Running head: MOVER THEORY


First or Late Mover Theory Twonishia Mobley-Short AIU Strategic Management/MGT680-1005A-01/IP #3 November 28, 2010

Running head: MOVER THEORY 2 Abstract Various organizations want to bring a new product or a new version of a competitor¶s product into the market but some firms are not quite sure when would be the most beneficial time for them to enter the market. since there is little information given about the potential products that the manager is considering. . a comparison of the two theories will be given. This paper will consider some of the pros and cons of each theory and then it will discuss some of the successful and unsuccessful uses of these theories. With that being said. Some might think that the first mover would have greater advantages over the late movers but there is evidence to prove that not all first movers were successful and neither were the late movers always successful. Then. this paper will conclude after given a recommendation for the managers of this company to follow.

instead they decide when would be a good time to offer similar products that are already in the market. some firms might choose to be the first to move into a new market which explains the firstmover theory. Nokia. The first mover advantage is when the first significant company moves into the market (First-Mover. and Samsung all outrank Motorola (Einhorn & Crockett. Usually. the first company to introduce a cellular phone was Motorola but currently. Instead. However. just because the firm is the first to move. On the other hand. late movers like Apple¶s iPhone. For instance. 2008). they were the first significant company to make an entrance into the online book market (First-Mover. These ideas briefly explain the first-mover theory and the late-mover theory which would be discussed in this paper along with its pros and cons. Pros of First-Mover Theory . they choose to be late movers or second movers.Running head: MOVER THEORY First or Late Mover Theory Many people believe that the only way to be successful is by being the first to invent a product and bringing it into the market while others might believe that success results from imitating competitor¶s products and bringing those into the market. not all firms choose to be first movers. Firms that use this theory do not aim for was not the first to sell books online. even though Amazon. With that being said. 2010). that does not give them the first-mover advantage. the firms that have strong marketing and manufacturing skills and resources are the ones who are more likely to use the late-mover theory. For instance. 2010). Brief Overview 3 Timing of market entry is a very important decision for many firms.

For instance. because loyal customers of the first mover¶s products might find it to be hard and risky to switch to a product that they have never tried. once consumers become loyal then it would be difficult for late movers to convince these loyal customers to switch to another brand. On the other hand.). not only does the first mover have the advantage of the network effect but it has the ability of getting market share without having to worry about its competitors trying to attract the same customers (Pearson Education. One way to establish its defensive ground is by dominating a network. another benefit for first movers is the fact that they will have the ability to build a strong brand before competitors enter into the market. Apple¶s first mover advantage enables them to continue taking the lead with its iPhone against the Android phones because Apple already built its strong brand which makes it challenging for competitors to win against them (Burrows. the more buyers and users of the product. Once the first mover have proven to consumers that its products are of good quality and proves to be reliable and trustworthy. For those that decide to be first movers. 2010). timing is very important when entering into the market. With that being said. the more value the product has to the users. this means that if the first mover expands the market. Therefore. Why. there are many advantages of doing so. the more competitive it is to acquire market share. In other words. Also.d. . it is understood that the more competitors begin entering into the market. consumers become loyal to that particular brand. According to Pearson Education (2010). the business gains an advantage over its actual and potential rivals because it can establish its defensible ground´. 2008). ³being the first to enter a new market.Running head: MOVER THEORY 4 As previously mentioned. Once a product is accepted into the market it will result in attracting more and more buyers (Geodis. expansion could help its product gain acceptance in the market. However. n.

