Question

Explain the First Mover Advantage and the six modes of entry into foreign markets. Identify a foreign market that you will be entering. What are the advantages and disadvantages of each? Identify the best market entry strategy that you will be using for the foreign market of your choice.

Answer 1

The First Mover Advantage is the idea that a nation or a company which first produces goods or creates new manufacturing units, is the one to have a competitive advantage in the same, thus, leading to difficulties for other nations or companies to follow suit. The advantage may most likely prevail where economies of scale take place in the particular sector. A large supplier chain and techonological knowledge resulting from being the first player in the market contribute to the favourable position of the nation or the company.   

To enter in a foreign market, the player has to export products or services and gain an understanding of the demand situation. Development of turnkey projects through a collaborative approach are contracts where operation facilities are built so that they can be be sold to a firm to carry out them. Another way to enter foreign markets is through licensing where a firm wishing to enter a market grants licensee rights to anothe existing firm in the market for the use of a product or service. Franchising models are gaining traction in different parts of the world where the franchisor helps in the business of the franchisee on an on-going basis which helps a new player in the foreign market. Establishing joint ventures is the fifth mode of gaining entry in foreign markets as it helps a business to benefit from the partner's knowledge who is from the host country. Owning a company by buying it provides the status of a local company and special benefits are attained from the local government too.

Thus the various modes of entry into an international business such as exporting, turnkey projects, licensing, franchising, joint venture and wholly owned subsidiaries are the most common ways for entry in an international market. For example, entering a market of Japan by an American animation business can certainly be advantageous as there is already a large number of the young population existing as the target base for anime (animation shows). The language and culture factor may pose as challenge for the American business. A strategy of getting into a joint venture may prove to be ideal as the knowledge of the Japanese firm with regards to knowing the customer base, target audience, culture, etc. can be beneficial to the American firm.