Business Finance Homework Help

Discussion

1.As the first-mover to a market, it is easy for a company or an organization to establish the image of its branding. And the customer can easily get loyal to the products or services because there is demand and no other options. As the first-mover, the company also has more time to establish a better process and business structure, in which way it finds out methods to reduce cost, enhance efficiency, create better delivery of products or services, etc.

However, these advantages can become disadvantages. As the first-mover to a market, it is hard to recognize the risk and the real potential of the market. The products or services can be a complete failure that the market is imaginary and doesn’t exist. It can also be less profitable than expected. And the profitability may be short-term and disappear with the development of our society and technologies. Late-movers and competitors can easily copy and optimize the business model created by the first-mover after analyzing the first-mover’s failures and successes to minimize risk and failure. It could take a short time for the late-movers to catch up with or even beat the first-mover. Competitors can also easily avoid failure based on the first-mover’s experiences.

PERMALINKSHOW PARENTREPLY

2.While it is strongly argued by many that being a first-mover in a market has some advantages, it is seen that being a first-mover turns into a disadvantage rather than an advantage in the long run, and companies are starting to suffer in terms of profitability. One of the first mover advantages that comes to mind is that sales revenue can reach very large numbers in the short term. Among other advantages, the rapid development of brand awareness and reputation can be counted as the fact that the consumer will then consider it costly to switch to competition and decide not to change. Such preconceptions are factors that overshadow how being the first mover in the long run actually puts you at a disadvantage in terms of profitability. Research shows that companies that dominate the consumer goods market fall behind their competitors in terms of profit advantages in a period of 10 years, and those that dominate industrial products in an average time of 12 years. As the years progress, the brand advantage of being the first to enter the market begins to decline, while the costs remain high and the profit begins to decrease. Most of the competitors who entered the market later on, succeed in reducing their costs by taking the necessary lessons from the necessary experience, while the first-movers have problems in reducing their costs. According to another study, first-mover advantage is most dependent on industry dynamics. The pace of change in the industry and the pace of market evolution are the main factors on a company’s chances of collecting the coins of being a first mover. Even for a large company with every single resource available in hand, entering a market as first-mover is a difficult decision. And finally, wrong resources on the hand of a first-mover in a wrong market might create disaster for the company.

References:

Boulding, W. & Christen, M. (2001). First-Mover Disadvantage. HBR. https://hbr.org/2001/10/first-mover-disadvantage

Suarez, F. F. & Lanzolla, G. (2005). The Half-Truth of First-Mover Advantage. HBR. https://hbr.org/2005/04/the-half-truth-of-first-mo…