What sets an organization apart -- competitive edge

Controlling or having something others do not have Doing something better than other organizations

Doing something other organizations cannot do

Competitive strategies are designed to exploit an organizations competitive advantage Implies there are other competitors also trying to develop competitive advantage & attract customers Competitive advantage can be eroded easily (& often quickly) by rivals actions

When organizations battle for some desired object or outcome

Customers Market share Survey rankings Needed resources

Hyper-competition A situation of intense and continually increasing levels of competition in todays business environment

(1) Industry perspective

Supply Side

Identifies competitors as firms that are making the

same products or providing the same service Describes industries according to number of sellers & the similarities or differences in the products or services
The number of sellers & level of product-service differences will affect how intensely competitive the industry is

(2) Marketing perspective

Demand Side

Competitors are firms that satisfy the same

customer needs How similar are the benefits that customers derive from the products and services that other firms offer? Intensity of competition depends on
How well the customer need is understood or defined How well different firms are able to meet that need

Industry

Market

Same Product-Service

Customer Needs

(3) Strategic Group Perspective

Competitors are firms that follow similar strategies
Strategic group is a set of firms competing within an

industry that have similar strategies & resources A single industry could have a few or several strategic groups depending on what strategic factors are important to different group of customers

Strategic Group Perspective (contd)

Firms in same strategic group have two or more

competitive characteristics in common

Sell in same price/quality range Cover same geographic areas Be vertically integrated to the same degree Have comparable product line breadth Emphasize same types of distribution channels Offer buyers similar services Use identical technological approaches

Group of firms pursuing same or similar strategy with similar resources

Although McDonald's and Subway are both in the fast food business, they dont really take into account what the other is doing before formulating their strategies... On the other hand, Burger King and McDonald's have a lot in common both have a similar strategy of serving low priced fast food to the average family

Possible strategic dimensions for identifying strategic groups

Price Quality Geographic scope Product line breadth-depth R&D expenditures Product characteristics

The purposeful and coordinated monitoring of your competitor(s)

QUESTIONS Where do they add customer value?
Do they offer higher quality, lower price, better service, or excellent credit terms?

Which customers are your competitors most interested in?

Do they seek your best customers, the ones you dont want, or do they go for everyone?

What is their cost base and liquidity?

How much cash and working capital do they have?

Are their suppliers better than yours?

Are they less exposed with their suppliers than your firm?

What do they intend to do in the future?

Do they have a your market segments targeted? Are they committed to growth?

How will their activity affect your strategies?

Should you adjust your plans and operations?

Do either of you have a competitive advantage in the marketplace?

How much better than your competitor do you have to be to attract customers?

Will new competitors emerge over the next few years?

Who is a potential new entrant?

If you were a customer, would you choose your product over those offered by others?
What irritates your current customers?

Every firm has resources & work processes

Systems to do whatever its in business to do

But not every firm is able to

Effectively exploit its resources & capabilities Obtain resources & capabilities it needs

Some firms are able to pull it together & develop distinctive capabilities, others dont Competitive advantage implies gaining the edge on others using resources & capabilities As firms strive for sustainable CA, stage for competition is set - intense, moderate or low

What is competitive strategy?

Consists of business approaches to Attract customers by fulfilling their expectations Withstand competitive pressures Strengthen market position Exploits competitive advantage by finding ways to use resources & capabilities to set firm apart from competitors

