First Mover Advantage Competitive Advantage Mobile Phone Industry Marketing Essay
Many studies have been conducted in the United states about whether a first-mover advantage is a source of sustainable competitive advantage, but there is still a debate whether this is true or not. My research proposal focuses on the first-mover (dis)advantages and the resource-based view of a firm, which will be applied to the European mobile phone industry, to study whether first-mover advantages are really sources of a sustainable competitive advantage.
“Are first mover advantages really a source of a sustainable competitive advantage in the European mobile phone/tablet industry?”
To answer this research question, the following sub questions are made up, which together will give an answer to the research question:
What are the views on competitive advantage within the perspectives of the industry structure and the resource-based view, and which limitations exist?
What is a first-mover advantage and how can an organization gain advantage of this?
Is the first-mover advantage sustainable in an industry?
Can a latecomer in the industry overcome “latecomer” disadvantages and successfully gain a leading position?
This research consists of two parts, a theoretical block and an empirical block. The theoretical part introduces existing knowledge about two competitive streams of thinking and first-mover advantages. This is done by a comprehensive literature study. The main aim of this part is to relate previous research with this study. The second block concerns the empirical research.
This assignment is a research proposal, which implies that the actual field research will not be a part of this report. This means that no actual conclusions and discussion can be provided.
Chapter two discusses the literature review. This chapter includes different streams of thinking concerning theories about competitive advantages, which eventually will be related to first-mover advantages. Chapter 3 uses the input from chapter 2 to develop a theoretical model and to formulate hypothesizes. This chapter forms the basis of the research that has to be carried out. Chapter 4 will discuss the methodology. The methodology section is about ‘the science of finding out’; it describes the procedures for scientific investigation (Babbie, 2009). Besides the data collection process, this chapter is also about validity and reliability. Finally, this chapter also deals with the actual data analysis methods that are used to put the research into practice.
An analytical introduction to competion
One of the main issues in strategy research is: Why do organizations differ in their behavior and their profitability? In answering this question, researchers have often selected to view organizations as independent entities striving for competitive advantage from either external industry sources (e.g. Porter, 1980) or from internal resources and capabilities (e.g. Barney, 1991).
An introduction to first-mover advantages
Organizations are constantly trying to outperform other organizations, by implementing different, superior strategies. According to Porter (1996), an organization can outperform competitors when the organization is able to create a difference that it can preserve. The organization is able to do so by (1) delivering greater value to customers, (2) create comparable value at lower cost or (3) do both. Lieberman & Montgomery (1988) suggested that an organization adopting a first-mover strategy, might be able to secure and sustain positive returns.
I define the first-mover advantages as “advantages in terms of the ability of pioneering firms to earn positive economic profits” (Lieberman & Montgomery, 1988). Research point out that pioneering organizations obtaining superior resources and capabilities, enjoy first-mover advantages and thus generates higher levels of market share or financial revenues than later entrants (Frawley and Fahy, 2006).First-movers may gain advantages from several sources, such as learning effects, control of scarce resources or by creating buyer switching costs (Boulding and Christen, 2001; Lieberman and Montgomery, 1988). Lieberman and Montgomery (1988) argue that there are three sources of advantage from first moving. The first source of advantage is about the pre-emption of scarce resources. The second source of advantage comes from technological leadership, which results from successful patents and R&D and from learning curve effects. The third category is deals with influencing the behavior of buyers (switching costs). Lieberman (2008) added a fourth source, which is referred to as network effects. NETWORK EFFECTS “These potential sources of advantage can be offset, however, by higher costs or risks faced by the pioneer” (Lieberman, M., 2005).
Potential sources of first-mover advantages in the mobile phone industry
Pre-emption of scarce assets
Earlier research on first-mover advantages showed that market entrants could be able to acquire superior resources of different types and select the most attractive niches, such as (1) physical resources, (2) geographic positions, and (3) positions in customer perceptual space (Lieberman, M., 2005). For example, when a product requires certain natural resources, a first-moving organization may be able to gain control over their supply (Lieberman and Montgomery, 1988). On the distribution end, organizations may be able to secure major sites. Dos Santos and Peffers (1995) illustrate this with banks, where “early moving” banks get the best sites for their cash dispensers. Other comparable assets that may be pre-empted by first movers may only support to gain and sustain an advantage in limited conditions. These contain geographic space and investing in plants to try to reach economies of scale (Lieberman & Montgomery, 1988).
The behavior of buyers constitute of opportunities for the first-mover to achieve a differentiation advantage or a cost advantage to be endowed in the first/mover by the marketplace (Kerin, Varadarajan and Peterson, 1992). Before later entrants enter, first movers have a monopoly over what consumers see and learn (Dos Santos & Peffers, 1995). Organizations are gaining experience and asymmetric information about the customer, form customer learning, and create switching costs (Kerin, Varadarajan and Peterson, 1992).Switching costs provide incentives for an established relationship to continue. An example in relation to the mobile phone industry is that application stores of manufacturers sell applications that will only work on their operating system. Apple did so with the iPhone. Applications that customers bought would only work on iOS (operating system for iPhones). Apple built their image early with customers (Cho et al., 1998), and educated the customers on what a smartphone should be in general, so that they think that what the first mover offers is what the product should be like (Bohlmann et al., 2002; Brown & Lattin,1994).
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