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While firms enjoy the success of being the first entrant into the market, they can also become complacent and not fully capitalize on their opportunity. According to Lieberman and Montgomery:. Vulnerability of the first-mover is often enhanced by 'incumbent inertia'. Such inertia can have several root causes:. Firms that have heavily invested in fixed assets cannot readily adjust to the new challenges of the market, as they have less financial ability to change.

Firms that simply do not wish to change their strategy or products and incur sunk costs from "cannibalizing" or changing the core of their business, fall victim to this inertia. They may pour too much of their assets into what works in the beginning, and not project what will be needed long term.

Some studies which investigated why incumbent organizations are unable to be sustained in the face of new challenges and technology, pinpointed other aspects of incumbents' failures. All in all, some firms are too rigid and invested in the "now", and are unable to project the future to continue to maximize their current market stronghold. First-mover advantages are typically the result of two things: Skill and technical proficiency can have a clear impact on profits and the success of a new product; a better product will simply sell faster.

An innovative product that is the first of its kind has the potential to grow enormously.


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Technically competent companies are able to manufacture their products better, at a lower cost than their competitors, and have better marketing proficiency. An example of technical proficiency aiding first-mover advantage is Procter and Gamble's first disposable baby diaper. Luck can also have a large effect on profits in first-mover-advantage situations, specifically in terms of timing and creativity. Simple examples such as a research "mistake" turning into an incredibly successful product serendipity , or a factory warehouse being burned to the ground unlucky , can have an enormous impact in some instances.

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Initially, Procter and Gamble's lead was aided by its ability to maintain a proprietary learning curve in manufacturing, and by being the first to take over shelf space in stores. Much of the problem with the concept of first-mover advantage is that it may be hard to define. Should a first mover advantage apply to firms entering an existing market with technological discontinuity, the calculator replacing the slide rule for example, or should it apply solely be new products?

The imprecision of the definition has certainly named undeserving firms as pioneers in certain industries, [ citation needed ] which has led to some debate over the real concept of first-mover advantage. Another common argument is whether first-mover advantage constitutes the initiation of research and development versus the entry of a new product into the market.

Typically the definition is the latter, since plenty of firms spend millions in research and development that never result in a product entering a market. Many factors affect the answer to these questions; including the sequence of entry; elapsed time since the pioneer's first release; and categorizations such as early follower, late follower, differentiated follower, etc. A commonly accepted way of measuring a first-mover advantage by pioneering firm's profits as the consequence of its early entry. Such profits is an appropriate measure, since the sole objective of stockholders is to maximize the value of their investment.

Still, some issues have risen with this definition, specifically that dis-aggregate profit data are seldom obtainable. Still these links can be weak and lead to ambiguity.

Early entrants always have a natural advantage in market share, which does not always translate to higher profits. Though the name "first-mover advantage" hints that pioneering firms will remain more profitable than their competitors, this is not always the case. Certainly a pioneering firm will reap the benefits of early profits, but sometimes profits fall close to zero as a patent expires.

This commonly leads to the sale of the patent, or exit from the market, which shows that the first-mover is not guaranteed longevity. This commonly accepted fact has led to the concept known as "second-mover advantage". First-movers are not always able to benefit from being first. Whereas firms who are the first to enter the market with a new product can gain substantial market share due to lack of competition, sometimes their efforts fail.


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  • Second-mover advantage occurs when a firm following the lead of the first-mover is actually able to capture greater market share , despite having entered late. First-mover firms often face high research and development costs, and the marketing costs necessary to educate the public about a new type of product. Often second-movers are able to overwhelm first-movers by taking the first-mover's product from a niche consumer market to a mass market.

    While firms may enjoy a first-mover advantage if they jump out to an early lead and hold onto it, the notion that winners are always the first to enter the market is a misconception. Markides and Geroski's Fast Second describes this effect in further detail. The following are a few examples of first-movers whose market share was subsequently eroded by second-movers:. Obviously, every market is different. Thus, while some markets may highly reward first-movers, others may not. In , Jeff Bezos founded Amazon.

