Advantages and disadvantages of being a first mover in an industry

Moreover, the last 20 years have seen a flood of first-movers failing, with companies like Nokia, Yahoo and G.

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First-movers can establish positions in geographic or product space such that latecomers find it unprofitable to occupy the interstices. Exchange rates can increase or decrease competition among an industry, which is important for a firm to take advantage of Hill et al.

Still these links can be weak and lead to ambiguity.

Examples of first mover and late mover firms

But does the concept still hold in this day and age? A new, innovative technology can provide sustainable cost advantage for the early entrant; if the technology, and the learning curve to acquire it, can be kept proprietary, and the firm can maintain leadership in market share. Setting up production for a new product at scale? Some advantages include the idea early entrants can lead other companies in their understanding and use of technology in ways that are hard for later entrants to copy. An innovative product that is the first of its kind has the potential to grow enormously. For example, Pfizer enjoyed a monopoly in the erectile dysfunction market for five years with its patented drug Viagra before two rival products Cialis and Levitra were developed by other pharmaceutical firms. All in all, some firms are too rigid and invested in the "now", and are unable to project the future to continue to maximize their current market stronghold. Thus standardization lead to format war.

Lower market-entry pricing may be a clever strategy, yet absorbing investments early is risky. This defense mode often leads to a certain kind of fatigue which in turn impacts mindset, company culture and performance. In many markets there is room for only a limited number of profitable firms; the first-mover can often select the most attractive niches and may be able to take strategic actions that limit the amount of space available for subsequent entrants.

How standardization can lead to a format war: Standardization can be an improtant source of competitive advantages. 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.

The diffusion of innovation can diminish the first-mover advantages over time, through workforce mobility, publication of research, informal technical communication, reverse engineering, and plant tours.

Another way that a first mover may benefit from technology leadership is by applying for patents for their technology to try to prevent other companies from copying it.

First-mover disadvantages[ edit ] Although being a first-mover can create an overwhelming advantage, in some cases products that are first to market do not succeed. Magnitude and duration of first-mover advantages[ edit ] Though the name "first-mover advantage" hints that pioneering firms will remain more profitable than their competitors, this is not always the case.

A new, innovative technology can provide sustainable cost advantage for the early entrant; if the technology, and the learning curve to acquire it, can be kept proprietary, and the firm can maintain leadership in market share.

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Advantages and Disadvantages of Being a First Mover