversify income sources, expand development opportunities, and reach customers across multiple regions and segments.
• Establishing Competitive Barriers: With a superior market strategy, companies can dominate markets—even newly entered ones—and establish themselves as market leaders.

Sustainable Revenue Growth: Successful market penetration helps rapidly increase sales and quickly generates attractive profit margins.

Suggested Penetration Approaches for FDI Enterprises

To enter a new market like Vietnam, FDI enterprises can consider the following three approaches:

• Increase Usage Frequency: For service businesses (e.g., telecom or internet), increasing customer usage frequency can be effective. For example, Viettel launched the “M10” package, offering 10 free minutes of on-net calls after every three top-ups.
• Expand Distribution Channels: Marketing plays a vital role in market penetration. A company with a solid marketing strategy starting with a wide distribution network can provide customers with optimal purchasing convenience, increasing reach and revenue.
  Example: AEON Mall partnered with NowDelivery to boost online reach.
• Strategic Pricing Adjustment: Price is always a focal point for customer comparison. For similar quality products/services, a favorable pricing strategy helps businesses capture the market and surpass competitors.
  Example: Honda reduced the price of the Wave Alpha by 15% in rural areas.

The Right Time to Apply a Market Penetration Strategy

Research from Harvard Business Review identifies three ideal scenarios for entering a new market:

• Underserved High-Potential Market:
  Example: Medical equipment market in the Central Highlands (MPR < 35%)
• Changes in Consumer Behavior:
  Example: Online shopping trend surged by 167% post-pandemic (2023)
• Increased Competition:
  Example: Emergence of 3–5 new competitors within the segment

Professional Market Penetration Strategy Consulting for Enterprises

Now that you understand the fundamentals and the crucial role of thoroughly investing in and developing a market penetration strategy, you may be seeking a professional partner to support and advise on in-depth tax and accounting solutions during market entry.

Contact KMC – a professional tax and accounting services provider for foreign-invested enterprises, especially Japanese businesses operating or planning to operate in Vietnam.

KMC CONSULTING supports FDI enterprises throughout the entire process:

• Analyzing market share and assessing penetration potential
• Optimizing pricing structure and tax policies
• Developing performance measurement systems based on international standards

Let our top-tier lawyers and industry experts accompany and assist your business with professionalism, dedication, legal compliance, and guaranteed effectiveness.

View more: Optimal Cash Management Strategies for FDI Enterprises: From Theory to Practical Application