    Unbeknownst to many, is that Book Stacks Unlimited or books.

    Wilful Blindness by Margaret Heffernan

    Founded by Charles M. Stack, it is considered to be the very first online bookstore.


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    • This inspired him to search for a web-based business. Once Bezos decided to launch the largest online bookstore, he began advertising on over 28, other internet sites and has since dominated the business. BookStacks was subsequently sold to Barnes and Noble. Different studies have produced varying results with respect to whether or not, on the whole, first-mover advantages exist and provide a profitable result for pioneers.

      The first being that on average, first-movers tend to produce an unprofitable outcome Boulding and Moore. Secondly, pioneers that manage to survive do enjoy lasting advantages in their market share Robinson. Thus, the pioneer strategy is not necessarily a route that just any firm can take, but with the right resources, and the proper marketing approach, it can result in lasting profits for the company.

      Managers can make a big difference for a firm when deciding whether or not they should be followers or pioneers. Making good decisions and acting upon them can help a firm, but in the end there are other factors that must be taken into account before making a final decision. One issue is that a firm must find a way to at least limit, if not prevent, imitation, by, for example, applying for patent s , creating a product that is too complicated to reverse engineer, or taking control of resources that are important to the production of its product and any imitation.

      Finally, a company must do its best to prevent incumbent inertia caused by self-righteousness, or possible changes in the market environment.

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      One way to overcome such inertia is by expanding the product line. The advantages of having a wider product line are much easier to maintain compared to those of being a pioneer Robinson. Managers who opt to be followers have to pick the right method of attack on the pioneer of the product. Some attempt to go head-to-head against the product, hoping that increased spending in advertisement is enough to counteract the first-mover advantages. This technique has proven successful but usually against smaller pioneers that lack resources and recognition in the market Urban Otherwise, this "me-too" strategy proves ineffective since the follower will most likely lack brand name and product awareness.

      An alternate method is to create an entirely new market segment and distribution channel, to establish a foothold in the industry, and then employ the me-too strategy. There are several problems that do arise when one attempts to clearly define "first-mover advantages". These prevent us from entirely accepting that a company gains a clearly defined benefit from being the first to produce and market a particular product.

      Many studies have been done that try to identify all possible "pioneering advantages" that are available to a first-mover, but the results so far have provided only a basic framework without any clearly defined mechanisms.

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      The biggest issue that arises is that, despite the evidence of first-mover advantages, the fundamental question of how or why these advantages occur is still unanswered. When attempting to discover the answer, it became clear that it was too difficult to differentiate between an actual advantage and just blind luck.

      Ultimately, some firms are more suited to be pioneers, others are more suited to wait and see how the product does and then improve upon it, releasing a slightly modified reproduction. It was not enough for the defendants to say that they did not know what was going on; that they had not seen anything. If they failed to observe the corruption which was unfolding before their very eyes, not knowing was no defence. The guilty verdict sent shivers down the spine of the corporate world. In this book, distinguished business woman and writer, Margaret Heffernan , examines the phenomenon of wilful blindness.

      Drawing on a wide array of sources from psychological studies and social statistics to interviews with the relevant protagonists she examines what it is about human nature which makes us so prone to wilful blindness. Taught from infancy to obey authority, and absorbing the importance of selective vision as a key social skill, humans exacerbate their tendency to become institutionalised by joining organisations which are run by like-minded people.

      She looks at how hard work and the information overload of the modern workplace add to the problem. And she examines why whistleblowers and Cassandras are so very rare. Ranging freely through history and from business to science, government to the family, this engaging and anecdotal book will explain why wilful blindness is so dangerous in the globalised, interconnected world in which we live, before suggesting ways in which institutions and individuals can start to combat it.