First-mover Advantage - Implications For Managers

Implications For Managers

Different studies have produced varying results in respect to whether or not first-mover advantages, on the whole, exist and provide a profitable result for pioneers. There have been two outstanding conclusions that have been accepted the first being that on average, first-movers tend to produce an unprofitable outcome on average (Boulding and Moore). Consequently, pioneers that do manage to survive do enjoy lasting advantages in their market share (Robinson). Thus, the pioneer strategy is not necessarily a route that just any firm can take but with the right resources and the proper marketing approach can result in lasting profits for the company.

Managers can make a big difference for a firm when deciding whether or not they should be followers or pioneers. “Good generals make their luck by shaping the odds in their favor” (MacMillan). Making good decisions and acting upon them can help a firm but in the end there are other factors that must be taken into account before making a final decision. One issue is that the firm must find a way to at least limit if not prevent imitation by applying for patent, creating a product that is too complicated to employ the use of reverse engineering on, and taking control of resources that are important to the production of their product and any imitation product. They must also remember that first-mover advantages are not everlasting; eventually the competition will manage to take at least some piece of the marketing pie. Finally, they must do their best to prevent incumbent inertia caused by self-righteousness or possible changes in the market environment; this can be prevented by expanding the product line. The advantages of having a wider product line is much easier to maintain compared to those of being a pioneer (Robinson).

The follower strategy has a flaw that arises constantly, and that is the method of attack on the pioneer of the product. Some attempt to go head-to-head against the product hoping that increased spending in advertisement is enough to counteract the first-mover advantages. This technique has proven successful but usually against smaller pioneers that lack resources and recognition in the market (Urban 1986). Otherwise this “me-too” strategy proves ineffective since the follow will most likely lack brand name and product awareness. An alternate method is to create an entirely new market segment and distribution channel to establish a foothold in the industry and then employing the “me-too” strategy.