First Mover Advantage

Read the overview below and complete the activities that follow.

When to make a strategic move is often as crucial as what move to make. Timing is especially important when first-mover advantages and disadvantages exist. Under certain conditions, being first to initiate a strategic move can have a high payoff in the form of a competitive advantage that later movers cannot dislodge. Moving first is no guarantee of success, however, since first movers also face some significant disadvantages. Indeed, there are circumstances in which it is more advantageous to be a fast follower or even a late mover. Because the timing of strategic moves can be consequential, it is important for company strategists to be aware of the nature of first-mover advantages and disadvantages and the conditions favoring each type of move.

The goal of this exercise is for you to understand when being a first mover, a fast follower, or a late mover is most advantageous.

Before completing this exercise, be sure to review Chapter 6, Strengthening a Companys Competitive Position; specifically, the section entitled Timing a Companys Offensive and Defensive Strategic Moves.

When is it competitively advantageous to be a first mover?

Multiple Choice

• If the market responds well and allows the company to recover its investment costs at a good profit.

• If the costs of pioneering are high relative to the benefits accrued.

• If a follower emerges with a better performing product to win over buyers.

• If the market is rapidly changing in either technology or buyer needs.

• If market uncertainties make it difficult to predict future trends.