article 9: First-mover advantage - a synthesis, conceptual framework, research proposition

Question 1

achieve first-mover advantage

Answer 1

1. Produce a new product.
2. Use a new process.
3. Enter a new market can claim this distinction

Question 2

2 categories of theoretical-analytical support explaining first-mover advantage

Answer 2

• Economic-analytical perspective= use the barriers-to-entry concept and a firm’s utility function. For instance, scale effects, experience effects, asymmetric information, technological leadership, and buyer switching costs.
• Behavioural perspective= explain first-mover advantage at the product or brand level. For instance, less resistance among potential customers, consumer preference formation (= customers learn about brands and form preference), define a product category as a whole, and high degree of consumer awareness

Question 3

conceptual framework of first-mover advantage

Answer 3

start: environmental opportunity attractiveness
–> split into 2 parts:
1. first-mover –> competitive strategy & first-mover positional advantages
2. later entrant –> competitive strategy & later entrant advantages
–> all converge to overall magnitude of first-mover advantage:
- market share performance: absolute & relative
- profitability performance: return on assets & sales

Question 4

environmental framework of first-mover advantage

Answer 4

= the attractiveness of the market opportunity resulting from environmental change is a necessary condition for profitable entry into a product-market

Question 5

positional advantages: factors underlying cost and differentiation

Answer 5

1. economic factors = relate to cost advantages in the form of scale and experience economies and marketing cost asymmetries. Moderators;
   - Demand uncertainty and entry scale
   - Ratio of minimum efficient scale to market size
   - Advertising intensity
   - Response time
   - Scope economies
2. pre-emption factors = provide the basis for a first mover to achieve absolute cost advantage (contracts with suppliers at lower prices/ geographic space/ marketing channels).
   - Demand uncertainty and pre-emptive investment
   - Product characteristics
3. technological factors = relate to product, process, and organizational innovations that product a cost and/ or differentiation advantage.
   - Characteristics of technological innovation
   - Technological change and discontinuities
4. behavioural factors = constitute of opportunities to achieve a differentiation advantage for the first mover or for the differentiation advantage to be endowed on the first mover by the marketplace.
   - Nature of the good
   - Market type
   - Market evolution
   - Buyer’s investment in cospecialized assets= the presences of buyer switching costs benefit the first mover, however the type and magnitude of the cost vary by industry.

Question 6

competitive strategy

Answer 6

= the framework shows a directly relationship between the competitive strategies of pioneers and later entrants that emerge from the distinctive competencies and resources of each

Question 7

later entrant advantages

Answer 7

= can affect the magnitude of first -mover advantage by achieving cost and differentiation advantages for themselves
1. Lower imitation costs compared to the pioneer’s innovation costs
2. Free-rider effects on mover’s pioneering costs
3. Benefit from scope economies
4. Learning from the pioneer’s mistakes

Question 8

implications for marketing practice

Answer 8

• Market pioneering is not a normative strategic behaviour conducive to superior performance for all firms
• Market pioneering can only provide opportunities for gaining positional advantages. Actual competitive advantages depend on product-market contingencies and the actions of the first mover and later entrants
• Organizational reality: every firm is more often a later entrant than a pioneer