Chapter 5 - Timing of entry

Question 1

What are the categories for timing of entry?

Answer 1

• First movers
  
  • first entrants in a new product or service category, pioneers
• Early followers
  
  • early to market but not first
• Late entrants
  
  • enter the market when the product begins to penetrate the mass market or later

Question 2

When it is best to enter?

Answer 2

• Increasing returns suggests that timing of entry can be very important
• market related factors
  
  • availability of complementary goods
  • development of enabling technologies
  • degree of customer certainty
• firm specific factors
  
  • capital resources
  • prior experience
  • reputation

Question 3

First mover Advantages

Answer 3

• Advantages
  
  • Brand loyalty and technological leadership
    
    • shape customer expectations, protected technology
  • Preemption of scarce assets
    
    • entry barriers
  • Exploiting buyer switching costs
    
    • helps retaining customers
  • Increasing returns advantages
    
    • self-reinforcing, dominant design

Question 4

First mover Disadvantages

Answer 4

• Disadvantages
  
  • High research and development expenses
    
    • exploration costs
    • development processes and complementary goods
  • Undeveloped supply and distribution channels
    
    • no ready-made suppliers or distributors, develop or assist
  • Immature enabling technologies and complements
    
    • adoption rate slowed
  • Uncertainty of customer requirements
    
    • expense to learn what customers want

Question 5

Which factors influence the optimal timing of entry?

Answer 5

• customer certainty
  
  • if customer needs are well understood -> early entry feasible
• the margin of improvement offered by the new technology
  
  • dramatic improvement over previous -> accepted more rapidly, early entry
• the state of enabling technologies
  
  • if other technologies required -> entry depends on their maturity
• influence and availability of complementary goods
  
  • availability of complementary goods -> accepted more rapidly, early entry
• the threat of competitive entry
  
  • entry barriers high -> no need to rush
  • entry barriers low and value of product high -> early entry, competitive
• the degree to which the industry exhibits increasing returns
  
  • if increasing returns, large installer base, switching costs -> early entry better
• the firm’s losses
  
  • can sustain losses -> early entry
  • can also catch up
• firm’s resources
  
  • significant resources linked to marketing, complementary goods, supply and distribution development -> early entry
• firm’s reputation
  
  • well respected firm, reduces consumer uncertainty and attracts suppliers and distributors -> accepted more rapidly, early entry

Question 6

When to Enter?

Answer 6

• only one firm, inimitable goods -> when it wants
• several firms, inimitable good -> race to capture market
• highly imitable good -> wait while others invest in improving and market
• specialized assets -> likely to enter
• firms’ products threatened by new -> likely to enter
• core products threatened and several rivals -> early entry

Question 7

How to improve timing options?

Answer 7

• develop the innovation early or quickly -> more choices for entry
  
  • early entrant -> quickly refine its innovation in response feedback
  • can reap both first and second mover advantages