ORDER OF ENTRY, LONG TERM MARKET SHARES AND PERFORMANCE IN THE EUROPEAN PLASTERBOARD INDUSTRY

Colley, John, Graham (2006) ORDER OF ENTRY, LONG TERM MARKET SHARES AND PERFORMANCE IN THE EUROPEAN PLASTERBOARD INDUSTRY. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

There is a significant body of evidence which suggests that the first entrant to a particular market will obtain long-term benefits from being there first. Two strategic perspectives (Resource Based View and Industrial Organisation Theory) are applied to this phenomena. More specific first mover theory and associated empirical evidence is considered.

A study is devised to develop an insight into the various markets which constitute the European plasterboard industry to provide a greater understanding of order of entry influence on long term performance so as to help with future strategy formation.

Empirical evidence is gathered specifically for the European plasterboard industries, in the form of order of entry, long term market shares and a proxy for long term profitability is developed from assessing the cost structure of each of the competitors in each of the twenty country markets which have a plasterboard plant.

The theory and empirical studies would suggest that First Mover Advantage (FMA) does normally create a propensity for long term market share advantage. There is some evidence suggesting that later entrants benefit from greater profit levels as a consequence of being able to choose a more appropriate cost structure, having gained advantage from studying earlier movers behaviour.

However, there is a contradiction in that some industries benefit substantially from economies of scale and in such industries there would be an expectation that greater long term market share should result in higher levels of profit due to the economies of scale effect.

This study of the European plasterboard industry produces a number of findings, as follows:-

1. A link is demonstrated to exist between being first mover and long term market share advantage.

2. In around a third of markets studied a second mover only enters the market. In these instances, the second mover achieves parity with the first mover regarding market share and cost structure.

3. In 40% of markets studied, three players eventually enter the market. On average the first mover retains significant market share and cost structure advantages. The second mover achieves better market share and cost structure than the third mover but both are significantly inferior to the first mover.

It could be inferred from these results that a third mover takes share predominantly from the second mover as though these customers are more mobile then those held by the first mover.

The findings are consistent with previous empirical evidence regarding FMA and long term market share advantage. Also, the Boulding and Christen (2003) work, which suggests that subsequent movers select a cost base to compete.

However, the third mover finding suggests a clear propensity that customers who have already changed supplier are more likely to move again. Having identified and experienced "switching costs" these are subsequently perceived to be less of a barrier to movement.

Two case studies are selected on the basis of providing a historical retrospective and analysis of events in Europe's oldest plasterboard market (UK) and a much more recent rapidly developing market (Russia). The case studies are used to analyse protagonist behaviour against the background of theoretical and empirical work available. The objective is to provide greater understanding of the mechanisms which support the FMA linkage with particular regard to the European plasterboard industry.

Item Type: Dissertation (University of Nottingham only)
Keywords: First Mover Advantage
Depositing User: EP, Services
Date Deposited: 30 Nov 2006
Last Modified: 12 May 2016 11:53
URI: http://eprints.nottingham.ac.uk/id/eprint/20607

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