Barriers to entry and first mover advantages of a small pioneering company in the modern competitive environment.

Abstract

This study investigates two strategic issues that small pioneering companies should always place emphasis on. Barriers to entry and first mover advantages carry such strategic significance that it should be a priority of any pioneering company, regardless of size. Contemporary studies have questioned the absolute ability of barriers to entry to thwart the entrance of new competitors in an industry, or the sustainability of first mover advantages. The implication being that barriers to entry and first mover advantages should not be high on a strategic agenda, as initiatives in this regard can be overcome by companies with superior resources, or due to the diverse strategies and objectives of companies. This study considers the case of a small pioneering company and analyses the competitive environment of the industry it intends to enter. The analysis utilises Porter's Five Forces Framework in a modified form. The framework was chosen as it considers the structural determinants of an industry, from which competitive pressure elements such as barriers to entry and first mover advantages can be identified and analysed. This modification is necessary as first mover advantages are typically separate considerations for pioneering companies in strategic formulation. This analysis considers the Five Forces of competitive pressure, but replaces first mover advantages with competitive rivalry, due to the particular circumstances encountered by pioneering companies. The relevant determinants of competitive pressure are then identified and ranked, in terms of priority, to give guidance to the strategic planning, formulation and implementation process. The analysis stops short of developing a full strategic plan but is sufficient to highlight the competitive issues that will need to be considered. The case study illustrates how barriers to entry and first mover advantages can still be fundamental to the strategic development process, regardless of the resources and strategy of potential entrants. The case study also proposes a model that spatially depicts the prioritisation of the ensuing strategic issues that are precipitated when analysing Porter's Five Forces Framework.