International Business Strategy IBS Essay Example | Topics and Well Written Essays - 2500 words

International Business Strategy IBS - Essay Example It is proved that using the first mover advantage a firm can increase its competitiveness but the full success of this practice cannot be guaranteed, even for firms that are already established in their market. 2. International Business Strategy 2.1 The concept of first mover advantage - overview In the context of international business the first mover advantage theory can be related to the work of Markusen (2002). According to the above theorist, trade relationships are likely to be influenced by geography, meaning that businesses that are interested in entering the global market tend to prefer the markets of neighbouring countries, probably because risks and costs involved are expected to be lower (Sitkin and Bowen 2013). For FDI also a similar practice is used. Under these terms, the development of international business is based on two, critical, factors: a) learning effects; this term is used for showing the transfer of knowledge between ‘the research and development secto r of each business and its other sectors/ departments’ (Sitkin and Bowen 2013, p.38); this strategy of knowledge transfer decreases risks since no external intervention on knowledge used for building business strategy can occur; b) the first mover advantage; the specific concept reflects the following idea: ‘the first firm to enter a new market and leverage its existing experiences is in a good position to shut out future rivals’ (Sitkin and Bowen 2013, p.38). According to the above, the first mover advantage involves in ‘introducing in the market a new product or service’ (Cullen and Parboteeah 2013, p.273). However, the benefits of the above concept are related to the following term: that the product/ service employed ‘is not only innovative but also comprehensive’ (Cullen and Parboteeah 2013, p.273). The term comprehensive is used for showing a product/ service that ‘meets the customers’ expectations’ (Cullen and P arboteeah 2013, p.273); only such product/ service would be able to result to profits. The concept of first mover advantage, as described above can be effectively used for developing a business strategy in regard not only to the international market but also to the local market (McDonald and Burton 2002). The terms of such use of the specific concept are described analytically in the next section. 2.2 The use of the concept of first mover advantage in formulating a business strategy In regard to the use of the concept of first mover advantage in practice the following fact should be highlighted: the specific concept can be incorporated in different business strategies, meaning that it can be used as the basis for developing business strategies of various formats, depending on the needs of each organization, the resources available and the conditions in the business environment (Cullen and Parboteeah 2013). Figure 1 – Franchising based on the first mover advantage – the oretical model (source: Michael 2013, p.62) The study of Michael (2003) refers to the use of the first mover advantage as part of a franchising strategy. The involvement of the specific concept in a franchising strategy should be based on certain rules; the relevant framework is presented