A ‘WAIT-AND-SEE’ APPROACH FOR FRANCHISEES IS NOT ALWAYS WRONG

By Gerhard van Wyk

Many franchisees believe that being the “first mover” or first-to-market is the key to success. This is not necessarily true.

According to a study cited in the Harvard Business Review, 47% of first movers have failed (swellstrategies.com/2011/03/05/first-mover-disadvantage/). While the first mover has the opportunity to define and own the market, it also faces the greatest risk of failure. By observing the first mover a fast follower can gain a better understanding of what works and what doesn’t.

The disadvantages associated with being a first mover and when planning and implementing new strategies or product launches, should be considered (Jooste et al, 2009).

-          The way competition will develop and how the target market will respond is unknown to the first mover. The challenge for first movers is that they may spend time and money on the wrong competitors and markets.

-          The cost of opening up a market or markets is the burden of the first mover. The benefit of opening up the markets cannot be protected from competitors for any significant period, forcing the first mover to protect its position at a high cost.

-          Strong competition could present a serious threat if the first mover has not garnered enough customer loyalty.

-          Technological advances could render early investments obsolete, allowing late entrants to benefit from the technological shake-out, perhaps even affording them the opportunity to overtake the first movers.

The possible advantages of employing a ‘wait-and-see’ strategy are as follows:

Positioning mistakes – if the first mover misjudges the preferences or buying behaviour of the market, followers could capitalize on such miscalculations with a more tailored offering.

Product mistakes – product weaknesses and flaws allow followers the opportunity to gain market share, overcoming the pioneer’s initial advantage through product enhancements that better meet customer needs.

Marketing mistakes – a mismanaged market entry presents an opportunity for followers to develop an effective marketing programme that competes directly with the pioneer.

Technological flexibility – if the technology associated with a product is rapidly changing, the follower may secure an advantage by introducing products based on superior technology.

Limited resources –pioneers who do not invest adequately in facilities, people and products, may be overtaken by a follower willing to outspend the first mover, thereby overcoming the inroads made by the pioneer.

Followers are at risk of losing market share to the first mover if they are not quick enough in responding to new innovations. (www.jmorganmarketing.com/social-business-first-mover-fast-follower/ ) to read more about the phenomenon.

If a franchise feels that it does not have the organisational competencies needed to be a first mover, it may be advisable to let other organisations take the lead and follow them to market. Adopting a ‘wait-and-see’ approach could be more rewarding than being the first mover.