Leveraging on first-mover advantage in global business    

By Joseph AKYEAMPONG

The era of globalisation has caused businesses to be established in other countries far from the places where the businesses originated. The establishment of businesses away from their home states has contributed to the growth of world trade with the increase in the standard of living of people in many countries. It has also made possible the introduction of a variety of products from foreign lands which before the beginning of modern commerce were difficult to obtain.

The Concept of First-Mover Advantage

First-mover advantage is when a business in a particular industry is first to establish itself in a country away from its home state before other competitors come in. By that, it is able to reap the attendant rewards for being the first to be established in that particular country. Coca Cola, the American soft drink manufacturer and Nestlé, the Swiss food conglomerate are overwhelmingly popular in many countries in which they were the first to be established. Consequently, many consumers have stuck with them giving them the advantage of capturing a substantial share of the market.

When is it appropriate to be a first-mover?

A business takes the strategic decision of investing in a country which does not have the business which the first mover intends to introduce. For instance, up till 2001 when Shoprite, the South African retail giant first opened at Accra Mall, many Ghanaians, especially those among the younger generation had not experienced the glamour of shopping in a large retail store like what was offered by Shoprite as a one-stop shop.

Though Ghanaians of the older generation had known the likes of Kingsway, UTC, Glamour and others, the glitz offered by Shoprite and the ambience in their shops has made Shoprite up till date, a household name in Ghana. This is despite its decision to pull out of Ghana on account of its high overhead cost of operations; nevertheless, it still attracts mass patronage once it is not wound up and is sufficiently still attractive to be taken over by another shopping franchise. Shoprite, since its establishment in Ghana exploited the appeal which was generated by its first-mover advantage to open several other shops in most of the malls still with an appeal to shoppers, even before its official exit with its transfer to the new franchise.

In Ghana, the appeal of Shoprite as a first-mover with its uniqueness in establishing one-stop shops in the malls in Accra, Kumasi and Takoradi has also attracted other shopping brands to follow suit. The most important among them are Melcom, Palace, Citydia, Game and Pep Stores, also from South Africa. Apart from Melcom which has stayed in close competition with Shoprite, the rest of the supermarket chain stores do not match the customer appeal of Shoprite. Unfortunately, some of them like Pep Stores and Game had close down.

Benefits of first-mover advantage

Because of the first-mover advantage of business in being the first of the kind to be set up, it has many advantages accruing to it. The advantages which particularly accrue to a first-mover business like a retail giant in Ghana like Shoprite are the ambience of its shopping environment in the various malls and the large variety of goods that it offers.

When a business establishes itself strongly by its brand, it wards off competitors who may be scary in competing with the strong brand of the first-mover. By establishing a strong brand, the first-mover is able to capture a substantial chunk of the market. Thus, a competitor which intends to set up in the market after the first-mover may have to spend substantial amounts of money in publicity and establishment costs in a bid to rival the first-mover and thus not afford it the luxury of selling low so as to attract customers away from the first-mover.

Because of the advantage of setting up first and the substantial volume of business that it may generate, a first-mover is always in a position to outmuscle its competitors on price competitiveness. When a first-mover is able to outmuscle its competitors being late entrants, it may become difficult for the late entrants to gain a sufficient share of the market except they embark on aggressive marketing and offer competitive pricing to undercut their first-mover competitor which may affect its profitability in the short to medium term.

Longevity of First-Mover Advantage Businesses

A distinguishing feature of most first-mover advantage businesses is that, they last long and are not easily affected by the vagaries of the market. This is because, since they are first to enter a foreign market, they exert a lot of effort to establish their brand and invariably capture a large segment of the market. Over the years, they capture a significant part of the market and establish their dominance to such an extent that, they become price competitive which makes it difficult for later entrants to divert business away from them.

A later entrant which intends to match up with a  first-mover may have to spend enormous amounts on publicity, customising its premises etc and engage in severe price under-cutting which may not in the end guarantee its sustainability. Consequently, it may have to fold up for not breaking even due to its spending enormous amounts of money to enable it capture a substantial amount of the market disproportionate to its sales volumes.

In Ghana, the first-mover advantage could even be said to apply to the establishment of churches, particularly the charismatic denomination. It is a fact that the first generation of charismatic churches in Ghana being, Action Chapel International, International Central Gospel Church, Light House Chapel International, Royal House Chapel, Perez Chapel have taken a quantum leap over the later charismatic churches. Also in the area of broadcast journalism, radio stations like Joy FM and Peace FM have successfully exploited their first-mover advantage in broadcast journalism, thereby capturing a large segment of listeners of radio who have maintained fidelity to them over the years.

First-Mover Advantage Businesses in Ghana

In Ghana presently, there is no doubt that some businesses have taken advantage of their first-mover status to establish a niche in the market and gain a wide appeal among the populace. Notable among them are Coca Cola, Guinness Breweries, Japan Motors, Fan Milk, Unilever, KFC among others.

The writer is a lawyer with specialisation in international business law.

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