What is a First Mover?
A first mover is a service or product that achieves a competitive advantage by being the first to market a product or service. Being first often helps a firm create brand awareness and client loyalty before rivals join the field. Other benefits include more significant time to refine its product or service and fixing the market price for the new item.
Rivals who want to profit from the first mover’s success and increase market share almost always follow them in a given industry. Most frequently, the first mover has created sufficient market share and a robust enough client base to retain most of the market.
Examples of First Movers
Businesses having a first-mover advantage include inventors Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY). Amazon developed the first online bookshop, which was enormously successful. When other shops created an online bookshop presence, Amazon earned excellent brand recognition and parlayed its first-mover advantage into promoting various new, unrelated items. According to Forbes’s “The World’s Most Innovative Companies” 2019 rating, Amazon ranks second. It has yearly revenues of $280 billion and, until the end of 2019, has a 20% annual sales growth rate.
eBay launched the first essential online auction website in 1995 and is a popular shopping site globally. It placed 43rd on the Forbes list of innovative enterprises. The corporation produces $287 billion in yearly revenues, with a 2.8% annual sales growth rate.
Advantages of First Movers
Being the first to create and promote a product comes with many prime advantages that boost a company’s standing in the industry. For example, a first-mover generally wins exclusive deals with suppliers, establishes industry norms, and creates strong ties with retailers. Other benefits include
Brand recognition is a significant first-mover advantage. It inspires loyalty among current consumers and pulls new customers to a company’s goods, even after competing firms have joined the market. Brand recognition also positions organizations to diversify goods and services. Examples of dominating brand name awareness among first-movers include soft drink behemoth Coca-Cola (NYSE: KO), auto-additive giant STP (NYSE: ENR), and boxed-cereal titan Kellogg (NYSE: K).
Economies of scale, mainly manufacturing or technology-based items, are a significant advantage for first-movers. The first mover in an industry has a longer learning curve, which typically permits it to build a more cost-efficient way of manufacturing or distributing a product before it competes with other enterprises.
Switching costs lets a first-mover develop a solid company foundation. Once a buyer has bought the first mover’s product, switching to a competing offering may be cost-prohibitive. For example, a corporation employing the Windows operating system generally would not convert to another operating system due to the expenditures involved with retraining personnel, among other things.
Disadvantages of First Movers
Despite the numerous benefits of being a first mover, there are also downsides. For example, other firms might imitate and improve upon a first mover’s goods, therefore gaining the first mover’s share of the market.
Also, frequently, in the drive to be the first to market, a corporation may forgo crucial product features to hasten manufacturing. If the market reacts adversely, subsequent entrants might gain from the first mover’s inability to offer a product that corresponds with customer desires; therefore, the cost to create vs. the cost to duplicate is dramatically unequal.
- A first mover is a corporation that achieves a competitive advantage by being the first to launch a new product or service on the market.
- First-movers often build excellent brand awareness and consumer loyalty.
- The benefits of early movers include time to create economies of scale—cost-efficient means of manufacturing or distributing a product.
- The potential for competitors to copy or improve first-movers is one of their drawbacks.
- Amazon and eBay are examples of firms that possess first-mover status.