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First-Mover: Advantages, Disadvantages & Examples

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  • 0:00 What Are First Movers?
  • 0:25 Advantages
  • 1:05 Disadvantages
  • 2:00 Real-World Examples
  • 4:35 Lesson Summary
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Lesson Transcript
Instructor
Susan Fenner

Susan has an MBA in Management from the University of North Alabama. She teaches online and campus-based Business courses.

Expert Contributor
Steven Scalia

Steven completed a Graduate Degree is Chartered Accountancy at Concordia University. He has performed as Teacher's Assistant and Assistant Lecturer in University.

Have you ever heard the marketing term 'first mover' and wondered what it meant? Perhaps you are familiar with the term, but would like to learn more about the benefits and drawbacks to being a first mover. Let's take a closer look.

What are First Movers?

You've probably heard of the old adage, 'The early bird gets the worm.' But what does that have to do with marketing strategies in today's highly competitive markets?

A company that is the first to establish itself in a given market or industry, the proverbial 'early bird,' is known as the first mover. First movers hope to gain a sustainable competitive advantage by establishing themselves before any competitors enter the market.

Advantages

There are some advantages to being a first mover. Here are some of them:

  • First movers have the potential to make a lasting impression on customers, which can lead to brand recognition and brand loyalty.
  • First movers have more time to refine their processes and to perfect their products or services.
  • First movers may have an advantage in controlling resources, such as a strategic location or an exclusive contract with key suppliers or talented employees.
  • First movers may have a sustainable advantage when there is a high cost involved for customers to switch brands at a later date.

Disadvantages

There are also some disadvantages to being a first mover, such as:

  • First movers bear the economic burden of developing a new market that followers into the market can exploit.
  • Followers into the market can learn from the mistakes of the first movers, allowing them to reduce their risk and avoid making costly mistakes.
  • Followers may be able to examine the processes of the first movers and modify them for greater efficiency and cost reduction.
  • Followers can utilize newer technologies that become available, while first movers may be heavily invested in older technologies.
  • First movers sometimes rigidly adhere to their original path, even when it isn't working, which opens the door for followers to move in with a revised version of the product that better serves the market's needs.
  • First movers may be driven by a fear of missed opportunities, leading them to launch a new product or service before the market is ready

Real-World Examples

So what will be your marketing strategy? Will you lead the way as a first mover, or will you wait until the ground work has been laid and then jump into the market?

Let's take a look at some well-known companies that used the first mover marketing strategy to achieve a sustainable competitive advantage.

A prime example of a successful first mover is Coca-Cola, or Coke. Coke was invented in 1896 by John S. Pemberton. When Caleb Bradham invented Pepsi-Cola thirteen years later, Coke was already selling a million gallons per year. For over a hundred years, Pepsi has been trying to play catch-up in the cola beverage market, but first mover Coca-Cola continues to dominate the market. In 2014, the Coca-Cola brand was valued at $79 billion dollars . . . a very juicy worm, indeed!

Other examples of successful first movers include:

  • eBay -- the first online auction service
  • Kleenex -- the first facial tissues
  • Amazon -- the first major online bookstore

These three powerhouses were able to capitalize on first-mover advantages to become household names! Can you think of any others?

Remember, though, being a first mover is not a guarantee of a sustainable competitive advantage. Here are two examples of followers who were able to outmaneuver the first movers and walk away with a larger market share.

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Additional Activities

Deciding On Whether To Be The First-Mover - A Business Case:

The following business case will help you apply your knowledge of being the First-Mover in an industry.

We are in the year 2075, and you are an executive of Toyota Motors. The industry is on the verge of the newest revolution in car manufacturing: The flying automobile. Many experts believe that there is sufficient technology now to have covers hover above roads suing a magnetic field, resulting in fasting travel times, less carbon emissions, and cheaper maintenance. You have the duty to decide whether Toyota should be the first-mover in this emerging industry. Your employees have gathered the following key data points.

  1. Toyota is very passionate about its brand and is adamant about maintaining a strong brand name.
  2. Toyota has a large amount of cash idle that it can invest in new projects.
  3. The flying car industry is expected to have rapidly-changing technology for the next 10 years
  4. There are currently 2 suppliers worldwide that can provide the parts required to build a flying car.
  5. Experts believe that the switching costs will be high for consumers since the magnetic field is controlled by the corporation that first sets it up.
  6. Experts believe that consumers are currently reluctant to trust flying cars as they are scared of accidents.

Required:

Using your knowledge of the first-mover strategy, write a short essay (minimum 150 words) that outlines the advantages and disadvantages of Toyota becoming the First-Mover in the flying automobile space. Be sure to use the case facts and not simply rely on generic information provided in the lesson.

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