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Advantages And Disadvantages To First Mover And Last Mover Theories

1139 words - 5 pages

Unit 3 Individual Project
Dana J. Walker
Strategic Management
October 13, 2013
American Intercontinental University

The following paper will be a comparison of the advantages and disadvantages of the first mover theory and the last mover theory. It will show examples of real firms that have been either successful or a failure as they have employed one of the theories at their company. In my conclusion I will give my recommendation on which theory I think should be used and I will support that with not only details but also an example of a company that I feel validates my claim.

The first mover theory can be summed up as “being the first in a new market allowing for an ...view middle of the document...

First Mover Disadvantages:
* First to make mistakes – The competition has an opportunity to learn from first mover mistakes and adjust their strategy so they don’t make the same errors.
* High developmental cost – Being the first means you have no guidelines to help you calculate what you should be spending so you will always spend more than those coming after you to put your product into the market.
* Customer loyalty – There is a chance you will not have product that meets the expectation of the customer so you brand will be left without a base to support it.
* Intellectual property circumvented – There is always the chance that the technology that a firm has developed to use in the new market will not be patentable or protected under the law.

The last mover theory is the advantage “a company will gain by being the last to sell a product or service when the cost is lower and technology is better” (“Last-Movers Advantage,” 2013).
Last Mover Advantages
* Hind sight – The firm is in the position to learn from all the companies’ mistakes that have preceded them in the market.
* Timing – A firm is able to gauge if the market is worth entering and the exact time to jump in with their new product or service.
* Customer base – A firm can make sure that there is a solid customer base that will allow them to build brand loyalty by offering something the competition may not have.
* Price – A firm can come in with a price that is lower than the competition because they have had time to research and compare costs to assure they are getting a lower cost for materials which will help them save in production and then pass those savings on to the customer.

Last Mover Disadvantages:
* Resources – Coming into the market last may pose the problem of getting the industry resources that are needed in the areas of talent, office space, and resources for production.
* Acceptance – Last movers will almost always have to overcome the popularity of the first mover’s products and services.
* Learning curve – The last mover must come in a build a network, learn the business, and establish themselves in a market that is already moving and thriving.
* Identity – The last mover must have a product that the consumer can differentiate from the competition. If there is no difference than there will be no reason for them to switch products or services.

There have been companies that have enjoyed great success as first movers but have also endured failure as a first mover, and on the...

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