First-Mover vs. Late-Mover

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INTRODUCTION

Would following the first-mover theory be the more effective way to build a new business or would just creating a new version with the late-mover theory be a more economical way to build a new business? The choice needs to be made and this response will address that aspect.

Organizational management needs to make intelligent decisions when it comes to whether a company should get involved in the development of a new product especially one that has not been publicized. The first-mover will take the lead when it comes to being "first" to place the product out in the limelight. They also don't have to worry about competition since they are first. The first-mover will work harder to create a product that will be the best performer at the time of its launching into the marketplace. The best is that even their advertising will show unique and creative designs.

FIRST OR LATE-MOVER THEORY

Advantages of Being a First-Mover:
- The old adage of "early bird catches the worm" applies - The old adage suits the first-mover well in that if you get there first, you get the customer or buyer before anyone else.
- Can set goals without competing since product is new - Setting goals is much easier to do when there is not competition with a new product
- Choice of how to distribute without interference - There is no prior distribution channel that is being used so there is a choice in what way the company wants to approach this.
- If technology is involved (such as technology patents), possibility to surpass in this before late-movers - Technology patents once approved are harder for late-movers to copy and utilize
- Control over resources - "...a first-mover can benefit from acquiring the resources and assets first before their competitors (Lieberman and Montgomery, 1987)."
- Ability to convince by deals - having buyers take advantage of a new product (switching costs) - For a consumer to switch products works if the consumers are drawn to it early on (Lieberman and Montgomery, 1987).

Disadvantages of Being a First-Mover [Reference: (Davis, 10/29/2007)]
- Risks of failure are high - Risks of failure are high for the first mover since it is new and never been produced before. The first mover takes a chance on the consumer not buying it
- Patents may not get approved in time - Patents need to be filed and approved to keep a product safe. If the patent is not approved before the item hits the market, there is a chance that a late-mover could copy it.
- Consumers need to be educated to the product use - Consumers will need to know how the product works and what it does. It is an educational process that sometimes takes time to get the product off the ground.
- Consumers do not have a variety of choices in the product - may be dissatisfied - Consumers may not have a choice such as color or design because the product is new and may only come in one color to start. The consumer could become dissatisfied immediately and then the product doesn't sell.
- No information exists as to how good the product is - The market dynamics for the product are not available such as trends or how many were sold so the consumer has nothing to rely on.
- Investment risk could be a failure - In this economy, the investment in the materials, advertising, and packaging to introduce the product could be risky if it doesn't sell. All the money that would be invested to create a brand new product only to have it fail - would be bad.

Examples of Successes Using the First-Mover Theory:
- Delta Hotels - Delta Hotels was a first-mover. It utilized search engine optimization (SEO) to gain dominance in organic and local search results (Delta, 2011)
- Sony - Sony - This is one of the most ...