Late Mover Essay

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Also called a late follower or a later market  entrant, a late mover is a firm that enters a market sometime after both the market  pioneer(s) and after early follower firms. While there are no set guidelines in terms of the passage of chronological  time that clearly differentiate late movers from early movers, it is generally acknowledged that  late-mover  firms enter  markets characterized  by significant numbers  of existing competitors and, as such, the markets  are often relatively mature  in terms  of growth  rate.  Kodak, for example, was labeled a very late mover in the inkjet printer  market  when the company  decided to enter this market with its own brand of inkjet printer many years  after  numerous   other  firms  had  established strong  footholds in the market.  Similarly, the CocaCola Company, with its Dasani brand of bottled water, entered  the bottled water market quite late in terms of its earlier high growth but nevertheless has found such a timing strategy to be profitable for the firm and a valuable complement  to the firm’s portfolio of beverage products.

Given that market timing is an important element in  firms’ marketing  strategies—since  firms  seek to make the most of their limited resources  in relation to perceived market opportunities—late movers must often be concerned  with being “too late” to market, which  can  reduce  the  opportunity available to  the firm, as opposed to being “too early” to market, which can  waste  a firm’s resources.  The firm  that  either implicitly  or  explicitly pursues  this  particular  type of market-follower  strategy (where the other type of follower strategy is to be an early follower—entering the market soon after the market pioneer or pioneers) ultimately seeks opportunities to pursue and exploit some  form  of follower advantage.  Specifically, this is typically where the firm’s entry strategy enables it to obtain greater economic or behavioral benefits in comparison  to those achievable by pioneering  firms and earlier follower firms, such as lower-cost  product  development  (as a result  of evaluations  of the pioneer’s new product) or more-effective product positioning (as a result of learning from the pioneer’s marketing mistakes).

At the same time, however, late movers must be sensitive to order-of-entry effects, where there are effects on marketing performance that are directly attributable to the sequence of entry of a firm into a market relative to that of competitors.  For example, research  on frequently purchased consumer goods has found that, as a firm’s order-of-entry increases (e.g., the later it enters in relation to competitors), market share, probability of consumer  trial, and probability of repeat purchase by the consumer are all observed to decrease.

Given the  pros  and  cons  of late  following, it  is not  surprising  then  that  research  on follower firms indicates  there  are  both  late-mover  success stories and stories of failure. Where  late movers have been successful, characteristics  of the  market  have often included that the market demand “explodes” around the same time as the late mover enters the market— suggesting that earlier firms, including the pioneers, were ultimately too early to market and/or  that there is a technological change or development in the market that  enables the late mover to capitalize on the change and introduce  an innovative  product  rather than a me-too or imitation product.

On the other  hand, where late movers have failed, there  may have been  any number  of circumstances faced by such firms, such as being up against strong incumbents  who, individually or collectively, have depleted the potential market to a point where it is not economically viable for a new entrant to enter. Alternatively, there may be psychological factors at work, such as where the market pioneer has become synonymous with the product  category. Still other reasons include that  one or more  incumbent  firms may have found ways to lock in existing customers  to such an extent as to make the economic  switching costs sufficiently high that they discourage customers from considering switching to the product of a new entrant.

The implication  of such findings for late movers is that  there  are a great many risks associated  with later market  entry. There may or may not be profitable opportunities to enter  a market  depending  on the characteristics  of the market and the firms seeking to exploit them and, as such, it is critical that firms considering  such a timing strategy evaluate the circumstances  on an ongoing  basis. For firms already in the market, there are also implications; such firms should be vigilant for openings in the market that may be profitably exploited by late movers who, by choice or circumstance,  ultimately enter markets when such entries may be least expected.

Bibliography:  

  1. Scott G. Dacko, The Advanced Dictionary of Marketing: Putting Theory to Use (Oxford University Press, 2008);
  2. Zachary Finney, Jason B. Lueg, and Noel D. Campbell, “Market Pioneers, Late Movers, and the Resource-based  View (RBV): A Conceptual  Model,” Journal of Business Research (v.61/9, 2008);
  3. Gurumurthy Kalyanaram and Glen L. Urban, “Dynamic Effects of the Order of Entry on Market Share, Trial Penetration and Repeat Purchases for Frequently Purchased Consumer Goods,” Marketing Science (v.11, 1992);
  4. Steven P. Schnaars, Managing Imitation Strategies: How Later Entrants Seize Markets From Pioneers (Free Press, 1994);
  5. Venkatesh Shankar, Gregory S. Carpenter, and Lakshman Krishnamurthi, “Late Mover Advantage: How Innovative Late Entrants Outsell Pioneers,” Journal of Marketing Research (v.25, 1998).

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