First Mover Theory Vs Late Mover Theory
First mover and late mover strategies both have benefits and drawbacks. First mover firms come into the market with new products that nobody has observed before. In doing so, they have various advantages. These firms enjoy technological leadership. This is due to experience in research and development as well as patents they hold. They are also able to access scarce resources before other firms and this gives them advantage over later competitors. During the early stages of industrial development, most buyers go for the best and first product they know of. This is often the product sold by the first mover firm (Lieberman & Mongomary, 2000, p. 16). Due to this behavior by buyers, later entrants must invest more money to attract buyers, while the first mover firms enjoy customer loyalty. Microsoft, Google, Procter and Gamble, and Lincoln Electric are among first mover firms that have succeeded due to this strategy.
IBM failed in personal computers, Wesabe in web finance, Matsutisha in VCRs and EMI Group in the CT scanner. The reasons for their failures include persistently high costs that overwhelmed the benefits, free rider effect that allowed competitors to use the first mover firms experience to grow, market uncertainty which led the firms to make wrong decisions, and slow growth eventually failed these companies (Boulding & Christen, 2001, p. 72).
Late movers grow faster than first movers. They spend a lot less money on marketing and infrastructure than first movers. This is because market potential is already established. Hence these firms are certain of which groups to target in the market place. Innovative late movers can exploit the knowledge for the product by buyers to expand their target market. Late movers suffer several disadvantages such as access to resources is difficult as first movers have already acquired them (Shankar, Carpenter, & Krishnamurthi, 2002, p. 55). The market shows some resistance towards late entrants. They spend more money to convince their customers that their product is just as good as already established products. The first movers have a head start in the market. Late entrants that succeeded include Google in email, Android in smartphone area, HCL technologies and Twitter in the social networking field. Failures that came in late include Tucker automobiles in the motor vehicle industry, Sharper image in electronic sales, Pets.com and Ford’s Edsel that led to massive losses.
Both of these strategies have potential for success. First mover strategy is appropriate for companies that have enough resources to penetrate the market and conduct research and development efficiently. Late mover strategies are for less endowed companies that are good at innovation. These firms are in a unique position to out compete the pioneers.
References
Boulding, W., & Christen, M. (2001). First Mover Disadvantage. Harvard: Harvard Business
Review .
Lieberman, M. B., & Mongomary, D. (2000). First Mover Advantages. California: Stanford
School of Business.
Shankar, V., Carpenter, G., & Krishnamurthi, L. (2002). Late Mover Advantage: How
Innovative Late Entrants Outsell Pioneers. Journal of Marketing Research , 54-70.
