In the last write-up (Click here), we talked about cases where the ubiquitous presence of first movers’ advantage was questioned, of course, based on established studies done across the globe. Today, we will look into “preconditions” in the market and firm situations which will allow first movers’ advantage to exist and thrive.
The following is the summary of preconditions that will allow first movers’ advantage (FMA) to exist:
i. Faster the speed of change in technology, lower will be the length of existence of FMA
ii. However, the quicker a firm is to adopt technology, the higher will be the possibility of having FMA
iii. Quick adoption of technology alone does not guarantee FMA to exist. Those quick adopters who have successfully created a strong brand loyalty, are most likely to survive and thrive by having FMA. The loyal base of customers finds it inconvenient and costly to switch to new brands. Kodak has been quick in adopting digital camera technology, yet failed in branding unlike Canon or Samsung. Result? Kodak digital camera fell far behind Canon and Samsung.
iv. Another situation where FMA can sustain, is by preempting the access of scarce resources to late entrants. By legitimate capitulation of scarce resources by the first mover, e.g., long term contract with scarce suppliers, price capping, creation of own transportation network, access to scarce human resources etc., the first mover can play its profits for an elongated period.
v. Equally important is to look at the pace of market evolution. How the taste and preferences of customers change and how quickly a first mover can actually stay as “first mover” by moving quickly into new market segments and stay relevant, would be extremely important to sustain FMA. Thus, first mover does not always mean to market “first-of-its-kind” product in the market, rather a first mover can be so by moving first in a new market segment with an existing product as well. Finding out the existence of the segment is the key to success here.
Evidently, it seems that three things are essential to gain FMA. First, superiority in the market through dynamic adoption of technology (and do it continuously); second, stay ahead of others in branding, which will give a competitive edge concomitantly in line with adoption of technology; and third, keep abreast of changes in customer needs and preferences.