Anjali Mukerjees Health Total (AMHT)is an 8-year old, Rs. 3 crore company in the market for health/fitness programmes. The company offers two related product lines: 3 health programmes and 9 health foods in the form of snacks. The brand aims at delivering 2 major promises: health and beauty through health. It has thus positioned itself on a health and beauty through nutrition platform, distinguishing itself from other fitness programmes such as Talwalkars, VLCC, etc. It caters to Sec A1,A, and B customers through 4 centres in Mumbai and 2 in New Delhi. In addition to the new products it is planning for delivering beauty through the health route, the company sees opportunities in preventive health care and is aiming at growth through collaboration in this area, expanding its presence into at least the top 10 Indian cities. The market for health/fitness and beauty programmes straddles the health care and the beauty industries, and is highly fragmented in structure. The health-and-fitness market may be segmented as below in terms of consumer perceptions: Health programmes such as AMHT National level fitness programmes such as Rama Bans, VLCC, Talwalkars Smaller local players in different parts of the country, of which there are scores Though there is a fair amount of overlap between health programmes and beauty programmes, some programmes such as Shahnaz Hussains and Jamuna Pais have been able to acquire a distinct consumer perception as exclusively beauty oriented programmes. The health/fitness and beauty programmes attract a lot of indirect competition from yoga and meditation pragrammes like Siddh Samadhi Yoga & from Ayurvedic Centres, gyms, and the like. This unstructured and fragmented nature of the market makes it difficult to guess its size and growth

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Primary Activities

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Inbound Logistics
Primary Activities

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Primary Activities

Operations

Inbound Logistics

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Operations

Primary Activities

Outbound Logistics

Inbound Logistics

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Procurement
Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Technological Development Procurement

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Support Activities

Human Resource Management

Technological Development Procurement

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Firm Infrastructure
Support Activities

Human Resource Management

Technological Development Procurement

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Identifying Resources and Capabilities That Can Add Value

Value Chain Analysis

Firm Infrastructure
Support Activities

Human Resource Management

Technological Development Procurement

Operations

Outbound Logistics

Primary Activities

Marketing & Sales

Inbound Logistics

Service

Competitive advantage will arise through:

Providing buyer value comparable to competitors by performing value chain activities more efficiently cost based advantage

and / or

Performing value chain activities in unique ways that create greater buyer value than competitors and hence command a premium price differentiation based advantage

Competitive advantage arises from one of two sources:

Performing the same activities as competitors, but at a

lower cost Performing a different set of activities or activities that are perceived as unique in the industry, and charging a premium

Another important factor is the scope of the product-market (broad or narrow)

Mix of these factors provide basis for

Cost leadership strategy (low-

cost strategy) Differentiation strategy Focus strategy

Competitive Advantage
Low Cost

Differentiation
Targeting the whole market with the chosen strategy Targeting a specific segment of the market

Broad

Cost Leadership Focus (Low Cost)

Producing products at a lower price than competitors

Differentiation

Market Scope
Narrow

Focus (Differentiation)
Differentiation of products and selling them at a premium price

Cost: Design, produce & market more efficiently than competitors

Differentiation: Deliver unique & superior value in terms of product quality, features, service

Determine your Competitive Scope:

Number & Nature of segments you will compete in

Strategy focus: organize value adding activities to be the lowest cost producer of a product in an industry Low cost implies OVERALL LOW COST
Also, product quality cannot be ignored

Champion frugality Strict attention to production controls Rigorous use of budgets Limited market segmentation Emphasis on productivity improvements Distinctive capabilities found in manufacturing & materials management

A cost leader does not try to be an industry innovator The overriding goal is- increased efficiency & lower costs relative to rivals
All functional strategies & capabilities are directed at

Will seek to minimize costs in marketing, R&D & production

Every strategic decision is aimed at keeping cost as low as

efficiency

Doesnt have deep & wide product lines Market products aimed at average customer Little product differentiation: Little or no product frills or differences

possible

 Price competition is vigorous

Product is standardized or readily available from

many suppliers There are few ways to achieve differentiation that have value Most buyers use product in same ways Buyers incur low switching costs Buyers are large and have significant bargaining power

Higher profits resulting from charging prices below that of competitors, because unit costs are lower
Even at same price more efficient cost leader generates

greater profitability

Increase in market share and sales by reducing the price below that charged by competitors (assuming price elasticity of demand)

Is a barrier to entry for competitors trying to enter the industry

Analysis of the value chain identifies where cost savings can be made in the various parts and links With a cost leadership strategy, the value chain must be organized to:
Reduce per unit costs by copying, rather than original

design, using cheaper resources, producing basic products, reducing labor costs and increasing labor productivity Achieve economies of scale by high-volume sales Using high-volume purchasing to get discounts Locating where costs are low

