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Writer's pictureDr. Marvilano

Overview of Strategy Tools: First Mover Advantage


Many of the world's leading businesses were built by adventurous managers and business leaders. These people make their mark in uncharted business territories. And in testing new waters, a few of them have struck gold.


This gives them first-mover advantages that translate to a significant market share in their respective industry lines. This article explains the first user advantage concept and the opportunities it presents.



What is it?

The first-mover advantage refers to the advantage a company gains as the pioneer of a particular product or service in the market. This product or service is usually the first of its kind and is introduced into a new market. And as the product filters across the market, it begins to establish itself and gain increasing patronage.


If the product is well received, it becomes a market leader and sets the industry standard. The product is thus said to have enjoyed a first-mover advantage. Below are three of the conceptual benefits of the first user advantage.


Technology leadership

Companies with the first mover advantage can claim exclusive rights to their technology/product. They could also make it more difficult to be imitated by future competitors.


Control of Resources

The first-mover advantage gives its hosts a level of control over their industry's resources. These resources include access to the best raw material (and suppliers), technical support, and marketing channels.


Buyer-switching costs

The first mover can manage production costs and create lower-priced products. Unfortunately, this makes it more expensive and less convenient for buyers to patronize other products.



First mover advantage
First mover advantage: Various Options


When do we use it?

Organizations use the first mover advantage to:


Explore new business opportunities.

First movers explore new prospects and find ways to provide value whenever a window opens.


Introduce new technology

First movers create markets for innovative products and services. These products are unique and different from what is available.


Create diversified and expanding businesses

First movers are not afraid to venture into new business terrains. They bank on previous successes to create unique and differentiated products.


Build a brand reputation.

The first-mover advantage helps organizations make a name for themselves. As a result, these organizations become pioneers in their chosen industries and create long-term visibility for their products and services.


Close industry gaps

The first mover identifies a pressing need in society or a particular market segment and then seeks to meet them. They tackle unsolved problems by providing innovative solutions.



What business questions is it helping us to answer?

The first mover advantage helps to answer the following questions:


What can I do differently to tackle this problem?

Organizations can become pioneers in their chosen vocations by creating a unique and creative way to solve an existing challenge. The first mover deploys unconventional problem-solving techniques and creates a different niche market.


What new opportunities can I exploit?

The first mover looks out for opportunities in new and emerging markets. For example, the electric car manufacturing industry will present opportunities in the electric-car charging segment.


How can I achieve long-term sustainability?

Managers with an eye on the future aim to remain relevant as time progresses. This encourages them to make as many big (and first) moves as are necessary to keep their businesses afloat.


How can I achieve a competitive advantage?

First movers set the pace for the competition by creating industry standards and controlling key resource portfolios.



How do we use it?

The first-mover advantage comes up when organizations provide a unique and crucial value to the populace. Here is a helpful guide on how to work around it.


Step 1: The "Search" stage

Look for an unmet need, an industry gap, or a good prospect in society and the market.


Step 2: The "Research" stage

Research what strategies, technologies, and resources are needed to solve the existing challenge.


Step 3: The "Analysis" stage

Analyze the data obtained from your findings. Then, undertake a feasibility study/analysis of the business prospect and do the necessary due diligence.


Step 4: The "Implementation/Development" stage.

This stage comes up once you consider the chances/risks to be worth taking. You can now develop your business plans, strategies, and other critical operational procedures.


Step 5: The "Sensitization" stage

This crucial stage allows you to pave the way for your products to hit the ground running. It requires you to develop strategic marketing campaigns that educate the public about your product's value.


Step 6: The big move

Now that you've put all the operational gears in place, you can set the wheels in motion. You can now launch your products through the appropriate channels and the right markets.



Practical example

Companies like Coca-Cola, Amazon, and Apple are some notable companies that have enjoyed the first mover advantage to considerable extents. Amazon, for example, revolutionized the online book-sharing/publishing industry. They decentralized the entire industry and gave publishers power over their books. They have even moved on to dominate the online retail/marketplace industry since then.



Advantages

It helps build customer loyalty.

By making the first moves in the market, you can build up a solid customer base that'll be loyal to your brand. This makes it more difficult for them to side with your competition in the future.


The first mover gets to define industry standards.

These standards relate to the production, marketing, and other operations-related standards that other industry players later adopt.


It helps build strong retailer relationships.

The long-established relationships that the first mover creates with the top industry retailers will favor them in the future. This is often due to the popularity of their products, leading to a high patronage rate by stores.


Increased brand recognition

The first-mover advantage helps product brands achieve market visibility early by creating sustained customer relationships.



Disadvantages

Short-term profitability

The first-mover advantage may not provide any benefit in the interim. This happens because it takes time for a new product's market to take shape.


Marketing and Education Costs

Because your product is new to the market, you'll have to spread the word about it as much as possible. Unfortunately, this could present significant cost implications for the marketing team.


Possibility of Product defects or design flaws

In a bid to pave the way for new technology, you will end up making a few missteps. Thus, the first mover must employ effective quality control before rolling out their products.


Sole risk-management responsibility.

It'll not always be smooth sailing for new entrants in any market, especially if the industry is developing. The first mover usually bears the risks associated with a new product.


It creates second-mover advantages

The second mover learns from the first mover's experiences and uses it to their advantage whenever they step into the ring. By observing your moves, future competition can create better, lower-priced products.


 

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