First-Mover Advantage

Quick Summary of First-Mover Advantage

The edge that a company gains by entering a particular market before any competitors. This advantage can be gained in many ways, such as having the first chance at accessing resources (and if a particular resource is scarce, another company might not be able to get enough to have a chance at competing), gaining funding from the most-interested individuals, or by developing new technologies which other companies do not have access to. Although being the first-mover has the potential for many advantages, some disadvantages can arise as well, such as the ability of other companies to study and mimic the products and techniques of the first company.

First-mover advantage can be referred to as an advantage that can be gained by any company which is first to capture a segment of the market. First-mover advantage is not necessarily gained by any company which is first in terms of starting a business in any sector, but any significant company which makes the first attempt at establishing itself can get first-mover advantage. Explaining in a better way, consider an example of Amazon.com, which may not be the first company to sell books online, but it is definitely a significant company to get established in the online book market.

The first-mover advantage was popular with the internet world, but now that importance is simply lost. First-mover advantage plays a significant role in determining market share but may not aid sufficiently in the success of any business. First-mover advantage is fruitful only when returns justify risks. First-mover advantage can be near-monopoly status and high margin profits.

Advantages Of First-movers

First-mover advantage gained by first moving companies can be of various forms. Firstly, we can say when any company enters market first; it gets the opportunity to capture market share more easily as there are no rivals and hence no worries to save customers from getting attracted to rival company’s goods or services. Secondly, even if rivals come in the market, first-mover company has a well-defined management team that implement policies that ensures strong competition. Polices corresponding to similar products, brand loyalty, retail outlets, up-and-running allocation systems and many more are taken by first-mover companies to increase competition. In this way, first-mover companies can defeat their rivals and strengthen their position and fight more effectively to safeguard formerly acquired share and also continue to expand.

Few success stories of First-mover advantage

First-mover advantage is a real concept and there are some companies that have actually gained a lot of advantages by moving first in the market. Firstly, we can talk about Richard Arkwright, who was creator of modern factory system. Arkwright developed a comprehensive mechanized system for cotton yarn. Using this mechanism he built several factories of his own and within five years, he owned fifteen Arkwright-patent mills that operated around the north of England. Before court declared his invented technology was free for use by all, Arkwright enjoyed six years of first-mover advantage. He not only made a leading position in spinning market but also made constant expansions and achieved superior competence. Competitors chased Arkwright all his life but could never catch up him.

Examples of First-Mover Advantage in a sentence

For the adventure sports enthusiast, GoPro has had a first-mover advantage however competitors have recently entered this segment of the camera market.

First-mover advantage will be in our favor the faster we’re able to get our product to the market. We can be the pioneers of our products well into history.

Risking millions in research and development and eventually establishing the first colony on the Moon gave the corporation the first-mover advantage because as soon as other companies began forming colonies, the prices for land on the moon skyrocketed.

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