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First slide

Do you know which companies launched


the first commercial versions of:


• Personal computer,
• Word processing software,
• Web browser, and
• Internet search engine
• Today, none of them is the market
leader in those categories or even
anywhere near the top - despite the
fact that all these products were
introduced just 15 to 30 years ago.

• First Movers vs Market Leaders
• Personal Computer:
– First Mover: Altair (1975)
– Market Leader: Dell (2006)
• Word Processing Software:
– First Mover: WordStar (1979)
– Market Leader: Microsoft Word (2006)
• Web Browser:
– First Mover: Mosaic (1992)
– Market Leader: Microsoft Internet Explorer (2006)
• Internet Search Engine:
– First Mover: Excite (1993)
– Market Leader: Google (2006)

 The founder of Intuit, Scott Cook,
who says that they had the 47th
mover advantage in their category
('personal finance' software) when
they launched Quicken in 1984! That
is, there were 46 other vendors
selling personal finance software
largely similar to Quicken in
functionality.
What is first mover
advantage
It’s a firm’s ability to be better off than
its competitors as a result of being
first to market in a new product
category
Examples

Sony in personal stereos

Gillette in safety razors

Xerox in fax machine (bad)

eToys in Internet retailing (bad)


What does it depend on?
resources
Luck

Anything else?


How to achieve it?
1.Create technological edge over
competitors by starting earlier
2.Get access to scarce assets: talent,
key suppliers, location;
3.Building early customer base
4.
Conditions were ignored


Conditions
1.Pace of technology development
Examples:

Glass was invented in 3500 BC. By Middle

Eastern artizans. But glass blowing started


only 3000 years later; lead glass 1600
years later.
Contrast – computer (changes every day)

1.Pace of market expansion


Examples:

Slow: automobiles and telephone -50 years to

have 70 % household penetration


Fast: VCR and cell phones – 20 years only
The likelihood of first-mover
advantage
Calm waters
Best conditions for a long lasting
dominant position; Vacuum cleaner
Make a graph about growth of

consumption
1908 produced by Henry Hoover

1930 ONLY 5 % of household

purchased
To hoover

Why:

1.Harder to differetiate from the first


Market leads, technology
follows
Walkman-the personal stereo since
1979
Design was the same for 10 years!

Market grew quickly: 40 Mil in sales for

10 years!
Short-term advantage – without

resources: Boston’s Elias Howe


sewing machnines
Long-term advantage - with
Technology leads, market
follows
Short-lived advantage is unlikely:

- Many years of flat sales


- Operating losses
- New competitors come in all the time
-
Long-lived advantage is also unlikely
Deep pocket and strong R&D! Possible!

Because they can wait till technology


stabilizes
Ex. Sony’s digital camera
Rough waters
AT&T and Netscape
Item becomes obsolete very quickly.

Products are overtaken by new entrants

that don’t have to care about


maintaining older product lines.
Lack of marketing reach and productin

capacity to meet the demand


Ex. Gaming console market, laptop

market (Osborne 1 – 24 pounds. After –


numerous models)

However
Short-term advantage is possible IF
form knows when to exit
Long-term advantage is ALSO possible

IF firm has strong brand name, VERY


deep pocket (not a guarantee,
however: IBM which introduced 1st
hard drive in 50sfailed)
Such as Intel.
iPod?
2001 - launched
2003 – 70% digital music players

market share
2004 – 82 %

Threats: Dell and iPod mini


To be or not to be?
No
Polaroid would fail anyway

If benefits come only later after

entrance
So
1.Analyze environment
2.Assess your resources
3.Decide if advantage will be short-
term, long-term, immediate or
delayed, or none
4.In order for a company to try and
become a first-mover that
company needs to figure out if the
overall rewards outweigh the
beginning/underlying risks