This Little Piggy Went to Market & This Little Piggy Went Home – An Investigation of the “First Mover” Advantage

The “first mover” advantage refers to the theoretical benefit a company experiences when being the first to launch a new product. This head start allows the company to be the technological leader in the market until substitutes are introduced. This initial monopoly can be an advantage but there are disadvantages that must be considered to keep the competitive edge.

Although the company must spend initial investment capital on research and development, this allows the company to be the first to patent, which creates a barrier to new entrants. Also, with the development the technology and its associated trade secrets, the “first mover” now has the experience with the technology and IP to move forward. Because the company created the technology, it knows its complexities and limitations better than potential competitors. The “first mover” must be careful to have enough capital after the launch of the new product to be working on the next project. To keep the advantage the “first mover” must move quickly and continuously.

Capital must initially also be spent on marketing. This is mainly a disadvantage because when a competitor breaks into the market, they can piggyback on your advertising. They no longer need to explain the product, just the advantages the second technology has over that of the “first mover”. When marketed aggressively with a good product though, this could become an advantage by creating brand loyalty. If the “first mover” company is able to attract the early adopters and early majority before the first follower brings their product to market, the “first mover” will have a distinct advantage over potential future competitors, as consumers will be skeptical of substitutes. The “first follower” must capitalize on this and continue marketing to ensure product visibility. Advertising must be continuous to sustain the consumer recognition of the product and to guarantee the company’s capitalization of the time granted to the first to market.

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Comments
2 Responses to “This Little Piggy Went to Market & This Little Piggy Went Home – An Investigation of the “First Mover” Advantage”
  1. you make a good point about the marketing expense. it is a real advantage for people to come to the market after a company has spent lots of money educating the public about what a certian product does and how to use it.

  2. First of all, I love the title of this post! Very clever!

    Now, getting down to business. I like your comment “To keep the advantage, the “first mover” must move quickly and continuously.” I think you can interpret this in two ways – the first is that the first mover needs to move quickly and continuously in the market that they are entering, ensuring that their technology is protected immediately, they’re not sluggish in establishing the product so as not to allow competition to come into the market, and they educate and advertise quickly and effectively to make a name for themselves. I also think you can interpret it as they need to move quickly and continuously into the next market they want to enter. Once competition starts to enter the new market, you will need something to make you stand out from everyone else, or you will need to find a new market to enter to keep your brand name fresh.

    Interesting post! Thanks for sharing.

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