Studying order of entry in new geographies: A late firm perspective

Abstract

The question of order of entry into various markets is one of much strategic importance. While it has been studied in the extant literature, the same has been too simplistic in the sense that it focuses only on the difference between the market pioneers and the rest. Given that by definition a majority of firms existing around us will come under the “rest” this dichotomous division of little use. The aim of this study was to bring under greater focus the differences that exist between the various late firms in a market. In particular the patters that emerge in the order of entry across markets in terms of timing of entry, size of players and mode of entry was studied. For this purpose only entry into new geographies (rather than new product market niches or new industries) was concentrated upon. As a first step a literature review was undertaken on the following four themes - first mover advantages, order of entry, the relationship between size and strategy and choice between modes of entry. The same has been summarized in the report. Two ideas deserve special mention as having helped develop the final framework presented. These are the notion of buyer switching cost as a considerable source of first mover advantage and secondly the distinction that was drawn between late entrants (those who chose to enter late) and late comers (those who were late due to historical circumstances). To first study the question of timing of entry the strategies followed by successful late firms was delved into. This is because the question of entry is intimately linked to the belief of achieving final success – the right time to enter. In this regard it was found that timing of entry is determined by occurrence of an inflection point in the market which can aid in the success of late firms despite first mover advantages. This inflection point can either be in the form of strategic window opening up (in the case of latecomers) or in the form of change in the basis of competition/ key success factors (in the case of late entrant). This means that late entry should always be seen in waves each wave associated with a particular inflection point. In order to understand the differences between successive late firms both in terms of type of firm (size) and mode of entry a framework was proposed that took into account the fact that the most persistent difference that exist between latecomers is in terms of customer resources still available to be appropriated. These customer resources are either existing customers or unserved customers. Using buyer switching cost as a metric for measuring the ease of acquiring existing customers and number of unserved customer as a metric still has to offer, a two by two matrix was constructed. Later a dynamic element was added to the same by defining a “early” latecomer and “late” latecomer and understanding how the size of the two and mode of entry would differ while facing the same market situation (as given by two by two). The difference between the two is largely because of the number of incumbent and hence the competitive intensity that each faces. The same dynamic framework was then applied in the context of MNE entry into four Indian industries (Life Insurance, Mobile Service, Automobile, and Consumer Electronics) with reasonable degree of success. Finally some directions for further research have been identified. These include differentiating between the subsequent strategies between different latecomers post entry and extending the model to cover entry into new industries rather than only new geographies.