the prices of resources are likely to increase. they will have to keep the prices high in order to make a profit otherwise they may end up spending more money producing the product than the amount of money they are actually receiving for the product. Registering patents and trademarks protects the first entrant from future competition because it gives them the ability to stop others from capitalizing on what was invented or what the inventor have the patent for. resources would be even more limited. the sooner resources are acquired. the company will have the ability to decrease its cost. Therefore. the third benefit of first movers is the acquisition of resources. late movers may not be able to offer their products at low costs simply because when they first enter into the market. Pietersz (2005) said. Not only that. the cheaper it might be because as the industry grows. the inventor may also negotiate exclusive agreements with vendors. Moreover. Corl (2008) said that this is one way to make competition against what was invented a less attractive prospect for others who had intentions on becoming late movers.Running head: MOVER THEORY Furthermore. It is understood that there is a lack of resources in the competitive market but first movers have the 5 chance to acquire resources and assets before its competitors. The final benefit of this theory that would be mentioned is the first movers have the ability to register patents and trademarks of what they have invented before other competitors enter into the market. by the time competitors enter into the market. Moreover. when the demand increases. they have to try to attract customers which mean that the demand for their products might be low. Therefore. first movers should have already developed economies of scale. With this being said. In other words. they might want to recruit affiliates to sell their products for them and once this . by the time competitors enter into the market. This means that once the company grows and the production increases. For instance. then it is possible for first movers to reduce their prices.

Cons of First-Mover Theory 6 Even though there are many advantages to being the first mover. it would be even harder for competitors to take away the target market of the first movers (Corl.Running head: MOVER THEORY exclusive agreement is secured. With that being said. in either scenario there is no guarantee that the first mover¶s idea would be accepted into the market whether the market rejects the firm¶s idea or whether a second mover has something similar but better to offer the customers. they have no idea whether or not the consumers will be attracted to the product and they have no way of studying or predicting the customer¶s response to the product if the customers have never been introduced to anything similar to it before. With this being said. 2008). to go along with the challenge of educating customers. it is very risky to be the first mover because first movers are likely to find themselves redesigning the product to meet customers¶ needs. Secondly. first movers are likely to make costly mistakes which obviously give the late movers the opportunity to learn from the mistakes of the first mover and then do something different and introduce something better into the market (Davis. 2007). first movers are also faced with the challenge of educating others that are part of the supply chain. Therefore. educating customers can be costly and risky. Davis (2007) said that first movers are faced with the challenge of having to educate customers about the new product or service. The fourth disadvantage to being the first mover is the fact that many times a firm¶s idea is not a good idea or there is someone else who had the similar idea who enters the market almost immediately after the first mover enters (Davis. For instance. Thirdly. . there are also some major disadvantages that need to be considered. 2007). 2007). When first movers decide to launch a new product. It is very important to ensure that others that are part of the supply chain knows how the product works and knows its value so that they can have faith in the vision and adapt to their business (Davis.

. In other words. they can study the customer¶s responses to predict how they might react to the imitated product. Moreover. it might be easier to educate consumers about the product since they will already have an idea of the products value and how it works. The final advantage that would be considered is the first mover inertia. Therefore. This means that they can study the consumer¶s response to the product that was already marketed and they can do different things to the product they plan to offer that would satisfy the customer¶s dislikes. In other words. imitation is also less expensive than innovation which is also an advantage since imitators my not have to spend as much money as the first movers. there are also some benefits to late movers. Not only that. this eliminates the risk of having to redesign the product to meet customer¶s needs. Another advantage to consider is the fact that late movers have the ability to learn from the first mover¶s marketing mistakes. when first movers fail or have difficulty succeeding. if the product offers the same benefits of the first mover¶s products. late movers can benefit from the wait-and-see approach because they are given the opportunity to differentiate itself from first movers and offer something better into the market. late movers also 7 have a fair chance of receiving acceptance from the market since a similar product is already out there. However. first movers do not have the ability to accommodate the customer¶s needs and preferences because of its organizational inertia. many organizations tend to keep attempting to push their products or services forward to avoid abandoning it because abandoning products can result in wasted funds or other financial losses. Not only that. Late movers have the ability to take a free ride on the first mover¶s investments. they can imitate the products that were introduced to the market by first movers. It is very common for changes to occur in customers¶ needs and preference. In other words.Running head: MOVER THEORY Pros of Late-Mover Theory Despite the fact that there are several benefits to first movers. In other words.

