行政院國家科學委員會專題研究計畫 成果報告
策略性創業--三個策略觀點的比較
計畫類別： 個別型計畫 計畫編號： NSC93-2416-H-110-038- 執行期間： 93 年 08 月 01 日至 94 年 07 月 31 日 執行單位： 國立中山大學企業管理學系(所) 計畫主持人： 蔡敦浩 計畫參與人員： 藍紫堂、王智鴻、楊清棻 報告類型： 精簡報告 處理方式： 本計畫可公開查詢中 華 民 國 94 年 9 月 29 日
行政院國家科學委員會專題研究計畫成果報告 後進為何能夠先至？以電子零組件廠商為例之研究 計畫編號：93-2416-H-110-038 執行期限：民國93 年8 月1 日至94 年7 月31 日 主 持 人： 蔡敦浩 山大學企業管理學系 教授 計畫參與人員： 藍紫堂 中山大學企業管理學系 博士生 王志鴻 中山大學企業管理學系 碩士生 楊清棻 中山大學企業管理學系 碩士生
一、 Abstract
This study seeks to explain the reasons behind why first-mover advantage is unsustainable in emerging industries. For the purpose of study, four companies in two different industries, namely TFT-LCD backlight module and magnesium alloy enclosure manufactures are categories into two groups based on their entrance position (first-movers and latecomers). Since traditional strategies are much harder to use when analyzing industries undergoing rapid change, thus the concept of fitness landscape is used.
二、 Introduction
The purpose of this research is twofold. Firstly, it seeks to explain the reasons behind why first-mover advantages are unsustainable in emerging industries by analyzing available information. The second element of the dissertation is to provide possible strategies that first-mover and latecomers can use to compete in an ever-changing market. Therefore, issues that will be discussed extensively are as follows: (1) Emerging Industries, (2) Manufacturer Characteristics, and (3) Market Implications.
三、Literature Review
1. Definition of FMAFirst-mover or pioneer has been defined as the first brand to exist from some type of new product; the first firm to enter a new market; or the first company to sell a certain type of new product. Some academics use the perspectives of product research and development and market development to define first-movers that is a corporation that is the first to development a new product but not the first to introduce it to the market can only be defined as the innovator. Thus, the firm that first sells a new product in the market is the first-mover while first-mover advantage is the ability of pioneering firms to gain economic profits (profits in excess of capital). Therefore, firms that do not fit the definition of first-movers are then designated as late-entrants or followers, which can be further divided into early follower and latecomers. This research using the Lieberman & Montgomery’s (1998) perspective believes that first-movers are companies that first enter the new market, and first-mover advantages are the economic profits earned by these companies. And two major organizational management perspectives that did comprehensive research into first-movers are i) industrial organization and ii) resource-based value. We present their sayings
respectively as follows.
2. The perspective of I.O school (Industrial Organization school)
Scholars of I.O school ( Industrial Organization school ) argue that the strategy of enterprise is not dominated by the management ability but the force of industrial structure. Namely, they assert the role of management within the enterprise can hardly influence the industrial environment or the performance of enterprise. It ignores the internal effort of enterprise but take the external environment as the main dominative factor. As the said, the dominative factor in determining the performance of enterprise is absolutely stemmed from its industrial structure. Hence, under the consideration of I.O school, the First Mover Advantage (It is abbreviated to FMA in the following) is coming form the entry barriers that the first-mover built at the time he enter the market. Once first-mover enters a market, entry barriers can be formed through product differentiation, absolute costs and economies of scale. The existence of entry barriers will strengthen the competitive advantage of first-movers over latecomers. Stackelberg-Spence-Dixit’s model explained that first-mover firms can adjust its productivity and investment returns to earn greater economic profits over latecomers. Furthermore, learning-by-doing can accumulate experiences that bring the company down the learning curve so that it can improve technology, increase productivity, and through economies of scale lower the production costs, and is the price maker. Thus, giving the market and potential late-entrants that they mean business, and they have the ability to overcome and threaten any competitors thus lowering the willingness for others to enter the market. When facing potential competitors, first-movers can also use the constraints of fixed costs to convince latecomers of their determination to win, since under certain costs barrier competitors are less likely to be involved.
the entry barrier that the first-mover built. 3. The perspective of RBV
The same argument that proposed the first-mover can possess the advantage is held by the scholars of RBV (Resource Based View), however, they argue such saying with diverse logic. The perspectives of RBV academics believe that first-mover advantages arise from pre-emption, since i) first-movers can gain necessary production technology firstly, and ii) firstly gain relevant resources (i.e. input factors, location in geographical and characteristics space, and plant and equipments). Therefore, first-movers are most likely to get a hold of relevant and unique resources that can maintain sustained competitive competence. The sources that construct the preemption are from the aspects of location, production technology and essential resources. With these sources craft three major sorts of preemption which are-(1). preemption of locations in geographical and characteristics space; (2). preemptive investments in plant and equipment ; (3). preemption of input factors. The following presents the relevant details concerning these three sorts of preemptions.
