The first-mover advantage is the advantage of accruing to a company that enters a particular market segment before any other company in terms of gaining control of critical resources that later entrants are not able to gain. Companies gain first-mover advantage through attaining technological leadership, establishing customers’ switching costs, and gaining control of critical assets. Service companies like DHL rely more on information technology to run their businesses, and it is therefore difficult for a first mover to attain sustainable advantages over their competitors. This is because duplicating technological innovations is rather easy, and, therefore, competitors can be able to offer the same service easily at a lower price. In the area of information technology, research has shown that the cost of copying and offering a product to customers is almost 75% lower than that of developing an entirely different product (Tufano, 1989).
The increasing trend of globalization in search of growth and improved performance has resulted in a large number of service industries expanding into the international market. The global expansion of service firms is quite different from that of manufacturing firms because of the characteristics of the products offered. Service firms tend to have more intangible assets, which are hard to measure as compared to the tangible assets of manufacturing firms. Service sector firms must, therefore, focus on excellent service delivery to customers. For a service firm to achieve global success, the management should focus on various issues such as effective communication between employees and customers. This is important because it helps in communicating the benefits of the service being offered to customers. There is also a need to acquire knowledge about consumption patterns, culture, and behavior of the consumers in the new country. Researchers have identified several obstacles to the global expansion of service firms. These include the risk of technological obsoleteness, intense competition, and different legal requirements for business operations in different countries (Maister, 1993).
To manage its international businesses, DHL established a global human resource management approach where they source for the best employees from countries across the globe regardless of their nationality. This strategy is associated with two main advantages: First, it makes it possible for a multinational corporation to develop an experienced group of senior executives who are capable of managing the firm’s global operations. These managers have international experience and have amassed valuable business contacts across different countries. Secondly, the strategy enables the firm to reduce the tendency to identify subsidiaries of the firm with managers of the host country. This strategy also comes with various disadvantages: First, host countries may use their immigration laws to force the company to employ locals who may not be qualified or experienced for the various assignments. Secondly, it is very expensive as a result of increased training and compensation needs of employees. Lastly, it requires highly centralized human resource management, and the reduced autonomy of subsidiaries may not be favored by managers (Mossler, 2003).
DHL was not able to conquer the US market as was expected due to the intense competition posed by FedEx and UPS, and infrastructure issues that affected service delivery. The acquisition of Airborne Express also resulted in a culture clash that eventually led to the pulling out of DHL from the US market. First-mover disadvantages include the danger of free-rider effects where competitors may enjoy entering the market with lower costs than the first mover, the risk of total failure, and the risk of shifts in technology, which may render the service being offered irrelevant (Tufano, 1989).
Maister, D. (1993) Managing the Professional Service Firm, New York: Free Press.
Mossler, K. (2003), The Pros and Cons of International Staffing Policies, Munich: GRIN Publishing.
Tufano, P. (1989), Financial innovation and first-mover advantages, Journal of Finance and Economics, 25 (2): 213–240.