Factors influencing junior managers' poor decisions in new market entry

Abstract

Junior managers today make many important marketing decisions. One of the most frequent decisions made by junior managers is new market entry. Although these managers are well educated and possess strong technical skills, they often make bad strategic decisions. This study examines four major factors influencing poor market entry decisions, namely: prior success, competitive pressure, competitive market justification, and balance between R&D and marketing capabilities. We use both quantitative and qualitative data from Markstrat, a strategy simulation in which students acted as firm decision makers, to test four hypotheses concerning the antecedents of poor market entry decisions. We found that firms that have made the wrong decision to enter a new market (hence resulting in poor financial performance) tend to have: • Entered the market hastily without a track record of success in prior markets; • Entered the market due to competitive pressure; • Justified their market entry decisions mostly based on competitive reasons; • Sunk in substantial R&Ds expenditures without commensurate marketing expenditures when launching new products in the new market. This study’s findings offer insights into the phenomenon of poor decision making. We discuss how junior managers can be made more aware of common biases leading to poor decisions, and how senior managers can be sensitized to junior managers’ limitations and hence provide appropriate mentorship.