(1). Preemption of locations in geographical and characteristics space
Prescott and Visscher (1977), Eaton (1979, 1981), Economides et al (2002) separately used Hotelling model to analyze the effects of timing of entry in spatial preemption to conclude that first-mover can establish positions in geographic or product space that latecomers find it unprofitable to occupy the interstices. Hauser and Shugan (1983) developed the defensive model that prevented price making in new markets, so that product differentiation can be taken by first-movers to adjust to consumer tastes. If the product has been defined by the first-movers then latecomers must take substandard products to maintain product differentiation and market share. Furthermore, through strategic expansion, first-movers can expand its brand and product line latitude so that using multi-product strategies to fill-in product spaces to
prevent late-entrants from entering thus gaining greater profits. (2). Preemptive Investments in Plant and Equipment
Before innovation can be achieved, sustainable amount of investments are required. Under the uncertainty of profitability and loss, first-movers are mostly likely to achieve innovation. The enlarged capacity of the incumbent serves as a commitment to maintain greater output following entry, with price cuts threatened to make entrants unprofitable. To maintain monopolistic positioning, even without natural monopoly positioning, they must maintain patent rights in order to hinder latecomers. Under the race of patent competition model, under fixed research and development constraints, first-movers can benefit from preemption in investments of plants and equipments to gain monopolistic positioning.
(3). Preemption of Input Factors
First-movers can gain the exclusive use of relevant resources before their uses are widely-known such as mineral resources. Since the information gained upfront are lead time, therefore timing of entry gives first-movers the opportunities to gain greater competitive advantages. Before latecomers enter the market, first-movers can use monopolistic market positioning to gain greater profits, therefore the lengths of lead time is very important. The greater the lead time or the later the latecomers enter the market, the ability of first-movers to build effective entry barriers and maintain competitive positioning, the stronger the first-mover advantage and the greater its market share.
To sum up above, the argument concerning the FMA existing of RBV propose that the first-mover gets good opportunities to acquire the dominative location, production technology and essential resources by which could assist firm to establish sustained competitive advantage in its industry. Since the acquirement of these critical factors
firstly, the first-mover gather the superior advantage with preemption and establish the dominative force in business conducting. The later-comer can hardly to compete with the first-mover in production and service with weak location, poorer production technology and resources. Hence, the first-mover who holds the preemption of location, production technology and essential resources can get the sustainable competitive advantage in the market.
4. The perspective of Fitness landscape theory
Reviewing the relevant literatures of fitness landscape, it’s easy to realize the metaphor that scholars suggested: the traits of fitness landscape theory present the complexity, dynamic and evolution of business environment in the present time. There is no fixed path for business success. Scarce resource, limited capital and highly dynamic of competitive condition are characteristics that firm is positioning in. Under the circumstance, complete market information is hardly collected for decision making. And managers make the decisions only with available information, hence the depending path is hardly to trace. Such saying proposed that FMA hasn’t to be existed. The business condition fluctuates all the time; diverse context can provide various opportunities and resources. Since the business success is depended upon the suitable strategies that made and exercised under the proper condition. The first-mover gathered the transient advantage under the context that other competitors didn’t either observe the market potential nor put lots efforts on it. Once, the context shifts the FMA vanished as the condition that first-mover can’t fit in. Then the later-comer could overwhelm the first-mover.
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四、Research Methodology
This study used the qualitative research method to understand and explain social phenomenon. Qualitative research methods are designed to help researchers understand people and the social and cultural contexts within which they live. Kaplan and Maxwell (1994) argue that the goal of understanding a phenomenon from the point of view of the participants and its particular social and institutional context is largely lost when textual data are quantified. Gathering of information involves the case study approach. Case study can be seen to satisfy the three tenets of the qualitative method: describing, understanding, and explaining (Yin, 1989). Using one case study from each country, the paper explores how these firms learned process and product skills and know-how. Thus, a case approach study is very successful in demonstrating the nature of the component interactions.
