Strategic Management Issues - Research Paper Example

Strategic Management For many business entities, timing of when to enter a marketplace is a critical factor for success. This would determine whether such an entity enters the market early, referred to as early movers or late, referred to as late movers. According to Peng (2012), businesses could opt to enter into a market early to take advantage of the untapped potential. Others could choose to enter late so as to gain from the experience of others. Whatever the case, success is not a guarantee. First Mover First mover advantages refer to those benefits that a firm could achieve by choosing to enter into a new market or develop a new product or service before the entry of rival firms (David, 2013). First, such firms benefit from gaining market share and further positioning themselves in best locations. This could affect the theory in that higher market share could cause an increase in cost of operation thus diluting the associated high returns. Secondly, first movers gain new knowledge relevant for success in their fields (Li, Lam, Karakowsky & Qian, 2003). Changes in the knowledge could cause the first mover to find ways to fast learn the emerging knowledge. Being the first, such firms also secure resources and commitments for their provision (Eggers, Grajek & Kretschmer, 2011). This impacts the theory in the context where there is limited information on the resources available. Finally, they have the advantage of establishing and securing long-term relationships with investors, suppliers, customers and distributors, an important concept for firms seeking to develop long lasting business entities. However, Hill, Jones and Schilling (2013) observe that first movers suffer cost disadvantage as they have to establish most of the infrastructure from scratch. This affects the theory in that organisation that requires high set-up capital shy away from pioneering markets, products or services. There is a high uncertainty associated with first movers. This would particularly impact on the theory if the entity is not familiar with the regulations, needs and culture of the target geographical regions. Thirdly, first movers face the risk of adopting a losing strategy that would make them fail and leave opportunities for late entrants who would have learnt from their mistakes (David, 2013). This would be the case if the first mover would not be able to make predictions on their investments. Finally, first movers could invest in obsolete or inferior technology, making this theory particularly unappealing to entities in businesses where technology advances fast. Last Mover Last movers have a myriad of advantages. The first last mover advantage according to David (2013) is the fact that they enter into a market where uncertainty no longer exists. The effect of this is the risk of not having customers accepting the products of late movers. Secondly, they are saved the cost of educating customers on the new product or service as customers are already aware of such. This makes this theory appealing to highly technological organisations that would have to incur a lot of costs educating consumers on their products if such consumers are not aware of their operation. Moreover, they have the potential of learning from the shortcomings and successes of first movers and properly formulate their strategies so as to be superior (Peng, 2012). In this context, the theory would be used by operators in highly competitive markets. Finally, last movers have the privilege of conducting market research to understand how best to satisfy customer needs, giving them an edge over first movers. This casts this theory as one meant for laggards who fear venturing into new avenues without gathering adequate information first. Notably, last movers lose out on the opportunity to establish loyalty for their brand, as such a theory that would only be effective with a negative first mover brand. They also suffer from high cost of accessing resources or even being locked out from resources as first movers already gained commitment from suppliers. This implies that this theory could be unappealing to entities that seek to primarily make use of resources available to first movers. Thirdly, last movers come into the market that already has a player making them unable to secure the best positioning (David, 2013). This makes them less advantaged. Lastly, last mover disadvantage of inability to gain new knowledge in a market already pioneered makes this theory to be perceived as one that fails to promote knowledge development. Examples Examples of successful first movers include Ford that came up with the mass production of its Model T, this being the invention of automated assembly line (Shilling, 2007). Apple Inc. is said to have been successful as a pioneer in tablet computers technology, courtesy of its iPad (Hill et al., 2013). Microsoft is also credited with its Microsoft BASIC, the maiden personal computer software application developed in 1979 which remains dominant even in the modern context. Another company, Cisco, is renowned as the first mover in Internet protocol network router which since its launch in 1986 remains a critical technological tool. Perhaps, Microsoft and Cisco enjoy the benefits of having won customer loyalty. Failed first movers include early investors in TheStreet.com, the financial news site. According to Hawk, De-Almeida and Yeung (2013), the initial offering price was $19 in 1999, which shortly moved to a share price of $60, but later