New Trade Theory Is a Myth
MGMT2101 Group Essay |
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Abstract
The following essay aims to critically evaluate whether competitive advantage is rooted in the New Trade theory’s first-mover advantages, or if it is a myth. The Digital Audio Player (DAP) and Video Player industries are used as case studies to explore the concepts in question, in relation to the New Trade, Porters and International Product Cycle theories. Findings conclude that it is not the first mover, but the firm who strategically and continuously pursues these advantages that ends up attaining competitive advantage, regardless of their time of market entry.
Introduction
According to New Trade theory, there are several first mover advantages that the first mover or pioneer should gain. In order to analyse whether competitive advantage is rooted in the first mover advantage or if it is a myth, one must assess this theory in relation to real life industries. Therefore the video player industry and the DAP industry will be used as case studies to evaluate this debate, in relation to international product cycles, Porter’s theory of national competitive advantage and the New Trade theory first-mover advantages including market pre-emption, defining the standard, pre-emption of inputs, switching costs, rapid technological advancements and proprietary learning.
International Product Cycles; an overview of the Digital Audio Player and Video Player markets
Proposed by Vernon in 1966, the Product Life-Cycle theory aims to explain the international trade pattern of technological innovation and new products first occurring in major industrialised economies, then relocating to countries of lower costs of production. The product life-cycle theory has three stages of product development, namely new, maturing and standardised product (Hill, 2011).
Although its relevance in today’s market has lessened due to multiple manufacturing location strategies and international value chains, the theory can still illustrate
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Abstract
The following essay aims to critically evaluate whether competitive advantage is rooted in the New Trade theory’s first-mover advantages, or if it is a myth. The Digital Audio Player (DAP) and Video Player industries are used as case studies to explore the concepts in question, in relation to the New Trade, Porters and International Product Cycle theories. Findings conclude that it is not the first mover, but the firm who strategically and continuously pursues these advantages that ends up attaining competitive advantage, regardless of their time of market entry.
Introduction
According to New Trade theory, there are several first mover advantages that the first mover or pioneer should gain. In order to analyse whether competitive advantage is rooted in the first mover advantage or if it is a myth, one must assess this theory in relation to real life industries. Therefore the video player industry and the DAP industry will be used as case studies to evaluate this debate, in relation to international product cycles, Porter’s theory of national competitive advantage and the New Trade theory first-mover advantages including market pre-emption, defining the standard, pre-emption of inputs, switching costs, rapid technological advancements and proprietary learning.
International Product Cycles; an overview of the Digital Audio Player and Video Player markets
Proposed by Vernon in 1966, the Product Life-Cycle theory aims to explain the international trade pattern of technological innovation and new products first occurring in major industrialised economies, then relocating to countries of lower costs of production. The product life-cycle theory has three stages of product development, namely new, maturing and standardised product (Hill, 2011).
Although its relevance in today’s market has lessened due to multiple manufacturing location strategies and international value chains, the theory can still illustrate
References: Coplan J. 2006, ‘Diagnosing the DVD Disappointment: A Life Cycle View’, Glucksman Fellowship Program Student Research Reports, GLUCKSMAN-2006-1, The Leonard N. Stern School of Business, Glucksman Institute for Research in Securities Markets. Rosenbloom R. S. & Cusumano M. A. 1987, ‘Technological Pioneering and Competitive Advantage: The Birth of the VCR Industry’, California Management Review, Volume XXIX, Number 4, Summer 1987, p. 51 – 76. Tranas H C, 2009, “Industries Trajectory of Change: Industry Analysis of the Digital Video Player Industry”, pp.43-60. Yetton P., Craig J., Davis J. & Hilmer F. 1992, ‘Are Diamonds a Country’s Best Friend? A critique of Porter’s theory of national competition as Applied to Canada, New Zealand and Australia’, National Competition, Vol. 17, No.1, pp. 89-119. Websites Apple Inc., 2010 ‘Apple Annual Report For the fiscal year ended September 25, 2010’, 23 May 2011, p.78, 8-9 Other Kanta Ray, Dr Pradeep (2011), MGMT 2101 Lecture 3 New Trade Theories and International Product, School of Organisation and Management, University of New South Wales, Sydney, p.1-4.