The research was primarily conducted by a small research team of four people, consisting of a professor, a doctorate student, and two master students, working closely to conduct data collections and extensive data analyses. Two types of data were collected for this research, primary and secondary data. Primary data collection consists of several interviews, in a time period beginning from October 2004 to April 2005. Formal interviews were conducted 2 times, lasting an average of 2 hours, while in-formal and phone interviews were conducted once, with three separate interviewees that are either directly or indirectly associated with the companies and products studied, concentrating on the TFT-LCD – backlight module.
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Interview Method
Interviewee Job Title Formal Informal Telephone # of Interviews I1 Assistant Vice-President of Hannstar 1 － 1 2 I2 Special Assistant to Chariman － 1 － 1 I3 Venture Capitalist 1 － － 1 Total 2 1 1 4
Figure 1: Primary Data Collection – Number of Interviews
Secondary data collection began in September 2004, lasting until the beginning of the written portion of the research. Information such as previous literatures, news reports, industry statistics, company publications, and associated websites were used.
Information Types Sources of Information
Literature NSYSU library, Dissertation and Thesis Abstract System
News Reports UDN, China Post, Bookzone, and etc. Industry Statistics ITIS, MIC, Ministry of Economic Affairs,
Topology, and other research institutes Company Publications Financial reports, Marketing materials
Associated Websites Company websites, Industry websites, Securities and
Futures Institutes, Taiwan Stock Exchange Corporation
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五、 Discussions
We discuss the result of case study with following in this dissertation. First of all, the causality of first-mover advantage in the case study is discussed. Although, the first-mover got the advantage once they entered the market, they failed eventually. Hence, in the following presents the failure of the first-mover, by which manifests the failure condition that first-move encountered. And the third section explores why these first movers failed to keep on winning through the market. Finally, what the later-comers have done and how they do it, furthermore what context they are in for aiding them in overwhelming the market are mentioned.
The FMA causality
First-movers (A and C) got the advantages as they enter the market, figure 3 shows the causalities and its theoretic foundation.
FMA Causality Theory
Technological preemption
A company preempted the back-light module in manufacturing the TFT LCD. And by such doing assists it making lots profit.
RBV
Entry Barrier
C company made the differentiation of the computer case with the magnesium material. Get rid of outdate case material- aluminum, C company invests lots effort in developing the innovative material-magnesium and gets the great success in its industry.
I.O School
Figure 3: The FMA causality The failure of First-Mover
Although A company and C company are the First-Mover in each industry, they failed in keeping respective advantage in its industry eventually. The figure 4 accounts for the failure causality of these two companies.
10 Figure 4: The failure of First-Mover
The reason why the FMA vanished
As above presented that the First-Mover advantage is not long-lasting sustainable which been proven by those two cases. The reasons why the FMA vanished in these cases are listed in the following chart.
Figure 5: The reason why the FMA vanished The failure of
FMA
Causality
Technology obsolescence
A company didn’t sensor the major trend in dynamic market condition. And it failed in further developing its technologic renewal then lost its advantages in the market.
Entry Barrier disappeared
C company had made the differentiation of the computer case with the magnesium material. However, the shifting of technology has dramatically triggered by other competitors. The existing barrier of C company has vanished. And the new entry barrier is built by its competitors. Hence, C company has its market advantage no longer.
Company Reasons of the FMA vanished
A company
The technological preemption of A company in back-light module of the TFT LCD is under given time period. After that duration, A company didn’t sensor the major trend continuously in dynamic market condition. And it failed in further developing then lost its advantages.
C company
The entry barrier which C company had built is under some context in which others weren’t aware of the market latent. Under such condition prompts C company to make the better move in the market, however, as the other competitors acknowledge the market latent of magnesium material in manufacturing notebook and computer cases, competitors conceived of the new skill to ease the manufacturing. And D company built another entry barrier which yields it the E.O.S.(economy of scale) in producing notebook and computer cases with magnesium material and then defeated the C company.
