What is the first Mover Advantage?

The first-mover advantage refers come an advantage gained by a agency that first introduces a productAccountingOur audit guides and also resources space self-study travel guide to learn audit and finance at your very own pace. Browse hundreds of guides and also resources. Or service to the marketMarket EconomyMarket economic climate is identified as a mechanism where the manufacturing of goods and services are set according to the transforming desires and also abilities of. The first-mover advantage enables a company to establish solid brand recognition and also product/service loyalty before other entrants come the market.

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It is crucial to keep in mind that the first-mover advantage only describes a large company that moves into a market. Because that example, Amazon was not the very first company come sell books online. However, it was the first company come achieve far-reaching scale in the line that business.

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Advantages of gift a first Mover

There are several advantages to being the an initial business to execute a strategy.

Companies the are first movers deserve to often:

Establish your product together the industry standardBe able to tap into consumers first and make a solid impression, which have the right to lead to brand recognition and brand loyaltyMay have the ability to control resources, such as basing themselves in a strategic location, establishing a premium contract with an essential suppliers, or hiring talented employeesCan gain an advantage when over there is a high switching cost for consumer to move to later entrants

Benefits of being a very first Mover

Professors Marvin Lieberman and David Montgomery, in their 1988 award-winning paper, First-Mover (Dis)Advantages: Retrospective and Link with Resource-Based View, list three key benefits of gift a very first mover:

1. Modern technology leadership

First movers deserve to make your technology/product/services more difficult for later on entrants to replicate. For example, if the an initial mover can reduce the costs of creating a productCost of items Manufactured (COGM)Cost of products Manufactured (COGM) is a term supplied in managerial accounting that describes a schedule or declare that mirrors the total (an “experience” curve effect), the first mover can develop an absolute expense advantage. In addition, using for patents deserve to protect and also establish a first-mover advantage.

2. Regulate of resources

The 2nd benefit is the ability to regulate strategic and/or scarce resources. For example, Wal-Mart to be able to find its shop in little towns and also prevent others from beginning the market.

3. The person who lives switching costs

The 3rd benefit that an initial movers might enjoy is buyer switching costs. If the first business is may be to develop itself firmly, it might be inconvenient for consumers to move to a new brand later.

Disadvantages of being a an initial Mover

Being the an initial business in an sector may not constantly guarantee one advantage.

The first mover may invest greatly in persuading consumer to shot a new product. Later on entrants would advantage from these informed buyers and also would not must spend as much on educating consumers.Later entrants have the right to avoid mistakes made by the first mover.If the very first mover is can not to record consumers with their products, later entrants can take advantage of this.Later entrants deserve to reverse-engineer brand-new products and also make them far better or cheaper.Later entrants have the right to identify areas of advancement left by the an initial mover and take benefit of them.

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Examples the Successful service providers That were Not an initial Movers

Listed listed below are three carriers that were not an initial movers in their corresponding markets, yet have currently grown to come to be some of the best companies in the world:

1. Google

Before Google, over there were search engines such as Yahoo and also Infoseek. However, Google had the ability to customize its find engine come perform more effectively and also efficiently. Lock now regulate over 65% of find activity.

2. Southwest Airlines

Southwest Airlines entered the airline industry as a late entrant yet was able to expand and become the second-largest airline in the human being in regards to the total number of passengers. The firm focused on one area that various other airlines were not looking in ~ – short-haul flights.

3. Starbucks

There to be a lot of of locations to to buy coffee before the establishment of Starbucks. However, Starbucks was able to establish a solid brand same by placing an emphasis on do Starbucks the go-to place when you’re not home or in ~ the office.

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