Why Do Firms Enter a New Product Market? A Two-Dimensional Framework for Market Entry Motivation and Behavior (original) (raw)

Impact of Industry Incumbency and Product Newness on Pioneer Leadtime

Journal of Management, 2012

What are the energetic forces that induce established firms to enter new product markets? While most previous research has explained the economic profits expected from a new product market as firms' distinctive motivation for market entry, some recent studies also emphasize interfirm competition and benchmarking activities as another important factor that motivates firms' new market entry. To explain the established firms' diverse new product market entry behaviors, this study presents a two-dimensional scheme of entry motivation in terms of the degrees of target market profit focus and competitor focus. The first dimension captures the economic motivation of firms' new market entry that ranges from focusing on the direct expected profits from the target market to considering more strategic/indirect benefit incentives. The second dimension captures the degree of firms' external motivation for entry affected by competitors that ranges from independent entry decisions to fully competitor-oriented entry decisions.

The impact of market size on new market entry: a contingency approach

European Journal of Marketing, 2017

Purpose The purpose of this study is to offer explanations of the wide variation in the impact of market size on new market entry decisions – i.e. its positive impact lessens because of unreliable predictability of market size on post-entry profit and entry motivations other than post-entry profit. Design/methodology/approach On the basis of the two explanations, this paper builds a contingency frame that the impact of market size on new market entry depends on entry-context-specific variables. It validates the contingency frame, empirically analyzing 219 parameter estimates of the impact of market size on market entry obtained from 41 existing empirical studies. Findings The meta-analysis results reveal that the entry-context-specific variables used in this study – niche market entry, high-tech market entry, entry by industry incumbent firms and the year of market entry – notably moderate the impact of market size on new market entry decisions, as the research frame suggests. Resea...

Impact of market entrant characteristics on incumbent reactions to market entry

Journal of Strategic Marketing, 2011

This paper attempts to examine the likelihood of incumbent firms taking defensive actions given certain market entrant characteristics. Using conjoint analysis, four market entrant characteristics, market entrant company size, price of market entrant's product, innovativeness of market entrant's product, and market entrant's reputation as a competitor were presented to marketing executives in nine simulated cases. The marketing executives were asked to indicate their likelihood of taking defensive actions before and after new competition enters a market. The relative weights associated with the four market entrant characteristics indicate that market entrant's price is the most important factor in influencing incumbent firms to take competitive actions followed by company size, market entrant's reputation as a competitor, and innovativeness of market entrant's product in both before and after market entry conditions.

The Timing of Competitive Market Entry: An Exploratory Study of New Industrial Products

Management Science, 1990

In a dynamic, competitive environment, the decision to enter the market should be timed to balance the risks of premature entry against the missed opportunity of late entry. Previous research has mainly focused on the strategic aspects of the entry-time decision. In this paper we review the literature and develop a set of propositions about the timing of new product entry. Then we empirically test the relationship between the market-entry time and the likelihood of success for new industrial products.

Incumbent firms' response to entry: Price, advertising, and new product introduction

International Journal of Industrial Organization, 1999

Theoretical research shows that one of the more important determinants of entry is the anticipated response of incumbent firms. Incumbents can use price, advertising, or new products to limit or deter entry. Most empirical research however finds little support for these models. Using data from the ready-to-eat cereal industry I find that incumbents accommodate other incumbents on price and new products but use advertising to limit the scale of entry. Entrants are more likely to be met with an aggressive price response. I also find that incumbents are more likely to respond when the scale of entry is greater.

Reviews of market drivers of new product performance: Effects and relationships

This study adopts a meta-analytic approach to review the performance effects of the market predictors of new product performance and their structural relationships. Based on empirical findings from the relevant studies published before 2011, this study has a number of interesting findings. First, market orientation, competitor orientation, product advantage and launch proficiency are the dominant drivers of new product performance. Second, market orientation, marketing synergy, product advantage and competitive intensity have significant effects on new product performance. Third, product advantage serves as an important intermediary between the market predictors and new product performance. Fourth, product innovativeness per se does not affect new product performance. Finally, launch proficiency translates the effect of market orientation into new product performance. These findings not only identify the dominant market drivers of new product performance, but also profile the routes leading to better new product performance. Some important implications for market research and practice are also provided.

New venture strategies: An empirical identification of eight ‘archetypes’ of competitive strategies for entry

Strategic Management Journal, 1990

Previous literature on competitive strategies for new ventures diffrs significantly on the appropriate domain breadth for new ventures, niche versus aggressive coverage. While this study does not address normatively the appropriateness of either approach, it reveals eight distinct 'archetypes' of competitive strategy for entry with both niche and broad strategies represented. In this study 247 new venture CEOs from the information processing industry were asked to describe their venture's competitive strategy for entry using twenpsix competitive methods. Factor and subsequent cluster analysis uncovered these eight different 'archetypes': ( I ) aggressive growth via commodity type products to numerous markets with small customer orders; (2) aggressive growth via price competitive new products to large customers;

The impact of new product launch strategies on competitive reaction in industrial markets

Journal of Product …, 2002

The importance of successful innovation for the long-term performance of companies can hardly be exaggerated. However, we need to consider this in a dynamic setting, in which competitors do not remain passive. We find that two thirds of new product launches meet reaction by competitors after their launch. We also empirically demonstrate that the strategic launch decisions that managers take have an effect on future reaction by competitors. Following an extensive review of the literature, a propositional model is developed. In order to test this theoretical model, an ex post facto field study was designed, in which the authors obtained comprehensive information on 509 new industrial products launched in the US, the UK and the Netherlands. Competitive reaction is diagnosed in terms of changes in the marketing instruments of the competitor. A logistic regression model is estimated on the occurrence of competitive reaction with any marketing instrument. We also look at the occurrence of individual marketing instrument reactions. The data show that competitors react primarily by means of price changes. Product assortment and promotional changes are less frequent, whereas distribution policy modifications occur very rarely. The characteristics of the new product launch strategy were found to have a significant impact on both the occurrence and nature of competitive reactions. We claim that the competitive effect of radically new products and incrementally new products greatly differs. The results show that competitors fail to respond to radical innovations and to new products that employ a niche strategy. They do react if a new product can be assessed within an existing product category and thus represent an unambiguous attack. Both innovative and imitative new products meet reaction in this case. The results also demonstrate that competitors are more inclined to react to the introduction of new products that are supported by extensive communication by the innovating firm. The likelihood of reaction is also higher in high growth markets than in low growth markets. The article discusses theoretical and managerial implications of these results, as well as thoughts for future research that may add more insight.