When considering whether to be first to enter with a new product and/or into a new market, entrepreneurs must assess whether the first-mover advantages outweigh the first-mover disadvantages. Identify the three influences such an assessment depends on and briefly describe each one.

Question

What will be an ideal response?

Answer 1

Such an assessment depends on (1) the stability of the environment surrounding the entry, (2) the ability of the entrepreneur to educate customers, and (3) the ability of the entrepreneur to erect barriers to entry and imitation to extend the firm's lead time. A good fit between a firm's bundle of resources and the external environment results in superior performance. Entrepreneurs use key success factors to obtain a good fit but environmental changes are highly likely in emerging industries. Environmental stability includes demand uncertainty, technological uncertainty, and adaptation.

Offering a superior product is not sufficient to enable a first mover to make sales; the entrepreneur must also reduce customer uncertainty. To do this, the entrepreneur can offer informational advertising or through demonstration and documentation on how to use the product.

Lead time can be extended if the first mover can erect barriers to entry. Important barriers to entry are derived from relationships with key stakeholders, which may dissuade entry by (potential) competitors. This can be done by: building customer loyalties, building switching costs, protecting product uniqueness, and securing access to important sources of supply and distribution.