Cost Leadership

1. Economies of scale through utilization of excess capacity

2. Automation / utilization of robotics in manufacturing processes

3. Development of efficient distribution networks 4. Implementation of TQM (Total Quality Management) initiatives

Being overly aggressive in cutting price Low cost methods are easily imitated by rivals Becoming too fixated on reducing costs and ignoring

Buyer interest in additional features (tastes) Declining buyer sensitivity to price

Changes in how the product is used

Technological breakthroughs open up cost reductions for rivals

Differentiation strategy focuses on changing customer perception about a product, i.e., that the product is superior to other products Based on actual superiority (superior features) or perceived superiority

Offer products/services that create value to customers Offer products/services not easily matched or easily copied by rivals Not spending more to differentiate the firms products or service than the price premium that can be charged

 Unique taste -- KFC

Special features Nissan Micra

Superior service -- FedEx, Aquaguard Spare parts availability -- Maruti

More for your money -- McDonalds, Wal-Mart

Quality manufacture -- Honda , Toyota Technological leadership -- 3M Corporation,

Intel, Apple Top-of-the-line image -- Ralph Lauren, Chanel

Every strategic decision & action is directed at setting the firm apart from competitors All functional strategies & capabilities are aimed at isolating & understanding specific market segments & developing product features that are valued by customers

Has broad and wide product lines -- many different models, features, price ranges, etc.

Has many market segments & product features

Controls costs but not as rigorous as the cost leader to preserve source of differentiation Competitive capabilities tend to be in marketing and research & development

Will have significant expenditures in R&D & production.

Because you want to make high quality/highly

desirable product

Will have significant expenditures in marketing

Because you need to create maximum awareness

& brand equity

When there are many ways to differentiate a product and appeal to customers Buyer needs and uses are diverse Few rivals are following a similar type of differentiation approach Technological change is fast-paced and competition is focused on evolving product features

Products will get a premium price Demand for products is less price elastic than that for competitors products
Builds Brand Loyalty

It is an additional barrier to entry for competitors to enter the industry

 as you develop greater brand equity through increased product quality & awareness . You develop greater brand loyalty.
The greater the loyalty.. the less the price sensitivity

Analysis of value chain identifies the parts through which superior products can be created and customer perception may be changed

With differentiation strategy, the value chain must be organized to:

Create products that are superior to competitors products

in design, technology, performance, etc. Offer superior after-sales service Have superior distribution channels Create a strong brand name Create distinctive or superior packaging

Differentiation
1. Developing innovative products/services to broad range of customers 2. Significant investments in R&D 3. Capability to generate a series of successful new products over time

Difficulty in maintaining long-term distinction in customers eyes Agile competitors can quickly imitate
Expense of maintaining premium pricing requires greater marketing costs

Trying to differentiate on a feature buyers do not perceive as valuable Not understanding what customers want or prefer and differentiating on the wrong things Low-cost strategy can defeat a differentiation strategy when customers are satisfied with a standard product and do not see extra attributes as worth paying for! Over-differentiating such that product features exceed customers needs Charging a price premium that customers perceive is too high

Targets a segment of the product market, rather than the whole market or many markets
Segment is determined by the bases for segmentation
Geographical area Type of customer -- specific group of customers Specific & specialized product line

Within the segment, either cost leadership or differentiation strategy is used

Approach 1: Cost Advantage

Achieve lower cost than rivals in serving the specific

or narrow segment

Approach 2: Differentiation Advantage

Offer customers in niche market something unique

in that market
Product features Product innovations Product quality Customer responsiveness

Focus Low-cost
Ikea: Young furniture buyers who want style at low cost (price

sensitive and low service customer groups) Southwest Airlines: Short-haul, point-to-point service between midsize cities & secondary airports in large cities (low pricing & low service)

Focus Differentiation
Rolex: Serve highest end of wristwatch market (premium

pricing & image) Rolls-Royce: Serving luxurious end of automobile market (premium pricing & image)

Lower investment costs required compared to a strategy aimed at the entire market or many markets It allows for specialization and greater knowledge
It makes entry into a new market more simple

