What Is First Mover Advantage?

First mover advantage or (FMA) is a term that refers to the arrival of a company, business or anything along those lines to a market, the company moves into a market as a first mover hence making it’s place somewhat like a monopoly. First mover advantages are many, but so are it’s disadvantages. Companies who participate in this practice generally tend to make a good name of themselves, develop a brand name, get a loyal following (customers). Companies that come to the market after the first mover aren’t as successful usually, because the goodwill, brand image, and status has already been defined and people know not to go for newer products when the old one’s suit their needs just perfectly.

First Mover Advantage

What Is First Mover Advantage

Although there are some factors many competitor companies apply such as; lower pricing, deals, coupons, etc. but to no avail usually as the loyal customer following is key in making or breaking a brand. There are certain elements of risk also associated with the first mover process, the investors could possibly lose their capital, the company can’t penetrate into the market, the product isn’t a hit or many such factors. But, if it does take off the fruits of success are plentiful. It could be regarded as a gamble, which isn’t a professional term but fits the process very neatly. If the gamble goes well, the takeaway is high, if the gamble goes bad the loss is also bad. That basically sums up the risk factor involved in the first mover process.

First movers who are rather successful have a huge upper hand over their counter parts or competitors, in terms of resources, profits and sales. First moves make a significant part of a market, sometimes acting as a monopoly or following a monopoly like status. The profit margins are very high. Imagine if there is a company which manufactures a certain product, which is very useful and brings with it high demand. The other companies which manufacture the same product either default on quality or some other factor, giving an upper hand or advantage to the original companies, now the price of that product is solely dependent on the original manufacturing company.

Consumer behavior shows that, customers are more likely to trust more experienced business or professionals. The same case applies here, the longer the company is in the market the bigger the edge it has over it’s competitors. But that’s not always the deal, sometimes a monopoly can be broken with the introduction of a newer, better, and more cost effective alternative. It is a gamble in the proper sense for the investors. First movers are very high up in the market and are regarded as the trend setters, they have a long line of competitors which try to follow their steps and capitalize on their success. Which doesn’t really bother the first movers usually because of their vast brand recognition, goodwill, profits, and market? First movers essentially create opportunities for a lot of people, introducing a new product to the general market is a very risky business which may involve big profits and bigger losses. But nonetheless if the gamble pays off the results are outstanding. Some examples of first mover corporations/companies/businesses are; the Coca Cola company, Coca Cola is regarded as the first ever producer of cola products which essentially set off the soft drink market, many companies followed in their steps but none reached the level the original company is at. The Coca Cola Company is in business since 1886, and has a legacy. The customer base is made up of very loyal customers who are the main reason for the success of the company. Similarly, eBay was the first mover in terms of moving the auction process aboard the internet. Starting a sort of revolution, many companies followed in it’s footsteps but still haven’t reached it’s caliber. eBay is regarded as the oldest functioning company in the online auction market, providing it’s services to the general public ever since 1995. Gillette is known to be the leading company in the men’s grooming products market, Gillette also started off as a first mover reaping its benefits till date. But many competitors emerged out of the blue, so Gillette introduces newer better products, innovations in short, and has been doing so ever since it was founded. The Gillette Company is regarded as one of the leading brands dealing with men’s grooming products. Its customer base is vast and loyal due to the high quality products it supplies. The company was founded in 1901 as a safety blade manufacturer. As well as being a first mover, a good chunk of Gillette’s success comes from it being the innovator in the market, bringing key changes and improvements to its products. Like in all businesses, customer satisfaction is key for success.

First Mover Benefits

First mover advantages are many, some of which are mentioned above. First moving is a risky business by all means and requires the investors or head authority to have all the expertise needed in the field. The advantages or benefits of it are plentiful, which make the risk worth taking. Some of the benefits of first moving are given as below:

1. Leadership in Technology:

The first movers go through a learning curve, by this they get to learn the know-how of the machinery/technology involved in the manufacturing of their product. This enables them to fully understand and run the technology as per their needs, they can also make the product cost effective by these means.

2. Control over resources:

They have a sort of control over most of the resources required to run their company, business or whatever. Meaning that they may have the monopoly of raw materials necessary to manufacture their products so that no other company will be able to follow and make a profit. Or they might have certain contracts which allow them shelf space in many leading stores.

3. Buyer-Switching Prices:

As the companies have a hold on their respective markets they can switch prices to attract more customers, meaning that setting lower prices for the same product by their competitor with the same or maybe even better quality. This is key in making a loyal customer base.

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