How Can a Firm Have First-Mover Advantages
The first-mover advantage could be seen in the perspective of “the advantage that a firm or country may derive from being the first to enter a market, or from being the first to use a new technology, advertising technique, etc.” In other words, first movers could be seen in terms of being pioneers of the industry, product, manufacturing process, service, etc., and they enjoy certain characteristic advantages such as:
- They have the first access to scarce and expensive investment opportunities in prime locations and could exercise a greater degree of choice and preference for prime land and property for business ventures as compared to second movers since they would be the prime movers, or in a sense, the innovators in the field.
- Certain aspects of business are exclusive to first comers, and they could be seen in terms of licenses, Patents and Trademarks, Company registration, intellectual property assertions, etc. Therefore, under such circumstances, it is seen that such formalities could be completed for first movers without many hassles, whereas later entrants would have to be subjected to greater security, audit checks and procedural delays. Therefore, the first movers have the advantage of originality and novelty, which is so important in various aspects of intellectual property rules.
- With the entry of pioneers of the industry, it is seen that through deliberation or accidentally, the market economics of the industry may change or be changed in order to dissuade future competitors or rivals from coming into the field. Thus, the new company could enjoy a monopoly for some time until the economic climate change and new entrants force themselves on the forefront. “Gradual evolution in both the technology and the market provides a first mover with the best conditions for creating a dominant position that is long-lasting (Hoover in the vacuum cleaner industry is a good example).”
- It is seen that the company could invest its earlier profits into the company through a process of ploughing back profits so that there are enough funds at later stages for the efficient running of the business. It could also be seen, in terms of investments, acquisition of fixed and working capital and operational costs, the early profits may be useful. Although a lot would depend upon the organisational typicality, it needs to be said that an earlier firm has a better option of building up sound profits in commercially viable sectors compared to later entrants, since by the time they settle down, the chunk of market share would have already been determined.
- The strategic vendor company relationships could be nurtured better for first-time relationships as compared to subsequent ones since building and sustaining vendor suppliers and customer rapport is not an easy task and needs careful organisational and execution skills.