The focuser can stay close to customers and respond quickly to their changing needs Focuser can develop strong brand loyalty which can be difficult for other competitors to overcome

The focuser knows its market niche and knows it well

Operates in small scale making it difficult to lower costs significantly. Technological advances have minimized this drawback Competitors find effective ways to match a focusers capabilities in serving niche market Niche can become part of the overall market Segment becomes so attractive it becomes crowded with rivals, causing segment profits to be splintered

Cost Leadership
Product Differentiation Low (principally by price)

Differentiation
High (principally by uniqueness) High (many market segments) Research and development sales and marketing

Focus
Low to High (price or uniqueness) Low (one or a few segments)

Market Low Segmentation (mass market)

Key Core Competence

Manufacturing and materials management

Any kind of distinctive competence

Generic Strategies and Industry Forces

Industry Force
Entry Barriers Buyer Power

Generic Strategies
Cost Leadership
Ability to cut price in retaliation deters potential entrants. Ability to offer lower price to powerful buyers.

Differentiation
Customer loyalty can discourage potential entrants. Large buyers have less power to negotiate because of few close alternatives.

Focus
Focusing develops core competencies that can act as an entry barrier. Large buyers have less power to negotiate because of few alternatives. Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases. Specialized products & core competency protect against substitutes.

Supplier Power

Better insulated from powerful suppliers.

Better able to pass on supplier price increases to customers.

Threat of Substitutes

Can use low price to defend against substitutes.

Customer's become attached to differentiating attributes, reducing threat of substitutes. Brand loyalty to keep customers from rivals.

Rivalry

Better able to compete on price.

Rivals cannot easily meet differentiationfocused customer

Risks of Cost Leadership

Cost leadership is not sustained: * Competitors imitate. * Technology changes. * Other bases for cost leadership erode.

Risks of Differentiation
Differentiation is not sustained: * Competitors imitate. * Bases for differentiation become less important to buyers.

Risks of Focus
The focus strategy is imitated. The target segment becomes structurally unattractive: * Structure erodes. * Demand disappears. Broadly targeted competitors overwhelm the segment: * The segments differences from other segments narrow. * The advantages of a broad line increase. New focusers sub-segment the industry

Cost focusers achieve even lower cost in segments.

Differentiation focusers achieve even greater differentiation in segments

The big risk

Selecting a stuck in the middle strategy!

This rarely produces a sustainable competitive advantage or a distinctive competitive position

Happens when a firm is not successful in pursuing either a low-cost or differentiation strategy Occurs when a firms
Costs are too high to compete with the low-cost leader

Products & services are not differentiatied enough to

compete with broad differentiator

Unprofitable strategic position/direction Becoming unstuck involves making consistent strategic decisions about what CA to pursue & doing so by aligning resources & capabilities

A hybrid strategy may be successful, although Porter argues that either differentiation or cost leadership must be used (a mix of the two leads to being stuck in the middle)
Cost leadership alone does not lead to sales of products Differentiation strategies may be used to increase sales volume,

rather than charging a premium price

Price may be used to differentiate

Generic strategy doesnt create competitive advantage, rather it is a model to help an organization in analysis

Integrated Low-Cost, Differentiation Strategy

Develops CA by simultaneously achieving low-cost and

high levels of differentiation

Make an upscale product at a lower cost Give customers more value for the money

Technological advancements that make this hybrid

competitive strategy possible are

Flexible manufacturing systems Just-in-time inventory systems Computer-integrated manufacturing systems

Examples of Integrated low-cost differentiation strategy

Toyota & Honda Cost reduction through zero defects and differentiation through quality
Wal-Mart Cost reduction through automation and differentiation through quality (more value)

 Depends on Current firm resources & capabilities in place Fir resources & capabilities acquired & developed Each of Porters competitive strategies requires certain

skills, resources, & organizational abilities

Abell says that the standard two dimensional way of looking at a business (products and markets) has serious flaws. He suggests a three dimensional model, with 3 axes

Emphasizes that products are merely a physical manifestation of the application of a particular technology to the satisfaction of a particular function for a particular customer group. The choice is one of technologies, functions and customers to serve, not of products to offer. Central in the model is the Customer, not the Company itself