it makes it challenging for late movers to imitate the products of first movers. Mitsubishi and Samsung both offer flat panel televisions but since Samsung already have loyal customers. The last disadvantage that late movers need to consider is the fact that being late already puts a great deal of competition before them. first movers do not have to worry about competing for market share or competing for network effects. With that being said. Successful firms who used First-Mover theory . it takes time for late movers to develop their brand loyalty. they have to compete with first movers for market share and network. the minute that the late movers enter into the market. because first movers are likely to have already developed brand loyalty by the time its competitors enter into the market. For instance. With that being said. Mitsubishi faces challenges of trying to attract Samsung¶s loyal customers even though they offer similar products.Running head: MOVER THEORY 8 With that being said. it is likely for late movers to pay high costs since the cost of resources increases as the industry grows. Moreover. since first movers have the advantage of registering patents and trademarks. Cons of Late-Mover Theory There are several cons of the late-mover theory even though many firms have been successful. For instance. However. then they are prone to face lawsuits similar to the lawsuit Polaroid had against Kodak¶s instant camera for violating their patents. another disadvantage would be the likelihood of having a hard time finding resources since resources are very scarce in the competitive market. Thirdly. In other words. if resources are available. Another disadvantage is the fact that it might be costly in trying to convince loyal customers of first movers to switch over to using the products of late movers. late movers have the advantage of accommodating those sudden changes in the market. if late movers choose to imitate them. Why.

this brand was the first in the market but not the first in the . 2010).com was not the first to sell books online but it was the first significant company to make an entrance to the online book market and they are still number one (First-Mover. Creative Technology. Obviously. 2008). 2002). and Samsung (Einhorn & Crockett. Another example of a successful first mover is America On-Line (AOL). was also a first mover who introduced the disk drive MP3 player called Creative Nomad Jukebox. Motorola was the first company to introduce cellular phones but currently there are various other brands that are taking the lead such as Apple¶s iPhone. With that being said. Even though the Android phones were introduced to the market six months after the iPhone. Their smartphone called iPhone is one of the most leading brands and it is steady increasing Apple¶s revenue. 2002). As previously mentioned. Another example of a first mover was Peapod Grocer. Many people logged on to the internet for the first time using AOL and this internet service is still one of the most leading brands (Katz. Ltd. success results from being the best. For instance. Amazon.Running head: MOVER THEORY 9 There are various firms who were successful first movers. Salkever (2000) said that this online grocery service was in business for 11 years but they faced financial losses and was no longer able to continue its operations once fresh competitors invaded their market. this is evident the being first is not always the answer to success. Inc. Thirdly. many consumers are taking a wait-and-see approach to the Android while Apple¶s iPhone is taking the lead and steady making sales (Burrows. Nokia. was the first to introduce the smartphones. Therefore. Unsuccessful firms who used First-Mover theory There are various firms around the world who used the first mover theory but were not successful. 2008). EBay was one of the many businesses who tried to do business via electronic media and has been successful with using the first mover approach (Katz. Apple. The final example that would be considered is the e-tailing company called eBay.

Successful firms who used Late-Mover Theory In 1901. Apple Inc. Nestle¶s Taster¶s Choice. there were several inventors who contributed to the history of computers but IBM was the first significant company to introduce the 16-bit business personal computer. With that being said. IBM is not the leading brand computer today which shows that even though they used the first mover theory. they were unsuccessful because there are other leading brands like Apple and Dell who outranks them. instant coffee was invented by Satori Kato and the first brand was marketed in 1909 which was called Red E Coffee (Ries. late movers like Maxwell¶s House and Nestle¶s Taster¶s Choice were more successful. overtook Maxim and became the number one freeze-dried coffee in America (Sexton. George Baldwin Selden and many others but the Duryear¶s were the first to successfully invent a gas powered car and set up a company. 2007). However. 2004). Maxwell¶s House. As mentioned previously. Ford is currently America¶s most leading brand automobile. 2010). was the best seller for eight decades but in the late 1980¶s. However. With that being said. However. sold its first hard disk drive MP3 player called the iPod and they are currently number one in the industry (Daye. whose parent was Maxim. Another example of a successful late mover was Beiersdorf AG who is a multinational corporation that manufactures personal care products. The last unsuccessful firm that will be considered is the first American car manufacturing company which was set up by Charles Edgar Duryear and his brother Frank (Who Invented.Running head: MOVER THEORY 10 minds of consumers because in 2001. there are several people who tried to utilize the first mover theory but only the significant company is the one who has the first mover advantage. 2010). This company was not the first to introduce cosmetic . There were several other automobile inventors prior to these guys such as Nicolas-Joseph Cugnot. many people have never heard of the Duryears so it is obvious that they are no longer taking the lead.

