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Strategy Evaluation and Selection
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| Words: 5214 | Submitted: 16-Mar-2012
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3. Strategy Evaluation and Selection
3.1 Market entry decisions
Decisions to enter new markets are notoriously hazardous. Being first into a market can give a firm first-mover advantage, enabling it to entrench itself and making it much harder for new competitors to succeed. There are several notable examples of firms that have achieved this position, but perhaps the best known is how Microsoft came to dominate the computer software market. Although it can be claimed that Microsoft was not, strictly speaking, the first into the market, this is to miss the point. It came to a market early, benefited massively from barriers to entry and gained economies of scale, and became one of the fastest-growing and wealthiest businesses in the world. Late entry into a market is not necessarily a problem if it means that mistakes are avoided and a better product is introduced.
Factors affecting market entry
There are generally perceived to be three market entry positions for any business:
First mover (or pioneer)
Early adopter (or second/third mover)
First movers: First movers can define the product offer, set standards and, most valuably, gain market share and brand awareness. Yet there are significant difficulties and risks in being a first mover. The time and energy building market share may divert attention and resources from other parts of the business. And, because there are no previous entrants from whose experience you can learn, it is easier to make mistakes. First movers that have succeeded (such as Dell and Microsoft) have done so by, among other things, listening to customers, swiftly building and entrenching market share, and constantly driving innovations so that there is a stream of new products entering the market, ensuring that they do not get left behind. These things are hardly revolutionary, proving that there is no secret formula for success, just a constant desire to succeed.
Early adopters: Early adopters can either select profitable or promising market segments, or mimic the first mover’s offering but add additional features to defeat it. The advantage is that early adopters can learn from the first mover (from its mistakes or success) and guarantee that their new approach moves the market on.
The problem is that early adopters will inevitably be compared with the first mover, and every aspect of their offering and its relative strengths and weaknesses will be scrutinized. They also need to attack an entrenched market position and attract customers that may well be satisfied with the first mover.
Furthermore, the margins are unlikely to be the same for early adopters as new market entrants usually create price pressures and a squeeze on margins. What is needed is a clear focus on markets, customers and profits. The obvious approach is to target those areas where ...
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