Prospector Analyzer Defender Reactor

PROSPECTOR

Operates in a broad product-market domain Wants to be the 'first-mover' in a market, even if not profitable Rapid responses to early signals of opportunity Competes by meeting new market opportunities may not maintain strength over time in these markets Locates & maintains secure position in stable markets Offers limited range of products & services than competitors Protects its domain offers lower prices, higher quality, better service Not at the forefront of tech or new product development Intermediate type fewer changes than Prospector, more than Defender Maintains stable product line, but is careful about offering selected new developments Rarely the first-mover mostly enters 2nd or 3rd, with a low cost or high quality / service offering No well defined competitive strategy No consistent product-market orientation Not aggressive Reacts only when forced by environmental pressures

DEFENDER

ANALYZER

REACTOR

Miles and Snow typology

Prospector
Seeks innovation Survey dynamic environment and develops new products Competitors are uncertain about prospectors future decisions and actions seek first mover advantages by introducing new products and services OFFERS A BROAD PRODUCT LINE Learning orientation; flexible, fluid, decentralized structure Strong capability in research Values creativity, risk-taking, and innovation

Miles and Snow typology

Defender
Searches for market stability Limited product line Seeks to defend position Prevents others from entering its turf Can create and maintain niches Not likely to innovate Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead Close supervision; little employee empowerment

Miles and Snow typology

Analyzer
represent a middle ground between prospectors and defenders and
emphasize flexibility and second mover advantages Strategy of analysis and imitation

Copies promising new activities Operates in 2 markets (one stable, one variable)
Emphasizes efficiency in stable markets Emphasizes innovation In variable markets

Miles and Snow typology

Reactor
Lacks a strategic plan Reacts to environmental changes
Makes adjustments when forced to Unable to respond quickly to changes Responses to the environment are often ineffective

Tends to make piecemeal strategic changes

Offensive Moves: Direct attacks undertaken to

build new or stronger market positions and/or create competitive advantage

Defensive Moves: Undertaken to

protect competitive advantage reduce risk of being attacked discourage the offensive strategies of rivals blunt the impact of any attack Rarely a basis for creating competitive advantage

Counter-parry: fending off a competitors attack in one country by attacking in another country

1. 2.

Match / exceed competitive strengths

Capitalize on rivals weaknesses Simultaneous initiatives on many fronts

End-run offensives Guerilla offensives

3.
4. 5. 6.

Preemptive strikes

1. Attacking Competitor Strengths

Appeal Gain market share by out-matching strengths of weaker rivals Whittle away at a rivals competitive advantage

Challenging strong competitors with a lower price is risky, unless aggressor has a COST ADVANTAGE or advantage of GREATER FINANCIAL STRENGTH!

Attacking Competitor Strengths (contd.)

Possible Offensive Options

Offer equally good product at a lower price Develop low-cost edge, then use it to under-price rivals
Leapfrog into next-generation technologies Add appealing new features Run comparison ads

Construct new plant capacity in rivals market strongholds Offer a wider product line
Develop better customer service capabilities

2. Attacking Competitor Weaknesses

Basic Approach

Concentrate ones competitive strengths & resources directly against rivals weaknesses Concentrate on geographic regions where rival has weak market share Go after buyer segments rival is neglecting Go after more performance-conscious customers of rivals

Weaknesses to Attack:

Attack rivals with weaker advertising & brand recognition

Challenging rivals where they are most vulnerable is more likely to succeed than challenging them where they are strongest, ESPECIALLY when challenger possesses competitive advantage in areas where rivals are weak!

3. Launching offensives on many fronts

Objective Launch several major initiatives to

Throw rival off-balance, Splinter its attention in many directions, and Force it to use substantial resources to defend its position

Eg. new product introductions coupled with increases in advertising and reductions in price)
Appeal A challenger with superior resources can overpower a weaker rival by outspending it across-the-board long enough to buy its way into the market

4. End-run offensives
Manoeuver around rival firms rather than meeting them head on
Objective

DODGE head-to-head confrontations that escalate competitive intensity

Appeal Force competitors into playing catch up Change rules of competition in aggressors favor

End-run offensives (contd.)

