First Mover and Last Mover Theories

First Mover and Last Mover Theories

Introduction

This assignment is focused on providing an understanding of the first mover theory and the last mover theory along with their advantages and disadvantages. It also provides real life examples of companies which have benefitted from the application of either one of the theory.

Discussion

First Mover Theory

According to the theory of first mover, the firm which is the first to move in a new market especially in those industries which are subjected to the effect of networks will have advantages because the barriers for new entrants become high and even insuperable at times (innovationzen.com). The advantages that stem from the initial adoption of the consumers that allow the firms to acquire a larger portion of the market share. therefore, by the time competitors enter the market, it has been assumed that the fist mover will have developed the advantages in terms of brand recognition or loyalty along with the cost advantage in terms of the prevailing distribution and infrastructure system (Wong, 2003).

Advantages of First Mover Theory

The advantages of first mover theory are as:

The first movers always have the opportunity for exploiting the network effects along with the positive feedback loops which will lick the consumers in its technology.

Example

In the industry of videocassette recorders, Sony would have been able utilize the netwrwork effects through the licensing of its technology but it abandoned this first mover advantage to the second mover which was Matsushita.

The first mover can develop brand loyalty that is costly and expensive for the later entrants in terms of breaking down. When the company will become successful in it, the name of the company or its product becomes associated with the complete class of product which also consists of the products that are made by the competitors.

Example

The example is the people use the word Xeroxing instead of photocopying and FedExing when they want to send a package through the overnight mail. The other example is that when somebody wants to sear the web for something, they use the word Google it instead of search it through the internet.

The first mover can develop switching cost for the consumers which will make it difficult for the competitors and take the consumers away from the company that has the first mover advantage.

Example

The provider of wireless service can give the consumers a new wireless phone whereas the customers need to sign a contract in which they agree to pay for the phone when they will terminate the contract in the specified period. it is because the original cost of wireless phone might be hundred to two hundred dollars which shows a high switching cost that the late entrants need to overcome.

The first mover is also able to accumulate the valuable knowledge which is related to the needs of the customers, process technology, product technology and distribution channels. This type of knowledge accumulation creates an advantage that the later entrants find difficulty in gaining.

Example

Sharp had the first mover advantage in the ...