Advantages of First-Mover Theory and Late-Mover Theory

Abstract

This paper discusses the advantages of both the first-mover theory and the late-mover theory. It provides examples of successful and unsuccessful organizations for both theories. The paper ends with a recommendation about which theory would be best for the managers of the company to implement.

Introduction

" Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map."

- Wayne Calloway

" The early bird may get the worm but the second mouse gets the cheese"

- Unknown

First- Mover Theory

The first- mover theory states that the first company to enter a specific market will gain substantial market share and will have the ability to defend its leadership position in the market against new entrants (Scocco, 2006). First- mover advantages are the benefits an organization gains by entering a new market or developing a new product earlier than competition.

Advantages and Disadvantages

Being the first-mover in a certain market or industry can be beneficial to a firm because it helps (1) build a company's image and reputation among consumers, (2) create cost advantages over competitors (new technologies, new components, new distribution channels, etc.), (3) attain a strong, loyal customer base, and (4) make competitor duplication extremely hard (David, 2011).

As well as advantages, there are disadvantages to the first- mover theory. The major disadvantage to being a first- mover is unexpected/unanticipated costs that come with being the first company to conduct business in a new market (Boulding & Christensen, 2001). Another disadvantage would be technology advances. Being a first- mover, the company would have to be able to upgrade and improve at "moment's notice" when it comes to rapidly advancing technology.

A third disadvantage is testing the waters of the market. A first- mover organization may make many strategic and tactical mistakes when conducting business in new markets. This would be assisting a late- mover in succeeding in the market over their first- mover rival (David, 2011). A generalized disadvantage is the fact that even though first-movers have several advantages over late-movers, there is no absolute guarantee that these advantages will be sufficient enough to ascertain a credible competitive advantage (First Mover Theory and Late Mover Theory, 2008).

Late- Mover Theory

Late- movers are the companies that enter the market late, second, or after first-mover companies. Just like the first-mover theory, there are both advantages and disadvantages