What are first and second movers in international market entry? Giving examples discuss their advantages and disadvantages (initial introduction to the topic from Chapter 9)
Sample Answer
Sample Answer
Exploring First and Second Movers in International Market Entry: An Analysis of Advantages and Disadvantages
The concepts of first and second movers in international market entry play a crucial role in shaping the competitive landscape for firms venturing into global markets. A first mover refers to a company that enters a new market with a product or service before any other competitors, while a second mover follows suit by entering the market after the first mover has established a presence. This essay aims to explore the advantages and disadvantages associated with being a first or second mover in international market entry through real-world examples and case studies.
First Mover Advantage
Advantages:
1. Market Leadership: First movers have the opportunity to establish themselves as market leaders, gaining a significant share of the market and building brand recognition before competitors enter.
2. Early Adopter Advantage: Being the first to introduce a new product or service can lead to higher customer loyalty and preference, as consumers may associate innovation and quality with the first mover.
3. Technological Edge: First movers can leverage their early entry to develop proprietary technologies or processes, creating barriers to entry for competitors.
Example: Apple Inc.
Apple’s launch of the iPhone in 2007 positioned the company as a first mover in the smartphone market. By introducing a revolutionary product with a user-friendly interface and app ecosystem, Apple captured a substantial market share and set industry standards for smartphone design and functionality.
Second Mover Advantage
Advantages:
1. Learning from First Mover’s Mistakes: Second movers can observe and learn from the strategies and missteps of first movers, allowing them to avoid costly mistakes and refine their market entry approach.
2. Cost Savings: Second movers may benefit from reduced research and development costs, as they can replicate or improve upon existing products or services without the need for extensive innovation.
3. Market Segmentation: Second movers can target specific market segments that may have been overlooked by first movers, catering to unique customer needs and preferences.
Example: Samsung Electronics
Samsung’s entry into the smartphone market as a second mover allowed the company to study Apple’s iPhone success and develop competitive products such as the Galaxy series. By offering a diverse range of smartphones at various price points, Samsung captured a significant market share and emerged as a strong competitor to Apple.
Disadvantages for Both First and Second Movers
While there are distinct advantages to being a first or second mover in international market entry, both strategies come with inherent risks and challenges.
1. First Mover Disadvantages:
– High Risk: First movers face the risk of investing significant resources in unproven markets or technologies, with no guarantee of success.
– Imitation by Competitors: First movers risk having their innovations imitated or improved upon by fast-following competitors, eroding their competitive advantage.
– Limited Market Knowledge: Early entrants may struggle to adapt to evolving market conditions or consumer preferences, leading to potential setbacks.
2. Second Mover Disadvantages:
– Catch-Up Challenge: Second movers may find it challenging to catch up to established first movers in terms of market share, brand recognition, and customer loyalty.
– Perceived Lack of Innovation: Second movers may be perceived as imitators rather than innovators, impacting their ability to differentiate their products or services.
– Missed Opportunities: Delayed entry into a market can result in missed opportunities for capturing early adopters or gaining a foothold in key market segments.
In conclusion, the decision to pursue a first or second mover strategy in international market entry involves weighing the potential advantages and disadvantages associated with each approach. While first movers have the opportunity to establish market leadership and technological dominance, second movers can benefit from learning from predecessors’ experiences and capitalizing on market gaps. By understanding the nuances of first and second mover strategies and leveraging their unique strengths, firms can navigate the complexities of international market entry effectively and sustainably.