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The FMA doesn’t have to exist, and the Later-Comer can overwhelm the market In the TFT-LCD back-light module industry and computer case industry, A company and C company are First-Movers. Base on the theoretic saying First-Mover can gather invincible advantages from either entry barrier or preemption of critical elements. The case study of A company and C company presents the contradiction of such saying. As we discussed in the preceding paragraphs, the FMA exists under the given context or time horizon. The FMA would disappear when the given context shifts, then the Later-Comer could establish the better industrial standards or possess more critical producing elements to overwhelm the market. The opposite cases to A company and C company are B company and D company which are the Later-Comers in the TFT-LCD back-light module industry and computer case industry. We need to check what they have done to overwhelm the First-Movers in their industries. We put their efforts and performance into column in the figure 6.
12 Figure 6: The later-comers’ efforts and performance
六、 Research Findings
After a comparison of the differences between first-mover and latecomer companies, four differences were found, they are: 1) Timing of Entry, 2) Market demand, 3) Technology, and 4) Product Strategy. Using the concept of fitness landscape, this research will analyze the above factors and try to provide explanations for them. This means that in an ever-changing business environment, latecomer companies must have dramatically different strategies that can react and respond to the moves of the first-mover. And the FMA doesn’t have to be existed. Once, the context shifts the FMA vanished as the condition that first-mover can’t fit in. Then the later-comer could
Company Deeds of the Later-Comer
B company
B company invested lots capital in back-light module industry as well as got the technological infusion from Japanese manufacturer. B company involves actively in designing, manufacturing, assembling and selling of backlight module. For these doings aids B company in dominating the industry by specializing in the development and manufacturing of module. For now, its production volume ranks NO.1 all over the back-light module industry.
D company
D company got the financial aids from venture capital. Meanwhile, accessing the newest and higher producing technology in manufacturing magnesium. Furthermore, by its well management of production the volume capacity of manufacturing provides the E.O.S. for D company. Its newer and more efficient manufacturing method assists to cut down the production cost as well as to escalate the production quality at the meantime D company adapts the vertical integration, from design to parts production, by which prompts the customers’ value of its merchandise. With these efforts makes D company as the leader in this industry, leading in production capacity, production volume and sales as well.
13 overwhelm the first-mover.
(1) Timing of Entry
In emerging industries, latecomers are not necessarily in a disadvantageous position, due to the dynamic environment of the industry, as the business landscape changes continuous. The absence of the rules of game in an emerging industry, structural factors that determine a mature, stable industry does not exist. Latecomers hold the advantage in this situation since they can dramatically cut down on their leaning curve, shortening adjustment time through inside-information, in forming their operating strategies.
(2) Market Demand
Although the late-entrant in the industry, the right timing of entrance is most important; from the cases observed for this research, both latecomer companies entered their respective industry just prior to a dramatic increase in market demand, i.e. the growth stage of the product life cycle. Since Korean and Japanese manufacturers were looking abroad for suppliers as local production capacity reaches saturation, thus allowing latecomer companies in Taiwan to have ready-to-buy buyers. Volume building meant companies are able to further slid down the learning curve while reaching economies of scale much faster than normal, thus cutting down on production costs increasing company competitiveness in the industry.
(3) Technology
The continuous advancement in technology means when latecomer enters the market, they have access to newer and more productive (often revolutionary) technology. With the purchases of manufacturing machineries an expensive investment, first-mover companies are most unlikely to change to vastly different technologies as it becomes available. Not only is the purchase of new technology costly in financial terms, but also it is time-consuming in terms of reeducating employees to use the machine. Most likely, first-movers invest in evolutionary technology that is a slight improvement to existing technologies however it is still less efficient and productive than new and improved technology. Moreover, by the time latecomers makes the necessary purchases, it can enjoy the know-how gained by others as the frontrunners had already worked out the kinks in the technology and newer and better technologies have developed from this
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knowledge. Therefore, both latecomer companies, due to their late entry, where able to exploit the weakness of the technology strategy of the front-runners, as they are able to acquire more efficient and productive machineries that allowed it to overcome its timing of entry weakness. Latecomer Companies Specific Technology Technological Advantages B Injection Dramatically reduce product costs over traditional
printing method
D SSM
Better quality products, less porous and more stable than traditional die casting method (lower defective rate)
Figure 6-4: Latecomer Companies Technological Advantages
(4) Product Strategy
By the time late entrants enter the industry, first-movers mostly have already established themselves in the industry therefore, late-entrants must use focused product strategy to respond and compete with the first-movers’ now diversified product strategy (as found in both Company A and C). The effectiveness from the concentration of available scarce resources from a yet-to-be proven manufacturer provides much greater results than diversification. Putting all eggs in one basket is the right strategy when competing against first-movers that have turned their attentions and resources elsewhere.
