Taking into account first-mover advantages in the decision to enter the market

Abstract

When attempting to enter a market, it is of the utmost importance to make a well-thought decision. Numerous academics have examined the first-mover advantage literature to determine whether entering first, second, or late is more advantageous. After many decades, there is still no consensus, and it appears that we are in a dialogue of the deaf. This thesis gives a list of first-mover advantages and disadvantages and discusses the symmetry between first-mover advantages and first-mover disadvantages, as well as first-mover advantages and second-mover disadvantages, in order to extent the topic. This list alone is not enough to settle the debate, so we introduce the pattern of development and diffusion. The pattern of development and diffusion contextualises the problem and shows the demonstrates the effect of first-mover advantages on the development of a product category. The relationship demonstrates that a setting can be either dynamic (a market entry has a substantial impact on the product category) or static (a market entry has little effect).
This thesis proposes a model to illustrate the factors that influence the decision to enter the market. Aspects that influence the formulation of a market entry strategy are included in the model. For the sake of simplicity, only the strategy to enter a market has been investigated. Next to the model, we created a flowchart that describes the steps required to develop a market entry strategy. Eventually the goal is to make a well-thought decision. The dialogue of the deaf on first, second or late being most favourable has been the cause of this thesis but the conclusion is none of those. The most important part of first-mover advantages and disadvantages is the effect they bring along with the entry into a market. This thesis claims that first-mover advantages are advantages and disadvantages that may be evaluated over the development of a product category, rather than belonging to any particular order. The weights of (dis)advantages differ over the course of the development so at different points in time, different advantages can be utilised. The first-mover (dis)advantages present aspects that can be utilised at a particular situation. The decision maker should foresee whether, given the current (dis)advantages, after its introduction the situation is most favourable or if the situation is most favourable when you wait, and competitors have entered the market. The combination of the pattern of development and first-mover advantages show this principle and show why the dialogue of the deaf on market order is not useful. The decision to enter a market has never been simple, and it likely never will be. This thesis offers direction for the decision-making procedure and explains how to comprehend it. The complexities of market entry decision making are not yet resolved, but a well-thought decision is getting closer.