With that being said. GE. 1996). it is understood that there is a lot of competition in the cellular phone industry. The final late movers that would be considered are credit card issuers like Visa. The final example that would be considered is the competition between Kodak and Polaroid instance cameras. MasterCard and American Express. EMI was the first mover of introducing CAT scanners but the late mover.Running head: MOVER THEORY products into the market but after severing ties with partner JL Morrison & Co. Motorola was the first to introduce cellular phones but imitators like Cricket attempted to be successful by offering cellular phone plans with no contract but this phone provider is known for being one of the world¶s worst cellular phone providers in the area (Cricket. its brand managed to move up into the top three leagues in the cosmetic category (Pinto. MasterCard and American Express began to rule the market even though none of them were around when Diners faced a battle of trying to introduce credit cards to banks. Thirdly. took the lead in 11 the competition when they produced the copycat product of the CAT scanners (Shenkar. Polaroid was the pioneer of instant cameras which were introduced to the market in 1948 but Kodak decided to compete with them in 1976. 2010). Vizio and other leading flat panel television brands in the United States (Patel. Thirdly. However. 2010). Shenkar (1996) said the Diners Club was the first credit card issuer but late movers like Visa. even though the Android phone offers the same features and benefits. Another late mover was Mitsubishi who entered into the flat panel television market but was unsuccessful. and the public. merchants. 2009). attempted to imitate the iPhone with its Android phone. Sony. As a result. Apple Inc were the first to introduce the smartphone called iPhone but late movers like Android Inc. The Mitsubishi flat panel televisions rank lower than Samsung. Unsuccessful firms who used Late-Mover Theory As previously mentioned. Android has not outranked Apple¶s iPhone. .

if the company decided to develop a new product. 2010) Recommendation 12 After considering the pros and cons of the first mover theory and the late mover theory. in comparison to Apple Inc. it would be logical to learn from the mistakes of the first movers rather than trying to innovate something that is not guaranteed to receive the market¶s acceptance. it would be better to try a different approach. it is likely that a lot of time and money will be spent trying to redesign the particular product just so that it meets the customer¶s needs. to have a better chance of being successful. Even though some company¶s were first movers and managed to keep its lead. by studying the customers¶ responses to the current product that is already in the market will enable the company to predict how customers will respond to similar products that are marketed by late movers. Therefore. Kodak. because customers are less likely to purchase a product if it does not meet their needs. it would be better to offer a similar version of something that is already in the market. to avoid this risk of having to spend time and money redesigning the product. In other words.Running head: MOVER THEORY the late mover. was unsuccessful and was sued for violating some of Polaroid¶s patents and lost its court battle (Eastman Kodak. it would be recommended to use the late mover approach. Why. Developing a product that customers have never seen or used can be risky because it would be difficult to educate them or convince them to try using it. For instance. others have failed and it was not easy for those who did succeed to be successful. Why. The company also has the ability to find out what the customers like and does not like about the product that is already in the market which gives the company the opportunity to differentiate what they are planning to offer. With that being said. Not only that. they had the ability to learn . even though they were not the first to introduce the MP3 player. because then the company have the ability to study how the product satisfies the customer¶s needs. However.

. 2010). Therefore. Apple had the ability to take what was already invented and making it better and more attractive to customers. Conclusion Before entering into the market. Regardless of whether a firm is the first mover or late mover.Running head: MOVER THEORY 13 from the marketing mistakes of Creative Technology. timing is important when it comes to marketing because entering at the wrong time can be detrimental to the firm¶s idea. by learning from their mistakes. Sometimes first movers have the benefit of taking the lead by creating entry barriers for late movers and then sometimes the late movers tend to be more successful as a result of learning from the first movers¶ mistakes. it is important for firms to ask themselves if they should enter first or later. Even though many firms tend to have brilliant ideas. Ltd (Daye. the key to success is having the ability to offer customers the best product or service that meets their needs.

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