The second benefit is the ability to control strategic and/or scarce resources. In addition, applying for patents can protect and establish a first-mover advantage. For example, if the first mover can reduce the costs of producing a product (an “experience” curve effect), the first mover can establish an absolute cost advantage. Technology leadershipįirst movers can make their technology/product/services harder for later entrants to replicate. 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: 1.
May be able to control resources, such as basing themselves in a strategic location, establishing a premium contract with key suppliers, or hiring talented employees.Be able to tap into consumers first and make a strong impression, which can lead to brand recognition and brand loyalty.Establish their product as the industry standard.There are several advantages to being the first business to execute a strategy.Ĭompanies that are first movers can often: Learn more in CFI’s Business Strategy Class. However, it was the first company to achieve significant scale in that line of business. For example, Amazon was not the first company to sell books online. It is important to note that the first-mover advantage only refers to a large company that moves into a market. The first-mover advantage enables a company to establish strong brand recognition and product/service loyalty before other entrants to the market. The first-mover advantage refers to an advantage gained by a company that first introduces a product or service to the market. While there are indeed many advantages that first-movers may benefit from, there are also numerous disadvantages to keep in mind.Updated OctoWhat is the First Mover Advantage? Instagram - Vine and Snapchat may have been popular in their heyday, but Instagram eventually dominated the space despite launching after.įirst-mover advantage is a concept that describes the benefits that may come with being the first significant company, product, or service to occupy a particular market segment.Facebook - Myspace, Friendster, and Google Plus, among others, were once-famous social media platforms before Facebook took over.Google - Yahoo, Ask Jeeves, and AltaVista are a few of the many search engines that preceded Google.Some examples of companies that have enjoyed “second-mover advantage” include: They point to the fact that many of the world’s most profitable companies were not first-movers and were therefore about to benefit from their predecessors’ successes and failures. Such experts assert that it’s easier to achieve success in the business world without the baggage associated with being a pioneer. Being scrutinized more acutely due to having a first-mover status.ĭue to the possible disadvantages of being a first-mover, some experts argue that entrepreneurs and companies should instead aim to be a “second-mover,” rather than a first-mover.Being perceived by consumers as passé once newer, more advanced options become available.Not being able to learn from the successes and failures of competitors, while competitors are able to do so with your company - even before they launch.Failing to ‘keep up with the times’ if the company’s competitors are more successful with innovating and responding to customers’ demands.
Being knocked back by regulators, as well as banks and investors, as they may be hesitant to support an entirely new product, service, or company.Higher financial costs, given the need to establish a whole new market segment, among other first-mover costs.Paving the way for new companies to improve and expand upon the company’s existing products or services.
There are also many disadvantages first-movers may encounter. While it can be advantageous to be a first-mover, it isn’t necessarily a recipe for success.
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