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First Mover vs Late Mover

In: Business and Management

Submitted By uh60pilot642
Words 2130
Pages 9
Individual Project 3

Robert F Murphy

MGT680-1204A-02

Abstract
This paper assumes the role of a member of a team of managers wanting to know how to go about introducing a new product. The paper will discuss if it is better to use a late-mover theory or a first-mover theory through the use of positives and negatives of each which will be supported by examples of sixteen companies. Finally, a decision will be made as to which style should be used and why.

Introduction Within this paper the late mover theory and the first mover theory will be defined. Once they are both defined each one will be shown to have advantages as well as disadvantages. All of these advantages and disadvantages will be supported with real life situations and businesses that have used both for the positive as well as the negative. This analysis is being done because the head company wants to know which theory to go with in terms of releasing its new product. Unfortunately, the product is unknown as well as many other facets of the company. The benefit to that is the decision can be made with an unbiased approach and only the facts will hold true within this report.
Advantages & Disadvantages of the Theories The “First-mover” theory and the “Late-mover” theory are both ways of attacking the global marketplace with regard to product placement as well as the best time to strike. Many corporations in the world will come up with similar or even identical ideas at the same time. The difference is whether to try and be the first to put it on the market or wait and see how the other company does and respond accordingly through “tweaking” the product or just not even making an attempt.
First-mover Theory David (2012) refers to the “First-mover” as “entering a new market or developing a new product or service prior to the rival firms.” With this type of movement there are both positives and negatives that will affect the decision as well as the outcome of the company. Advantages and disadvantages have to both be weighed in terms of the method of attack.
Advantages
The first advantage of the “First-mover” theory is the ability to gain market share and position in the best locations. When a company is the first to enter the marketplace, they can choose when and where to place the product or service thereby causing everyone else that follows to move around them. Gaining customer loyalty will also be a major benefit. This is due to human nature where people want to stick with their first choice. Furthermore, it is sometimes believed (falsely at times) that the original creator of a product has the best version of the product. People will stick to that creator from the day the item comes out to the public. The corporation will also gain new knowledge of critical success factors and issues because the feedback will be instant and will deal only with their product or service. Finally, being a “First-mover” will give the corporation the view as being an innovator or someone that is at the forefront of the industry. This view will further allow for more customer loyalty.
Disadvantages
While “First-mover” has advantages, it also has some disadvantages which are essentially the mirror of the advantages. While the corporation has the ability to gain a high market share and position themselves in the best locations, the cost will be great. The corporation is breaking into a new market which will require great financial assets for commercialization and marketing. Gaining customer loyalty may actually become a problem down the road because if the product does not work as well as the “Late-mover” product, then the corporation could have just ruined its name. By being a “First-mover” there is no test base to compare against to see if the product will actually work as intended. This is a problem because the company is essentially going forward blind even though they most likely ran plenty of beta tests. Being a “First-mover” will also cost a great amount of money for the research and development of the product without really knowing how the public will receive the product. This unawareness of how people will respond can cause major financial issues down the road that may cause the business to go under.
Late-mover Theory The “Late-mover” theory follows the same basis as a “First-mover” by still taking a new product and reaching out to the public. The difference is that they will not be the first to put the product on the market. “Late-mover” corporations tend to see how a product does on the market that is created by a competitor and then adjust theirs to be better when they release it (David, 2012).
Advantages
Advantages of the “Late-mover” theory are directly the answers to the “First-mover” issues. A “Late-mover” will know exactly how the public received the product and will know if it is financially worth going forward with the development. Furthermore, the company will save money by seeing what problems the “First-mover” had and can change their product to not have the same problems. The “Late-mover” will also not have to create a new market. They simply have to enter into an already existing market which will greatly lower costs. Research and development will be less because they can essentially edit the product that was provided by the “First-mover”. This cost will really help out the bottom line.
Disadvantages
The disadvantages can also be great if a corporation decides to be a “Late-mover”. A “Late-mover” may miss the opportunity to be competitive in the market if they wait too long to enter into the market. This will then kill the industry. Waiting a long time to enter into the market may also cause the population to have less potential customers because the market might already be flooded with the product they are competing against. This, too, would lead to a waste of time and money. While the corporation might save money on marketing because it does not have to create a market, they now have to figure out how to separate them from the “First-mover” product in a way that people will not associate them with being “copycats” or “imitators” as they are sometimes labeled. Their product has to be different. Also, a “Late-mover” might not be able to keep up with the technological advancements or newer versions of the product due to the fact they are not in the market as long.
