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The curse of being first

If we looked back in history, we would see that all new ventures had either encountered strong resistance or got their honours at a later stage – when many people followed after the hard years were over.

This is what the rules in life tell you – to follow when everyone follows and not to overexpose yourself to a venture that seems good, but is ahead of its time. If everyone thought the same it would mean we stand alone with our belief that here is the chance to create a market within our nation (EU); new, wealthy and keen to team up with the rest of the world in setting the tone for the business – and maybe even taking over parts of those areas within the EU which completely failed to show results in Business Aviation.

Our show is in front of the door, and this year has been particularly special. Maybe that is because of the Chairman Brendan Lodge, who is a very well known, experienced and honored man, who knows exactly what he wants. He wants to have more business and he knows that it would be waste of time and energy to go back to the dusty old rules of competition and other unnecessary things.

We are here to move forward, to push the envelope, to probe important issues and to find out where the problem is. Holding meetings all around the world and discussing how and what can be done better in Russia and other Central European countries is an analogy of “Discussing the pain without asking the patient”. We need to first ask the patient and then ask the doctors treating the patient, to find out where we really stand and what else can be done to improve the situation.

CEPA EXPO was lucky to receive such incredible support. I think that I have talked personally to some three thousand people since the summer. And the most important thing is that not one single person believes that it is wrong to focus and to help develop this area. CEPA EXPO is one of these shows, which open another door that are much closer to the center of the business. The main advantage, however, is that it really wants to improve and to learn from other’s mistakes. We will use our all experience to change things and to shake off bad habits that are so convenient to us.

Change is success, and stability is illusion.We will use all available tools get the entire auditorium involved by programming our own twitter feed so that constant communication is possible and by giving chance to several people from panel and floor to discuss crucially important issues during the question and answer sessions.We are sort of beginners in this area, but we move towards our goal. We see each other as a part of an entire system where everyone plays a special role and completes specific task. We take our role seriously and we take responsibility for helping to pave the way to the places and opening the gates to businesses that will within the shortest possible time allow us to recover from recession and will allow the entire EU to become a huge aviation market. It will be market that is strong, prosperous and that will move us into the next decade. This market will successfully support all involved parties from operators to financial institutions.Blazing a new trail isn’t easy. It’s hard work that takes considerable risk. But CEPA believes that the risk is far outweighed by the rewards. The rewards being increases in number of new jobs created, which translates to a decrease in doubts. This will open door wider to more opportunities for the next generation. In addition it will provide more reasons for people to do business, to have a courage starting something new, and to smile.The important thing is that someone starts something somewhere, because it means that at least something is moving. This (CEPA) is something that I personally wanted and did. And I see today hundreds of believers, helpers and voluntary workers, who spend hours working without pay, but believing that we can catch up with the rest of the crowd. Also, now we at last enjoy closer connection to the authorities, airports and people in the industry, because we are there from the beginning and we know from the base what it means to do aviation business in these times. We understand what people in the industry fear and how to overcome the troubles. And we will overcome. When I attended the Forum 2000 in Prague this year I saw many important and famous people continuing in the spirit of Vaclav Havel, who was able to connect all countries from the former Eastern Bloc with their older brothers in the west. Joan Baez, the Tibetan leader Mr. Lobsang and many more promised to continue the idea of one united world. We think that doing something for the business aviation market is just a small piece that will contribute to building the bridge, which will allow us to create one big nation. No matter what currency and language we speak – we are just one nation.Still, moving to Central Europe, and I mean moving not doing business from neighboring country, requires going into the market semantically and physically in order to understand the culture and business. This however still creates FIRST MOVER ADVANTAGE but in a larger view.

There are two stages to developing first-mover advantages. First, a company must have an opportunity to be first at something, either through skill or luck. Second, the firm must be able to capture the benefits of being first. In their award-winning article, professors Marvin Lieberman and David Montgomery of Stanford University described three benefits of being first: technology leadership, control of resources, and buyer switching costs.

