Lecture 3, Part 2: Timing of Entry

Question 1

What is the First Mover

Answer 1

= First entrants to sell in a new product or service category

Question 2

Who is an early follower?

Answer 2

= early to the market, but not first

Question 3

Who are late entrants?

Answer 3

= do not enter the market until the product begins to penetrate the mass market over even later

Question 4

First-Mover Advantages

Answer 4

= Brand loyalty
= Technological Leadership
= Preemption of scarce assets
= Exploiting buyer switching costs
= Reaping increasing returns advantages

Question 5

First-Mover Disadvantages

Answer 5

= High research
= Development expenses
= Underdeveloped supply and distribution channels
= Immature enabling technologies and complements
= Uncertainty of customer requirements

Question 6

Factors enabling optimal timing of entry

Answer 6

1. Customer preferences
2. How much improvement the innovation provides over previous solutions
3. Are enabling technologies required for net technology
4. Do complementary goods influence the value of the innovation
5. Threat of competitive entry?
6. Are there increasing returns to adoption
7. Can the firm withstand early losses?
8. Does the firm have resources to accelerate market acceptance
9. Is the firm’s reputation likely to reduce the uncertainty of customer, suppliers, and distributors

Question 7

Research brief: Where and when to enter?

Answer 7

= If only one firm can produce this inimitable product, it can enter if and when it wants
= If several firms can produce an inimitable product, they race to the market
= If a product is highly inimitable, firms prefer to wait, while others invest in research
= Firms are more likely to enter if they have specialized assets
= Firms entered earlier when their core products were threatened and there were several potential rivals

Question 8

Strategies to improve timing options

Answer 8

= To have more choices in the timing of entry, a firm needs to be able to develop the innovation early or quickly
= A firm with fast-cycle development processes can be both:
1. early entrant
2. quickly refine its innovation in response to customer feedback

= In essence, a firm with fast-cycle development processes can reap first and second-mover advantages

Question 9

Formulating a Technological Innovation Strategy

Answer 9

= Assessing the firm’s position and defining its strategic direction
= Choosing innovation projects in which to invest
= Deciding whether and how the firm will collaborate on development activities, choosing collaboration mode, and choosing and monitoring partners
= Crafting a strategy for protection or diffusion a technological innovation (patents, trademarks, copyrights, …)