Complementing for Complexity: Leading Through Managing  The first mover in an emerging market
Impact of rising strength of emerging economies on market expansion Role of emerging market conditions on first mover advantages Sources of first mover advantages in emerging markets Strategies to sustain these advantages

With sluggish growth in the developed markets of the world, companies are turning to newly emerging markets for business expansion. Motorola is distributing its popular cell phones, pagers, and related advanced electronic communications products in Vietnam; Digital Equipment has formed joint ventures in Hungary to sell, service, and stem cloning of its computers; and both DHL International and United Parcel Service have recently made $400 to $500 million investments in Asia to capture the growing demand for their services in Thailand, Singapore, Malaysia, Korea, Taiwan, China and the Philippines. And fuelling such movements are the international trade agreements and dramatic economic liberalization.

The attractions
Emerging markets seduce the corporate players for many a reason, some of which are as follows:

• Potential for immediate added sales
  Firms that have strong global reputations can sometimes gain new customers relatively quickly in markets they have not distributed directly to, as word of mouth spreads and products from neighboring countries spill across the borders.
• Maturation of developed markets
  Although developed markets constitute the primary revenue source for many businesses, economic recession or stagnation and changing demographics (aging populations, low fertility rates) have led to flat or declining sales. Worldwide sales of motor vehicles, for instance, have grown only 1.2 per cent annually over the past decade due to the saturation of developed markets.
• Rising strength of emerging market economies
  The growth of the emerging market economies has been found to be phenomenal in the recent years. The Triad (USA, Canada, the European Union, and Japan) accounts for almost four-fifths of global income. However, emerging markets are moving up the ranks such that by the year 2020 it is projected that among the top ten wealthiest nations (based on GNP), China will climb to third place, pushing Germany to fourth, and Taiwan and South Korea will bump Canada off the list. Clearly even now, these rapidly developing economies offer a significant and growing number of buyers with the ability to pay for a broad range of goods and services. While the first movers (also called pioneers) are the firms that are first to sell their goods or services in a particular industry or category in an emerging market, whether by export, licensing, or foreign direct investment and are typified by foreign multinational corporations, the emerging markets are the less developed countries with indications of healthy economic advancement. Some countries falling under this definition are Malaysia, Thailand, India, Indonesia, China, Mexico, Brazil, Chile, Hungary, Poland, Turkey, the Czech Republic, and South Africa.

Role of emerging market conditions on first mover advantages
Emerging market conditions differ significantly from those of the developed world and their conditions have a telling impact on firm strategies and performance. There conditions can be grouped as economic, technological, socio-cultural, legal/political, and competitive-marketing factors which form an intuitively appealing schema for describing emerging markets.

Economic conditions

• Rapid economic growth translates into increased sales, resulting in scale economies and an economic advantage.
• In the short run, the presence of the dual economy provides an affluent, concentrated, and accessible buying segment, thereby increasing economic advantages. The segment requires minimal product and communications adaptations (lower costs), further enhancing economic advantages.
• The growing middle class expands sales for first mover goods and services, leading to scale economies and an economic advantage.
• High inflation rates increase operating costs and lower buyer demand, resulting in reduced sales and scale economies, thereby mitigating economic advantages.
• High levels of external debt increase the markets’ susceptibilities to inflationary pressures and currency devaluation, reducing economic advantages.

Technological conditions

• Poor infrastructure lowers economic advantages by increasing operating costs and lowers pre-emptive advantages by minimizing opportunities for entrance.
• Indirect, fragmented channels reduce economic advantages by increasing distribution costs and reduce pre-emptive advantages by precluding successful entry.
• Creating proprietary distribution networks will enhance pre-emptive advantages by accessing hard-to-reach markets and will heighten behavioral advantages by quickly developing prototypicality and a reputation for leadership among customers.
• Low technological capabilities create demand for innovations, and thereby enhance pioneers’ technological advantages.

Legal/political conditions

• Political instability reduces economic advantages by increasing operating costs and diminishes pre-emptive advantages by precluding market entry.
• Limited or non-existent trademark and intellectual property protection jeopardizes technological advantages by making first movers vulnerable to piracy and reduces economic advantages due to lost sales.
• Foreign investment restrictions reduce economic advantages by limiting investment opportunities and preclude pre-emptive advantages in some cases by foreclosing market entry.
• Trade agreements expand markets and lower import costs, leading to greater economic advantages and greater pre-emptive advantages.
• Privatization opens previously closed markets and thus enhances pre-emptive advantages.
• Liberalization increases all four types of advantages by creating a more favorable and profitable environment for business.

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