The first entrant could also control the supply of raw materials needed to make a product, as well as obtaining the ideal supply chain. This strategy was used by Walmart when they were the first to locate discount stores in small towns. An example would be the advantage of being the first company to open a new type of restaurant in town and being able to obtain a prime location. The second type of first-mover benefit is the ability to control resources necessary for the business that are of a higher quality than resources later entrants will be able to use. With the short lifetime of any technological advantage, patent-races can actually prove to be the downfall of a slower moving first-mover firm. Therefore, patents are a weak protection as the transitory value is low. It must be taken into consideration that technological changes are happening at an incredibly rapid pace. Īnother way technology leadership comes into play is when a firm has had a unique breakthrough in its research and development (R&D), providing sustainable cost advantage if the innovative idea can be sustained and protected. Not only this, but the first mover will be able to apply for patents, copyrights, and any other protective advantages that will further enhance their establishment in the market. For example, if the first mover reduces the costs of producing a product, then they will establish an absolute cost advantage, not just a marginal cost advantage. Technology leadership įirst movers can make their technology/product/services harder for later entrants to replicate. The three primary sources of a first-mover advantage are technology leadership, control of resources, and buyer switching costs. Mechanisms leading to first-mover advantages 4.1 Example of second-mover advantage:.3.2.3 Magnitude and duration of first-mover advantages.3.2.2 Alternative measures of first-mover advantage: profits vs.3.2 Definitional and measurement issues.3.1 Endogeneity and exogeneity of first-mover opportunities.2.4.1 Magnitude and duration of first-mover advantages.2.3 Shifts in technology or customer needs.2.2 Resolution of technological or market uncertainty.1 Mechanisms leading to first-mover advantages.These followers are also aiming to gain market share however, most of the time the first-movers will already have an established market share, with a loyal customer base that allows them to maintain their market share. First-mover advantage enables a company or firm to establish strong brand recognition, customer loyalty, and early purchase of resources before other competitors enter the market segment.įirst movers in a specific industry are almost always followed by competitors that attempt to capitalise on the first movers' success. In marketing strategy, first-mover advantage ( FMA) is the competitive advantage gained by the initial ("first-moving") significant occupant of a market segment. ( Learn how and when to remove this template message) JSTOR ( February 2015) ( Learn how and when to remove this template message).Unsourced material may be challenged and removed.įind sources: "First-mover advantage" – news Please help improve this article by adding citations to reliable sources. This article needs additional citations for verification.
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