Abstract
Rapid rate of change in technologies, markets, and other environmental factors makes order of entry as one of the most crucial decisions for business survival and performance in today's world. Pioneering (first-mover) is an important strategy for a firm in today's dynamic and competitive environment. Researchers have shown that, in the developed markets of the world, the pioneers have better performance and profitability than the followers. In this paper, the authors develop a conceptual framework to explain the various factors that might influence a firm's pioneering efforts in the Indian market. They propose specific hypotheses regarding the effect of order of entry on performance (market share, sales, return on investment, and profit before tax) and strategic components (R&D, advertising, promotion, and distribution). They also propose additional hypotheses to examine the association between the strategies and performance, variations within the pioneers group, and the moderating effect of competitive environment on the other relationships.
The authors use secondary data from the CMIE PROWESS database to test the various hypotheses. The sample consists of 394 companies across 32 industry segments which include consumer goods industries such as fast-moving consumer goods, beverages, and consumer durables and industrial goods industries such as cables and mining. They have used the same sample of companies at three different points of time (1993, 1997, and 2001) to test the various hypotheses. The sampling frame is the list of Top 500 Indian companies (Business World, October 7, 2002).
The results confirm the following aspects:
In general, the pioneers perform better than the followers and firms which enter early into the market have larger sales, market share, and profit than followers. Firms which enter first into the market are generally more aggressive in pursuing various strategies such as R&D, advertising, promotion, and distribution. Investments in strategies create entry barriers for competitors who may find it difficult to compete with existing firms as resource requirements are quite high in this scenario. Pioneering advantage seems to be a long-term competitive advantage for busi- nesses as pioneers' performance is consistently better than that of the followers over the years. Although the pioneering effect starts reducing over time in terms of market share, profit margins for pioneers are higher even after considerable length of time.
The authors find that there are large variations in the performance within the pioneers group itself which indicates that there are other factors also, apart from order of entry, with potential bearing on firm's performance. The results show that performance (market share) and strategic variables are closely related and dependent upon each other. Further, they find that the effect of order of entry on performance is stronger for those firms that operate in less intense competitive environment than those that operate in more intense competitive environment.