leaped to 99 cents as at October 2001. Thus, first movers made massive losses as opposed to late movers who bought the shares in 2001 as it now goes for $11. The second example is that of Prodigy Communications, a first mover in electronic shopping launched in 1984. The firm faced the disadvantage of uncertain demand because according to Shilling (2007), the then customers, unlike now, were more interested in email, web surfing and chat rooms, a mismatch that saw the firm perform poorly and sold off for just $250 million in 1996. Dumont was a first mover for television sets but lost to late movers like Motorola and RCA who brought in greater innovations to televisions. There was also a leading disposable diaper from Chux which later came to be displaced by Procter & Gamble who brought in Pampers after intense market research bringing on board some additions that appeal to customers. Hill et al. (2013) also give the example of Apple which despite being the first mover for handheld computer, Apple Newton, was overtaken by a later mover, Palm. Chevrolet was a successful late mover in the late 1920s, adopting the automated assembly line by Ford and incorporating significant innovations that made it outdo Ford in the strategy. Lotus was also another successful entity that became more innovative than the first mover in desktop spreadsheet program, Visicalc, developing the 1-2-3 model which became more user-friendly. Further, Visicalc was overthrown by Microsoft who brought in Excel, making it easy to appreciate that late movers learn from the failures and achievements of first movers to produce even better products. Interestingly, Shilling (2007) gives a case of Bill Gates who was not even involved in the initial development of DOS, but bought it from Seattle Computer Works and supplied it to IBM’s PCs. Thus, Microsoft used the late mover advantage, not having to invest in the initial capital, but come in late to make use of already established systems to make business sense. Hill et al. (2013) cite Boeing as a successful late mover, having edged out DeHavilland’s Comet to usher in Boeing 707, a more economical and highly innovative jetliner. There are firms that have fallen victim of late mover disadvantage. Mitsubishi could not fair on well in the flat screen television market already dominated by first movers, Sony and Samsung. The social network firm, iParent.com which came after Facebook could not keep up with the competition and had to wind up leaving the market to Facebook. Renault, an Indian firm had its sedans perform poorly in the market even after it delayed for four years after the entry of sedans in the market (Hawk et al., 2013). Finally, Gotham Concierge, a personal assistance organisation that joined the already competitive market in 2004 closed shop in 2008 following expenses on advertising exceeding returns, perhaps because customers already had their loyalty on first mover brands. Recommendation From this analysis, it would be appreciated that an entity would not have its success guaranteed by basically adopting a first or last mover strategy. With either strategy, the probability of success and failure exist. However, late movers seem to have more advantage. They enter into a market that already has the requisite education on the given product and would not therefore have to incur the cost of product education. They also learn from the experiences of first movers to determine how they would customise their strategies to ensure success (David, 2013). Therefore, even though late movers risk entering a market that has customers already established loyalty with a rival, they stand greater chance of success. Such late mover strategies are what saw Microsoft excel with its spreadsheet application and Chevrolet topple over Ford in its automated assembly strategy (Hill et al., 2013). Therefore, late mover is indeed a more beneficial strategy. Conclusion Before entering a market, it would be critical for an organisation to determine whether to adopt a first or late mover strategy. Even though many firms would pursue innovation so as to introduce new products and services to the market or be the first to enter into a specific market, they could be exposing themselves to numerous risks which would not be present for late movers. Thus, proper analysis of the market situation would play a great role ensuring entities succeed in their marketplaces. References David, F. R. (2013). Strategic management: A competitive advantage approach (14th ed.). Boston, MA: Pearson Education. Eggers, J. P., Grajek, M. & Kretschmer, T. (2011). Decomposing first mover advantages in the mobile telecommunications industry. Berlin: European School of Management and Technology. Retrieved 16 March 2014 from http://business.illinois.edu/ Hawk, A., De-Almeida, G. & Yeung, B. (2013). Fast-mover advantages: Speed capabilities and entry into the emerging submarket of Atlantic basin LNG. Strategic Management Journal, 34 (13), 1531 – 1550. doi: 10.1002/smj.2085 Hill, C., Jones, G., Schilling, M. (2013). Strategic management: Theory (11th ed.). New York, NY: Cengage Learning. Li, J., Lam, K. C. K., Karakowsky, L. & Qian, G. (2003). Firm resource and first mover advantages: A case of foreign direct investment (FDI) in China. International Business Review, 12, 625 – 645. Peng, M. (2012). Global strategy (3rd ed.). New York, NY: Cengage Learning. Shilling, A. G. (2007, February 6). First-mover disadvantage. Forbes. Retrieved 16 March 201 from http://www.forbes.com/forbes/2007/0618/154.html Read More