The managers of your company are deciding whether to develop a brand new product not yet seen in the marketplace or a version of a competitor's product that has already been launched into the marketplace.
Management has called a meeting to discuss which way to go. They want to know if they should follow the "first-mover" theory or "late-mover" theory. You have been assigned the task to develop a neat and organized report for this meeting that will give evidence that describes and discusses either supports or disagrees with these theories. You may use the Library or other Web resources to find more information on these terms as well as examples to support your position.
As a new consultant, you really don't know much about the company involved, the potential products that the managers want to discuss in their meeting, nor the personalities of the managers who will be attending the meeting. The very best that you can really do within the given scenario is to thoroughly and factually explore both of these theories in your report as input for their discussion during the remainder of the meeting.
You should provide an unbiased comparison of the two theories.
- Identify at least four advantages and four disadvantages for each theory and comprehensively show how each advantage or disadvantage affects the use of that theory (a minimum of 16 pros/cons in all).
- Identify at least four examples of real firms who have been successful and four examples of real firms who have been failures using each theory (a minimum of 16 real firms in all).
- Provide a definitive and unbiased recommendation of which theory to use. You should provide the specific attributes which constitute the most advantageous context in which the chosen theory operates and justify your recommendation with researched support, logic and examples.
In the end, state your opinion as to which theory to use and justify your recommendation - this is where your research should show. You should state what conditions/assets/resources are needed to better achieve success with the theory you recommend and justify your decision with research, example and logic.
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 ...
The advantages and disadvantages are given and explained for both theories along with examples of sucesses and failures in each case. 2280 words with many references.