One of the important dilemmas faced by the companies and managers in the strategic management process of a business is timing the introduction of new products/technologies into the market. Managers have two options for the introduction of new products/technologies into the market: pioneer vs follower. Each of the two options comes with it own advantages and disadvantages to the marketer. The pioneers enjoy advantages like first mover advantage, high shelf life, and greater market share,while the followers will have advantages like a n already visible market and low chance of failure of their products in the market. But the success or failure of both the pioneering and following strategies depend upon a lot of internal and external factors to the organization.
Advantages and Disadvantages of Pioneering vs Following Strategies
As mentioned in the introduction above, both the pioneering and following strategies have their own relative advantages and disadvantages over the other. One of the key advantages of the pioneering strategies is the quick capture of a significant market share over the rivals. Many studies in the area of strategy have shown that being the first player in the market have shown that first entrants in the market enjoy significant and sustained market-share advantages over other firms in the longterm. Pioneers gain these market share advantage by being the first movers in new technology, advanced products, and innovation in marketing strategies (Kalyanaram and Gurumurthy 1998). Such advantages enjoyed by first movers are known as first mover advantages.
The advantages that are enjoyed by firt movers range from earning a positive image in themarket and creation of a loyal customer base (Thompson and Strickland 2003). Some of these advantages are listed below:
1) Earning the positive image image and reputation in the market for being the first mover
2) Control of total costs through the application of latest technology and innovative supply and distribution channels.
3) Creation of a loyal customer base at an early stage of market entry.
4)Making it difficult for the rivals in the market to imitate their products and services.
Company’s which follow the pioneering strategies gain a lot of competitive advantage over the rivals by being the first in a new and emerging field. Building a competitive advantage which can be sustained is a process which takes time and is generally referred to as the buildup period (Kalicanin 2008). The build-up process can be minimized if a business firm already has all the requisite resources in place and customer response is positive and fast. On the other hand, buildup periods can be longer and painful if the growth in demand is weak and the underlying technology takes several years to master, and takes lot of time to establish the manufacturing capacity. Mostly due to the initial monopoly enjoyed by firms who are the first entrant into the market, they can charge higher prices for the products sold by them in the market and reap maximum profits quickly. The success of a market pioneer depends up on three important factors like having a technological edge over competitors, controlling late entrants access to scarce resources, and build a huge customer base early who can’t switch easily to competitors later. But the conditions under which three factors are most likely to succeed or fail depend upon external environmental factors like the pace of market and technology evolution which are largely outside the control of the firm (Suarez and Lanzolla 2005).
Firms which follow pioneering strategies, also suffer from a lot of disadvantages due to a number of reasons (Lieberman and Montgomery 1988). Some of the disadvantages to firm following the pioneering strategies are:
- Free-rider benefits that can be enjoyed by followers, which enter the market late.
- Uncertainties related to market and technology they adopt.
- Unexpected changes in customer needs and technology being followed.
- Inertia of early entrants.
A lot of factors influence the size of the risk being a pioneer. For example, the R&D (research and development) costs involved in innovation can be very high that they may not recovered easily from the future revenues.
And past research has also proved that risks which are involved in introducing a new product are a lot higher than the costs involved in coming up with incremental product changes (Min et al. 2006). According to a study by Niu, Wang, and Dong (2013), possessing a given set of resources and skills increases the chance of its success. The resources which can determine the success of a a firm are: technical resources and skills, marketing resources and skills, and marketing intelligence. While technical resources and skills refer to the commitment that a firm makes towards research and development, marketing resources and skills refer to possession of people with professional skills, capability to undertake market research, and capability to undertake market research. Marketing intelligence helps a firm to properly identify, analyze, and capture opportunities in the market. But despite not being able to garner a significant market in a quick span of time, market followers also enjoy a lot of benefits over pioneers. The advantages are more clear for big and well established firms in the market. Some researchers in the past have even argued that the ability to quickly follow the innovations of a market pioneer, called as ‘fast follower’ has lot of relative advantages. Well-established firms in the market have lots of established production capacity and marketing prowess which can be quickly deployed to take advantage of the new products/processes which are introduced by other firms in the market. Rather than deploying all these assets early and sustain any significant losses due to the inability to manage a significant market share, it might be better for big firms to track the performance of new products which have entered the market and come with their own products during the growth phase of the product’s life cycle. Moreover, the increased bureaucratic burden and the lack of the nimbleness of startups means that well-established firms generally lack the skills and abilities required for coming out with radical innovations and may not fare well in the early phase of the development of a product. For example, Apple had never introduced any new product category into the market but has taken the existing products and came out with their own variants after making some significant changes to them. This was the case with iPhone where Apple adopted the existing smartphone product category in the market and came out with its own smartphone with a highly innovative multitouch technology. Similarly, market followers also face some serious disadvantages over the well-established players in the market. A major potential disadvantage is the inability to come up with a competing product to the first entrant which can garner some significant market share. Many firms which enter the market late fail in coming up with a challenger product and contend themselves with having a small niche market for their products or ending as being total failures. Unable to challenge the market pioneers, late entrants just come out with low cost alternatives which will be preferred by consumers who can’t afford the expensive products released by market pioneers (Kalyanaram and Gurumurthy 1998).
Firms can either be the pioneers in a field by introducing new products or stay as followers by adopting the products which are already introduced in the market. Both the pioneer and follower strategies have their own advantages and disadvantages. And firms have tasted success in the past by adopting both the strategies. It is entirely dependent upon the market in which the firm is operating and the competition that is being faced in the industry to decide upon which of the strategies to be followed by a firm.