Technology Leadership

First, early entrants can lead other companies in their understanding and use of technology in ways that are hard for later entrants to copy. One way this can happen is that the early entrant learns how to reduce the costs of producing a product through accumulated experience in producing it. This is called a “learning” or “experience” curve effect. Unless later entrants can learn how to produce at these lower costs faster than the first entrant did, the first entrant will have a cost advantage. Harvard University Professor Michael Porter discusses this phenomen with his FIVE FORCES. However, researchers have found that in most industries it is relatively easy for later entrants to learn new technology quickly and overcome the lead held by the first-mover firm.

In many industries, though, later entrants can invent their own technology quickly enough so that the first-mover’s patent protection does not matter. A stronger advantage from technology leadership arises when the first mover can establish their product as the industry standard, making it more difficult for followers to gain customer acceptance.

Control of Resources

The second type of first-mover benefit is the ability to control a resource necessary for the business that is better than resources later entrants must use. Other resources that a first entrant may be able to control include a supply of raw materials needed to make the product, or access to shelf space at the supermarket. First-mover firms also have the opportunity to build resources that may discourage entry by other companies. For example, the first mover may increase production capacity or broaden their product line, signaling that there is not enough room for followers to enter and profit.

Buyer-Switching Costs

The final type of benefit that first movers may enjoy comes from buyer-switching costs. If it is costly or inconvenient for a customer to switch to a new brand, the first company to gain the customer will have an advantage. Switching costs include adapting to a new product (e.g., employee training), and penalties associated with breaking a long-term contract. Especially for consumer products, the first mover has the opportunity to shape consumer preferences. The first company to offer a product of acceptable quality may earn brand loyalty. Satisfied consumers tend not to spend time seeking information about other products, and tend to avoid the risk of being dissatisfied if they switch.

Uncertainty of First-Mover Advantage

Three types of benefits – technology leadership, control of resources, and buyer switching costs—can provide long-lasting first-mover advantages. However, researchers believe that in many industries, companies entering later can overcome these advantages. Sometimes there are even first-mover disadvantages, or advantages enjoyed by companies who enter later. For example, the first entrant may invest heavily in enticing customers to try a new type of product. Later entrants would benefit from informed buyers without having to spend as much on education. Later entrants may be able to avoid mistakes made by the first movers. If first movers become complacent, later entrants may take advantage of changing customer needs. As the Internet continues to develop, technology companies find themselves especially susceptible to second- or later-mover success. Follower companies are reverse-engineering many new products to develop competing products either faster or cheaper—negating much of the first-mover advantage.

Researchers are continuing to learn under what conditions first-mover advantages are most likely to occur. They are looking for differences across industries and geographic markets. For example, consumer product markets appear to offer more first-mover advantages than industrial markets, but more research is needed on service industries. Little is known about first-mover effects in countries other than the United States, though some evidence suggests that pioneering advantages may be stronger in other countries. Another important factor appears to be the ability of the first-mover firm to use their other resources to maintain the initial advantage of being first. For example, a firm that is already strong in marketing and distribution may be better able to sustain a lead with a new product than a newly-formed company. Researchers are also studying successful follower strategies.

Given the uncertainty about when first-mover advantages occur, companies need to carefully consider their strategy. Does the firm want to invest in seeking opportunities to be first? If opportunities arise, what is the best approach to market timing? Which of the three types of benefits are likely to be available to the first entrant in this market? Does the firm have the resources to sustain any initial benefits they gain from being first? If someone else enters first, how difficult will it be to follow? What advantages might later entry provide in better or lower-cost technology, or better adaptation to customer needs? Although first-mover advantages may be attractive, there are also advantages to being a follower. Company strategists need to decide which approach has the highest potential for long-term profits given their resources and market characteristics.

He who would learn to fly one day must first learn to stand and walk and run and climb and dance; one cannot fly into flying.

Friedrich Nietzsche

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