First Mover Versus Follower Essay Example | Topics and Well Written Essays - 3750 words

First Mover Versus Follower - Essay Example This advantage seems to be borne out of the fact that the First mover has access to extent of resources that later entrants might not have and thus gain advantage that the latter might not have. However, often, the first mover is unable to take make use of the advantage and that leaves space for the Second mover or the follower to move in to avail the advantage that still exists. The term first mover advantage means the first company to launch a new kind of product or service should have a competitive advantage over those that start afterwards . The advantage exists in the form of an opportunity that has to be made best use of. The opportunity can be availed successfully by first movers only if before the competitors enter the market, they build a customer base, build a strong brand, develop economies of scale and develop distribution channels such that a competitive edge is built and sustained. However, a follower may overtake a First mover especially if it has one or more of the fo llowing: A better product: If the follower is able to learn from the mistakes the first mover made, then it is able to build a better product and have an edge over the former. Better distribution system: A follower might be able to build a better distribution system in turn helping it gain a lead over the first entrant. A strong brand: The Follower might be able to build a stronger brand and thus help them position themselves ahead of the first mover. The internet boom of the Nineties was what made the First mover concept and became apparent as a phenomenon, obvious in business terms. Till then it was more of a notion. However, this phenomenon and its importance as a business concept has been on the decline since the recent economic downturn. The first mover is the first major or significant company to move into a market and not necessarily the first company to do so. For a company to attempt becoming the ‘first mover’, it should figure out whether the benefits are more than the risks. Many times, the first movers are rewarded with profits and a monopoly in the market. However, at other times, they are unable to build up on the advantage and this leaves the opportunity for other entrants to compete and effectively gain advantages and potential to capitalize on the same. The term â€Å"First Mover advantage† was made popular in 1988 in a paper by Professor David Montgomery and co-author Marvin Lieberman. Overtime this phrase and the underlying concept caught the attention of the industry and business community and prompted huge spending in new businesses or markets often ignoring the nature and extent of underlying risks. Researchers have shown that First movers have inherent advantages based on empirical and theoretical study of the various mechanisms that confer advantages to the early entrants. However, they withdrew their claims about the concept in a retrospective paper written 10 years later. In a research conducted in 1993, researcher s concluded that almost half of the first movers in the market in their 500 sample brands had failed to gain advantage over competitors. The study also showed that followers who entered the market relatively early had greater success in the long run. As per their study, the said followers had entered the market on an average of 13 years later than the pioneers. As per studies, based on order of entry, the following is the