Approaches:

Introduce products that re-define market in terms of competition

Introduce next-generation technologies & leapfrog rivals

Introduce products with different attributes & features to better meet buyer needs

Build presence aggressively in new geographic markets where rivals have little or no market presence
Come up with more support services for customers

5. Guerrilla Offenses
Approach

Use principles of surprise & hit-and-run to attack in locations & at times where conditions are most favorable to initiator

Selectively capture market share from rival leaders when the lack of resources or market visibility prevents a full scale
offense

Appeal

Well-suited to small challengers with limited resources

Guerrilla Offenses (contd.)

Options:

Focus on narrow target weakly defended by rivals Challenge rivals where they are overextended & when they are encountering problems Make random scattered raids on leaders with Eg.: Sponsoring the Indian cricket team tactics such as

failed for Nike, as Reebok managed to Occasional low-balling on price put branded stickers on their bats, at Intense bursts of promotional activity far less cost but for a much greater return Legal actions charging antitrust violations,

patent infringements, & unfair advertising

Approach

Involves moving first to secure an advantageous position that rivals are discouraged from duplicating!

Preemptive strikes (contd.)

Options:

Expand capacity ahead of demand in hopes of discouraging rivals from following suit Tie up best or cheapest sources of essential raw materials Move to secure best geographic locations

Obtain business of prestigious customers

Build an image in buyers minds that is unique & hard to copy Secure exclusive or dominant access to best distributors

Secure pricing advantages with long-term supply contracts

Acquire desirable, but struggling, competitor

Competitive advantage areas offering strongest basis for a strategic offensive:

Develop lower-cost product design Make changes in production operations that lower costs or

enhance differentiation lowers users costs

Develop product features that deliver superior performance or Give more responsive customer service Escalate marketing effort

Pioneer new distribution channel Sell direct to end-users

Objectives:

Lessen risk of being attacked Blunt impact of any attack that occurs Influence challengers to aim attacks at other rivals Strengthen firms present position Help sustain any competitive advantage held

Approach #1 Block avenues challengers can take in mounting offensive attacks Approach #2 Make it clear any challenge will be met with strong counterattack

DEFENSIVE STRATEGIES: APPROACH #1

Broaden product line to fill gaps rivals may go after Keep prices low on models that match rivals

Sign exclusive agreements with distributors

Offer free training to buyers personnel Give better credit terms to buyers

Reduce delivery times for spare parts

Increase warranty coverages Patent alternative technologies

Sign exclusive contracts with best suppliers

Protect proprietary know-how

DEFENSIVE STRATEGIES: APPROACH #2

Publicly announce managements strong commitment to maintain present market share

Publicly announce plans to construct new production capacity to

meet forecasted demand Give out advance information about new products, technological

breakthroughs, & other moves

Publicly commit firm to policy of matching prices & terms offered by rivals

Maintain war chest of cash reserves

Make occasional counter-responses to rivals moves

1) 2) 3)

Always counter an attack with equal or greater force Defend every important market Be forever vigilant in scanning for potential attackers. Assess the strength of the competitor. Consider the amount of support that the attacker might muster from allies

4)

The best defense is to attack yourself. Attack your weak spots and rebuild yourself anew
Defensive strategies: the domain of the market leader

5)

Popular strategy for multinationals Respond to attack by attacking competitor in another country
Ex.: KodakWhen Fuji attacked Kodak in the

U.S., Kodak retaliated by attacking Fuji in Japan. Goodyear also attacked Michelin in Europe as response to attack in U.S.

WHEN to make a strategic move is often as crucial as WHAT move to make First-mover advantages arise WHEN
Pioneering helps build firms image & reputation Early commitments to raw material suppliers, new

technologies, & distribution channels can produce cost advantage Loyalty of first time buyers is high Moving first can be a preemptive strike

Arise WHEN

Costs of pioneering are sizable & loyalty of first time buyers is weak Rapid technological change allows followers to leapfrog pioneers Skills & know-how of pioneers are easily imitated by late movers It is easy for latecomers to crack market