The first-mover arid late-mover strategies are basically related to the timing of strategic moves by an organization. Determination of the timing of strategic moves is important for every business organization. A firm may be the first-mover in launching a strategy to gain a competitive advantage in the marketplace.
Or, the firm may wait and be a late-mover to avoid risk There ate both advantages and disadvantages of becoming first-mover or late-mover. Thus, to be the first-mover or not is a crucial decision for a firm.
A firm can be. said to be first-mover when it enters into a new market or develops a new product prior to the competitors.
Being the first-mover means the firm is the first to initiate a strategic move Companies like eBay (first online auction firm), Honda (first motorcycle manufacturer).
They enjoyed first-mover advantages for a long time.
Advantages of First-Mover Strategy
Several advantages emerge when a firm takes a strategic move as the first-mover. The first-mover becomes the pioneer, helps the firm too;
- build a reputation in the marketplace,
- attract buyers to the products and the firm,
- gain new knowledge of the industry’s key success factors,
- comprehend the critical issues in the market,
- produce an absolute cost advantage over the competitors because of its early commitments to supplies of raw materials, new technologies, and distribution channels
- create a pool of loyal customers who are likely to repeat purchasers of products of the firm; and
- discourage potential new entrants to refrain from entering into the market through the creation of strong entry barriers.
Disadvantages of First-Mover Strategy
Making a first-move has mixed blessings. It may be very risky to initiate a strategic move first. The following are some of the disadvantages of first-mover strategy (these are advantages of being late-mover):
- It is highly costly to become the first-mover because the firm has to create demand in the market for the product and so it needs to spend a huge amount of money for promotion.
- it may invite serious adverse effects on operations of the firm if the industry is such that there are frequent changes in technology (such as in the software industry or in the telecommunications industry). In such a situation, the late-movers gain the advantage of using the latest technology.
- The late-movers can copy/imitate the technical-how; easily and eventually may be able to dust the first-mover from the market.
- The late-movers may become so powerful because of their ability to bypass the first-mover in developing skills and techniques that they can snatch-away the customers of the first-mover.