Market Entry Timing Strategy Essay

Empirical study (Robinson and Fornell, 1985) shows that primary mover 20%, advance(prenominal) followers 17%, and late appetizers 13% marketplace sh atomic number 18. Robinson (1988) believes that the sanctify of admittance alone explain 8.9% of the variation in market sh ars. It has been shown that the eight-day the elapsed time between ledger entry of the first mover and that of posterior entrants, the more than opportunities becomes avail adapted to the first mover to achieve apostrophize and speciality advantages. A longer response time provides the first mover to further awargonness and mental testing that contribute to category learning and for consumers to integrate into their holding additional information through and through media and WoM.Lieberman and Montgomery (1988) believe that first-mover advantages arise from tether primary sources Technological lead, pre-emption of assets, and buyer switching approach. Technological leading provides a learning cur ve, where unit crossingion f both told with cumulative output, which generates a sustainable cost advantage for the early entrant if learning asshole be kept proprietary and the firm poop maintain leadership in market sh be. If the first-mover has shining information, it may be able to grasp assets at market prices below those that will prevail afterwards in the evolution of the market, such as natural resources and retailing or manufacturing locations.Where there is room for scarcely a limited number of profitable firms, the first-mover nates often select the most attractive niches and may be able to take strategic actions that limit the amount of space available for posterior entrants. With switching cost, late entrants must invest extra resources to attract customers off from the first-mover firm. Buyer may rationally stick with the first brand they fiddle that performs the job satisfactorily. Brand loyalty of this sort may be particularly strong for affordable c onvenience goods. Thus, late entrants must moderate a truly superior product, or else advertise more frequently or more creatively.Schnaars (1986) implies that the early bird normally catches and retains the worm. Me-too products introduced by later entrants were a lot more likely to fail. Second entrants obtain on the average only about three-quarters of the market sh ar of the innovator, and later entrants are able to suppress progressively smaller shares. Consumers t suppress to know and favour the pioneering product, they have no reason to experiment with subsequent entries. These cost advantages put later entrants at a competitive disadvantage, and pioneers may be able to erect entry barriers that lock out subsequent entrants. Late entrants can also go through that the field is crowded and the market offers little prospect. However, a well-conceived second-but-better entry, plump for by aggressive advertising, may be able to surpass the pioneers entry. Later entrants mus t be better in terms of functioning or price, or both, if they are to have any chance of success. many an(prenominal) firms with strong market orientation seem to embrace later entry.No one entry strategy proved best in all situations. Primary pull in for the pioneer is to build an unassailable position earlier later entrants recognize the promise of the market or are unforced to take the risks of an early entry. It is most appropriate when take care and reputation are important to the customer, experience effects are important and not intimately copied, brand loyalty accrues to the pioneer, and cost advantages can be obtained by early commitment to suppliers and channels. It carriers many risks, because almost every aspect of an emerging market is unknown. Many pioneers end up pursuing false leads that later entrants are able to obviate. Thus it must be willing to commit a great deal of money for R&D and educate customers. The chances of a pioneer getting the product right for the first time are almost nil. One study found that it takes seven to eight old age on the average before a firm that enters a parvenue line of business actually turns a profit.Golder and Tellis (1993) express that for pioneers, consumer-based advantage consult to the benefits that can be delivered from the way consumers first choose and then salvation the product. The pioneer may become the standard for the product category, and a pioneer can lock-in some customers in categories that have high switching costs. lxx percent of market leaders are pioneers, and almost half of all pioneers are market leaders. Second firm to enter the market would obtain only 71% as much market share as the pioneer, and third firm to enter would obtain only 58% as much. On the other hand, they believe that if later entrants can leapfrog pioneers with superior technology, positioning, or brand names, firms could better off entering late. Evidence shows that the advantages of creation first-in are almost equally balanced by the many pitfalls and disadvantages.Kerin, Vradarajan, and Peterson (1992) state that one can achieve first-mover status by producing a modern product, use a invigorated process, and/or enter a new market. They distinguish between two perspectives the economic-analytical and the behavioural. The agent indicates that the pioneer creates barriers to entry so it becomes costly for others to follow, this in turn lengthens the lead time, hence enabling the first mover to benefit initially from no competition, and being more experience once new entrants emerge. From the behavioural view, the first mover communication is more effective and it obtains reputational advantage. Through purchase and trial, customers can become more loth(p) to switch. Similarly, there are economic and behavioural views on market contingencies.From the former perspective, the uncertainty of product demands can lower resource commitments and reduce cost advantage due to scale, b ut small scale operations are more efficient. A first mover can influence how attributes are valued, define the ideal attribute combination, and ultimately influence consumers preferences to its benefit over later entrants. The industry relies heavily on advertising and marketing, thus early consumer exposures to advertising is even more beneficial. The technology changes quickly, so the efficacious protection and experience advantage decreases. From the behavioural perspective, products can be intimately evaluated before purchase, so the purchase and trial benefits decrease. The cost of evaluating a product and making a purchase mistake is lower, hence switching costs decreases. But when consumers need to invest in special, related assets, the switching costs increase.However, following firms may benefit from the ability to free-ride on first-mover investments, resolution of technological and market uncertainty, technological discontinuities that provide gate-ways for new entry, and various types of incumbent inertia. They can achieve a CA by influencing consumers preferences rather than responding to them, such by moving away from the pioneer and unwrap a more worthy position. Early entrants main benefit is to learn from the pioneers experience, and avoid many of the onerous costs, along with being able to assess the markets reaction to the pioneers entry.Many early entrants have relied on some combination of marketing clout, product enhancement and low-cost production. Later entries can benefit from the passage of time. If the product form is changing rapidly and standardization has not been achieved, the later entrant may be able to leapfrog earlier entrants by introducing a superior product, backed by market clout. The later entrant can gain a sizable share of proven growth marketing by capitalizing on the low-cost production of me-too products. Many foreign companies pursue this strategy. Late entrant is risky when earlier entrants are able to erec t entry barriers, or the market is already flooded with products that leave no room for enhancement. aim Brothers Persil entered the tablet detergent market as a pioneer, whereby P&Gs Ariel entered as a follower. The former achieved significant customers that stuck to the brand, despite low switching costs. It built a brand image that indicated it was the best, it was innovative and technological advanced. It increased customer choice, which could lead to increased mirth and loyalty. Persil soon enjoyed large or monopoly market-share in the category, and had potentially highest share aft(prenominal) followers enter. Moreover, entering early allowed it to learn from experiences, with more time for trial and error. By entering first, it could create barriers for entry in the retail through shelf-space, and have patent on technology. Persil also set rules for competition on features, benefits and added services.It could also set the price value based or cost based, thus deciding the market. Ariel, on the hand, had the opportunity to assess the market favorableness upon entrance, and needed less knowledge to educate the market. It could learn from Persils mistakes in terms of pricing, and had less risk to brand equity. Ariel also enjoyed lower R&D costs and could free-ride on Persils effort, in addition to develop a better product. The saved time can be utilise for optimal positioning. The two competitors were competing heavily on the price per wash, higher and morose accordingly to each other, starting at 22.0p and 28.0p respectively in 1999, both finishing at 20.0p in 2004, but Ariel did better in the end through learning.In conclusion, one can say that faster entry into the industry does not necessary guarantee absolute competitive advantage. The order of first-mover advantage depends on the degree of fit between the environmental opportunity and the first-movers skills and resources. Market pioneering isnot a strategy that is appropriate for all firms. In organizational reality, firms are more often a later entrant than a pioneer.