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FIrst-Mover Advantages (With real world examples) | From A Business Professor
Benefits of being a first-mover
Positioning yourself as a first-mover may provide several benefits, including:
Developing retailer relationships
Depending on the sector, the first few months of production may be expensive until your company determines the most effective and affordable way to produce your product and launch it. Being first to market gives you time to shape your micro-economy and set up a reasonably priced system before any rivals enter the market.
What is a late mover?
A company that releases a new product into the market after its rivals have done so is known as a late entrant. The timing of late movers is frequently deliberate in order to optimize the product to meet the needs of the customer and produce it as cheaply as possible to save the company money.
What is the First Mover Advantage?
The first-mover advantage is a benefit obtained by a business that launches a good or service on the market first. Before other market entrants, a company can build up strong brand recognition and customer loyalty thanks to the first-mover advantage.
It’s crucial to remember that the first-mover advantage only applies to big businesses that enter markets. For instance, Amazon wasn’t the first business to offer books for sale online. However, it was the first business to significantly expand in that industry.
Learn more in CFI’s Business Strategy Class.
Let’s start by looking at the facts. The majority of today’s behemoths, including Instagram, TikTok, and Facebook, were not early adopters. Additionally, over the past 20 years, numerous first-movers have failed, including firms like Nokia, Yahoo, and G M. all facing dire straits or going under completely.
An interesting example is hot startup Theranos, which touted a technology that only needed a few drops of blood to deliver accurate results. Founder Elizabeth Holmes went “all-in” on a technology that simply didn’t pan out, and ended up becoming the biggest business failure of the 2010s thus far.
Just ask Uber, whose services were curtailed in South Korea, Germany, San Antonio, Portland, and the Netherlands, as well as partially outlawed in Thailand. Regulatory resistance can significantly increase your operating costs or limit your potential. One of those factors which should never be underestimated.
As an example – when Udemy first came online, it had to persuade both teachers and students that online learning was a viable alternative to in-person classes. If your offer is radically new, you will have to do something similar, which is another disadvantage of being first in a market.
Lower market-entry pricing may be a clever strategy, but absorbing investments early is risky, so the first-mover is left with the dilemma of how to handle these upfront investments. Most often, first-movers set their prices for their goods and services higher when they first launch than they do later, when the market reaches equilibrium (also impacted by growing competition).
Benefits of Being a First Mover
Professors Marvin Lieberman and David Montgomery, in their 1988 award-winning paper, First-Mover (Dis)Advantages: Retrospective and Link with Resource-Based View, list three main benefits of being a first mover:
First movers can make it more difficult for later entrants to replicate their technology, product, or services. For instance, the first mover can create an absolute cost advantage if they can lower the costs of producing a good (an “experience” curve effect). Additionally, filing for patents can establish a first-mover advantage and protect inventions.
The second advantage is having control over strategic and/or limited resources. For instance, Wal-Mart was successful in locating its stores in small towns and keeping competitors out of the market.
Buyer switching costs are the third advantage that first movers may experience. If the first company is successful in establishing itself, it might be difficult for customers to switch to a different brand later.
FAQ
What benefit is there in first movers advantage?
The first-mover advantage is the benefit of increased brand recognition, customer loyalty, and increased sales that frequently go along with a company that introduces a new product to the market first.
What are some of disadvantage of being first mover?
- Everyone goes after the first movers. …
- Being first is expensive. …
- There’s no prior experience to fall back on. …
- All your eggs are in one basket. …
- Someone has to pay for the up-front investments. …
- Regulatory resistance. …
- Complacency.
Can you think of an example of a successful first mover?
Examples from the Real World Let’s look at a few well-known businesses that employed the first mover marketing tactic to create a long-lasting competitive advantage. Coca-Cola, or Coke, is a perfect illustration of a first mover that succeeds. Coke was invented in 1896 by John S. Pemberton.
What are three advantages associated with first movers quizlet?
#1 Pioneering enhances a company’s standing with consumers. #2 Early adoption of new strategies results in an unbeatable cost advantage over competitors. #3 First-time customers remain strongly loyal in making repeat purchases.