Real Firms
Many firms in the world have to decide if they want to be a “First-mover” or a “Late-mover”. This decision can crush an industry or can actually propel them into the lead. This decision has to be made carefully and with much research. A problem with that is if a corporation takes too long to do the research then it will set itself up to be a “Late-mover” with no option. There is a fine balance between entering as a “First-mover” and being forced to be a “Late-mover”>
First-mover Theory
Successful Firms
Apple, Inc. has always been a great first mover. Apple introduced the iPad and the iPhone into the market way ahead of both HP and Nokia respectively. This worked great for Apple and let them be an industry leader. Intel has been making the first move for years and this can be seen through the advancements of computer processors that they have released to the public. IBM was very successful with this theory when they introduced the first 16 – bit business personal computer. This computer was the first of its time. Charles Duryear was the first person to introduce the car as we know it. These risks paid off greatly for all of these companies.
Unsuccessful Firms While many firms are successful with the theory, some are not. Motorola was one of the first cell phone companies but due to their service issues, they lost the market to other companies like Verizon, Apple, and Samsung for the creation of phones. Creative Technology, Ltd created the first MP3 player but never mastered the process while Apple took the idea and ran with it creating the iPod. The iPod quickly took over. Another “First-mover” that failed was Borders. Borders was one of the first book stores but failed to adapt to selling music and organizing itself the way the industry was going. This led to Barnes & Noble taking over.
Late-mover Theory
Successful Firms Nokia, while it followed Apple, was still largely successful with its N8 smartphone. Nokia was able to find out what people liked and didn’t like about smartphones and created one that met their needs. HP created a tablet like the iPad well behind Apple but they are still successful due to pricing and also offering features that Apple does not have. Another “Late-mover” would be Ford with regards to the eco-friendly craze. While they did not come out with the first eco-friendly car, they now have many cars modified for this purpose and are doing great in sales (Ford, 2012). Barnes & Noble was a late mover when it came to opening stores that offered more than books. The selection and vast ability to ship anywhere anytime increased sales and pushed them ahead.
Unsuccessful Firms Swissair was a company that attempted to gain a bigger grasp on the industry too late. The company reached out in the late 1990s and suffered greatly from September 11th just like many institutions. Unfortunately, they attempted to make a move too late and had no assets to assist with recovery leading to the company closing (Buisnesspundit.com, 2012). Pets.com was a company that fell flat as well. Many other businesses such as Petco were already way ahead and selling products online. Pets.com was way too late to try and gain a foothold on the industry. iParents.com was a website formed around the foundation of Facebook that allows parents to stay in touch with each other. No one wanted to use iParents.com because everyone already had Facebook or was getting on Facebook. Activision failed as well. They failed to adapt their plans to the changing market and fell while their competitors changed their tactics and survived.
Recommendation
The overall recommendation is to be a first mover. First movers are more forward, have a better report with the public, and show initiative. If the corporation does not make a proactive move to be a first mover, then it will definitely be a late mover. First mover costs will be higher but the opportunity for financial return on those investments is greater than that of being a late mover. Look at Apple. They are always a first mover and are known worldwide as one of the premier businesses.
Conclusion
Within this paper sixteen companies were discussed with regard to either being a success or a failure. It is evident that being a first mover will provide a higher amount of return on investment as well as offer the ability to be the “household name” for a product or service. A late mover can also have a great amount of money returned due to the low costs of opening in an already established marketplace. While both have great positives, they both have negatives as well. Whenever a company is deciding what to do, all aspects of that company must be analyzed with special regard to the financial security of the company. If the company cannot afford to fail when they front a lot of money for opening a new market, then the late mover theory might be better suited. Each theory will work differently for each company. There is no real right or wrong decision here for the general population. This decision is on a case by case basis. Hopefully, corporations have analysts that know what they need to look for.

References
Bazerman, M. H. (2002). Judgment in managerial decision making. (5th ed.). Hoboken, NJ: John Wiley & Sons.
David, R. (2011). Strategic management, concepts and cases. Boston Prentice Hall.
Dobrev, S.D., & Gotsopoulos, A. (2010). Legitimacy vacuum, structural imprinting, and the first mover disadvantage. Academy of management journal, 53(5), 1153-1174.
Market growth. (2012). Retrieved from http://www.Apple.com.
Short, J. C., & Payne, G. (2008). First movers and performance: Timing is everything. Academy of management review, 33(1), 267-269.
Suarez, F. F., & Lanzolla, G. (2008). Considerations for a stronger first mover advantage theory. Academy of management review, 33(1), 269-270.
Worst business failures. (2012). Retrieved from http://www.businesspundit.com.

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