When we talk of being first movers, it means that as a company, we are going to introduce the new commodity in the market as the first company. There are obvious advantages that are associated with being first movers, but this does not automatically mean being successful in the business, as there are also other disadvantages to be addressed. The best way to decide whether to under take a first mover step is to look at the risks that are associated with the step and what are the rewards. Alternatively the company can decide to wait and see how other competitors are fairing in the market.
In this case, the company will be able to study where the other competitors’ strength lies, and where are the pitfalls so as to capitalize on that. Also, this system, especially after understanding how the other competitors have dealt in a certain product, does not necessarily guarantee success. This is because there are as well obstacles that have to be tackled in considering the system. First mover’s theory In theory, we all believe that for you to win, you must be the first to make the move. In market this theory can also be applicable.
When a company first introduces a commodity in the market, the company will be able to gain a massive market share, develop a competitor advantage, and leadership position in the market. (Innovation Zen, 2006). This was well argued by Intel’s ex-CEO, Andrew Groove when he said that “the first mover and only the first mover, the company that act while others dither, has a true advantage, in this business, is the surest way to gain market share,” (Innovation Zen, 2006). There are still some other advantages associated with the first mover in the market.
For instance, being first movers, the company can establish its position in the market as a leader. The company will be able to establish business under as well as gaining experience to enable the company to reap the benefit of the learning curve, then assume cost leadership. When we move first in the market, the company will also be able to gain early commitment of suppliers of raw materials, new technology, and distribution channels hence creating cost advantage over the other late movers.
As first movers, the Company will be painted as pioneers, and this will help to develop the image of the company and reputation. In the end, it will enable the company to set subsequent standards for the commodities in the industry to be followed by competitors. Being first movers will also enable the company to constitute a preemptive strike that makes the organization a leader while letting the late movers to adopt a risky method of imitation, which might also be difficult and costly move to them.
Disadvantages of the first movers This method is very costly especially in terms of creating awareness to the customers as well as daily research and development. This is not the case with the late movers as they will only enter the market when they are sure that the market have stabilized. Even though it might be a hard task for the late movers to imitate the commodity, when they succeed in the imitation, this might negate the advantages that the company as a first mover has. Another disadvantage lies in perspective.
Technology is constantly changing, and therefore, any change that might occur in technology might render the first mover’s technology obsolete and thus the late mover use the latest technology to outdo the first mover. “Therefore the advantages and disadvantages of first movers show that good timing is important…in case conditions are not conducive to being first movers, then what matters are the strategies, positioning, and entry barrier that the first mover firm is able to create,” (Kozami, 2005 p 241) Advantage of late movers
There are various advantages associated with being late movers. Most of the advantages of late movers are actually a reflection of utilizing the disadvantages of first movers. One of the advantages is free rider effect. The first movers will need to undertake Research and Development, consumer awareness and development of infrastructure. This does not have to apply to late movers, as a company will only enter the market when it is precise that there is complete consumer awareness and that the product has shown success in the market. There is also the question of cost.
In last movers, it only requires the cost of imitation, which is much lower than incurring innovational costs such as undertaken by the first movers. Still to counter the cost, the company “may be able to exploit employee screening performed by early entrances and thus acquire skilled labor at low cost”, (Bresser, 1998 pp 447). This though might have been a costly affair to the first movers in training the employees. It is also advantageous to wait and see how the markets respond to the new technology and come up with the best ways of containing any uncertainties that may occur because of the technological changes.
This will imply entering an assured steady market as compared to when the company moves in as the first. Disadvantages of late movers The biggest disadvantage is that even though the company may move in as an imitator with improved commodities, there is still a substantial amount of monopoly, which the first movers will be enjoying, that cannot be available to late movers. It is more advantageous to the late movers if the technology changes thus rendering first mover’s technology obsolete. Therefore the late movers will enjoy the moment such as incident occurs.
But if the technology does not change, the late movers will be disadvantageous as they will require a very high cost of imitation so as to march the standard of the first movers, “under such conditions, the longer the first-mover’s lead-time is, the larger the late mover disadvantages. Thus, speed to the market becomes highly critical for imitating late-movers”, (Miozzo & Grimshaw, 2006, pp 126). Conclusion So far, looking at the advantages and disadvantages of both strategies, it is good to undertake a late movers strategy.
This is because, It is not always that a firm has to be first movers even if it has the opportunity. Smart late movers can overturn the apple-gate and beat the first movers at their own game. Sometimes fence-sitting till other firm has tested the waters in an industry may be a prudent business strategy than jumping straight away in order to be the first mover. Later-movers can succeed if they have the staging power, can learn from the mistakes of the first-movers and fine tune their business tactics accordingly, (Kozami, 2005, pp 241).
Reference Bresser R. K. F. (1998): Strategische Managementtheorie, ISBN 311015787X, Walter de Gruyter. Kozami A (2005): Business polity and strategic management, ISBN 0070444706, Tata McGraw-Hill. Miozzo, M. & Grimshaw D. (2006): Knowledge Intensive Business: Organizational forms and National …ISBN 1845422368, Edward Elgar Publishing. Innovation Zen (N. d): First Mover Advantage Revisited, Retrieved on 27th Oct from http://innovationzen. com/blog/2006/08/21/first-mover-advantage-revisited/