Latecomer Companies Product Strategy Product Strategy Advantages B Focused
Produced only backlight module of TFT-LCD D
Focused
Focused inclusively on producing magnesium alloy products
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These determinants combine internal and external factors and form an overall advantage position for the latecomer to succeed in an emerging industry. For companies to stay ahead of the race, it is important to keep-moving as the business landscape changes continuously. Stagnation and hesitation will ultimately result in failures as companies lag behind in the long-term, despite their current market position. Although, it is important for companies to keep-moving in a changing business environment, however, choosing the right path to follow determines its long-term success in the industry.
Since the business fitness landscape on which agents adapt continually shifts, because the payoffs of individual agents depend on the choices that other agents make (Levinthal 1997), means that current business landscape will continue to change. With the continuous advancements in technology, technology standardization will be difficult to achieve, thus, industry dynamic will continue to change due to the interactions of the companies themselves. Therefore, the leadership position in an emerging industry will continue to change as companies learn to adapt and respond to others. The effectiveness of company strategies depends on the timing as well as the position therefore to be successful this means that companies must have the ‘right’ strategy for the ‘right’ time and for the ‘right’ company. Although first-mover advantage is not sustainable in real-life business situations, however this does not deter companies from vying to be the first in the market, since first-mover advantage does exists for a brief period of time that the company may recuperate part of its initial investments and most importantly, it is in the position of dictating market positioning of new entrants. Although, first-movers may eventually lose their leadership positions, however, by adopting a mobile strategy with an emphasis on keep-moving, it is possible for these first-movers to remain one of the dealmakers in their respective industries. Furthermore, first-movers should build-up resources that are intangible and are not easily replaceable. For example, networking, i.e. interpersonal relationships will allow companies to have access to the newest research and development concerning their technology and act accordingly.
Most importantly, this type of resources cannot be easily copied by latecomers, as building relationships entails time and money that the latecomers may be lacking. The unstable natures of emerging industries means that nothing is certain and anything can happen. Therefore, to survive in an ever-changing environment, awareness and flexible is
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necessary. All parties must be constantly aware of the changing environment, while
flexible strategies will allow it to react accordingly and effectively.
七、 CONCLUSIONS AND IMPLICATIONS
As mentioned in the introduction, the purpose of this dissertation is twofold. Firstly, it seeks to explain the reasons behind why first-mover advantages are unsustainable in emerging industries by analyzing available information and applying learned management theories. The second element of the dissertation is to provide possible strategies that first-mover and latecomers can use to compete in an ever-changing market.
In relation to the first aspect of this dissertation, this has been undertaken through the process of a detailed review of the relevant literature on the topic and then the testing of the observations made in that literature with the four cases chosen. This research uses the concept of fitness landscape to try to understand and explain the phenomenon found in emerging industries, that is why first-mover advantages is unsustainable in the long-run. The following conclusions can be drawn from the research:
1. Although first-movers advantages may exists in mature, stable industry, however, the fast changing nature of emerging industries meant that this notion are no longer feasible. 2. Four important, inter-related factors that determine the possibility of latecomer to
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overcome first-mover advantages are i) the growing market, ii) the late timing of entry, iii) revolutionary technology, and iv) focused product strategy
3. Ever-changing business environment, fitness landscape, meant that static strategies are no longer feasible. The affect of every decision have direct implications for the industry at large, thus changing the landscape. Therefore, to survive in emerging industries, constant mobility and awareness is most important.
4. With the rules of the games changing, every player has the opportunity for success in the industry, despite of its current market position. Dynamic business strategies are necessary for long-term survival since the traditional notion of first-mover advantages is unsustainable in emerging industries. Using the concept of fitness landscape, strategic actions taken by the individual companies have great implications not only for other companies but also for the industry at large. With the environment uncertain, every player has an opportunity to overcome while exploiting others’ disadvantages. However, strategies taken are vastly different, depending on the position of the player. Existing static theories where endogenous factor are concentrated clearly is lacking for application in a dynamic environment. One might use traditional strategy to analyze companies in mature and stable industries however it is much harder to use them to look forward in industries undergoing rapid change. However, the concept of fitness landscape is successful in filling this void, offering a chance to look at the issue from a different perspective, where extraneous factors are focused. Thus, future research should consider the use of the concept of fitness landscape when explaining three-dimensional, dynamic environments, where traditional theories have failed.
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