Tuesday, January 31, 2012

The First Mover Advantage

Being the first to enter a Market with the intentions of selling goods or services is also known as the first-mover.  There is evidence that the first-mover has a distict advantage for being the first to market, but are these advantages just temporary, and is the first mover advantage just a myth?

The Advantages
Power- Being the first, you have control of the market.  This includes the ability to set the rules for how the product or service will be distributed to customers.  In addition, with the lack of competition, profit can be captured in the short run as the first-mover can set the price.  There is also a novelty for being the first, which tends to attract innovators and first responders.  This novelty may generate the momentum required to develope brand recognition, which can create spillover bennifits for years to come.  There are however a number of disadvantage while being the first-mover.

The Disadvantages
Risk- There is a great deal of risk associated with being the first-mover, and these risks are a clear disadvantages.  It can be extreamely expensive being the first on the scene.  Start up costs can be undaunting, expenses such as Marketing, the lack of a defined supply chain, and the costs of a flawd strategy can delay a first-mover and erase advantages discussed earlier.  The fast follower will be right behind the first-mover taking advantage of the mistakes made by the first to market.  This can even be a strategy of compeditors, waiting to gain a clearer understanding of the market befor launching.

While there are certain advantages to being the first-mover, there is one constant with all successful businesses, and that is having a great strategy that doesn't get complacent.  Strategies need to evolve as the markets change and as customers change.  A company that continues to generate barriers to entry, manage and leverage the supply of goods, satisfy the customer, and continue to develop diferentiators will be successful.  A solid strategy is the clear advantage, whether your first or your following.

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