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Why First Movers Have an Advantage

The first movers refer to the first people to move their business, service, or product offering into a specific market. The first mover captures valuable real estate, builds a customer base, and sets up critical supply channels before any competitors enter.

Because it takes time to explore new markets and identify opportunities, competitors often decline to compete in certain areas because they see no immediate benefit from entering. The Economist’s article “The Troubled Birth of a Consumer Superpower” illustrates China as a market where several western companies have faced challenges undertaking market entry due to complex business cases.

Despite these challenges, many brands have still entered the Chinese market successfully. An example includes Yum! Brands Inc., the owner of the Pizza Hut brand, opened 830 Pizza Huts across China in 1993 through its exclusive partnership with President Foods Corp, the largest food service company in China.

First movers often have a significant advantage over later entrants because the first mover’s investment is returned to them many times over through the use of their product.  For example, Apple Inc. launched the iPod music player early on, and it took nearly ten years for its competitors to catch up and develop competing products.

In many cases, they enjoy a significant advantage over second movers, and this article explains why…

Why Do First Movers Have an Advantage?

The first mover’s advantage is that first movers in a market enjoy significant advantages over their competition (second movers). Yet, this does not mean that all first movers end up successful. The critical thing here is to research the market carefully and not rush in without knowing what your competition will do.

Let’s Take a Closer Look at Some of These Advantages:

More Time To Prepare – 

By moving into a new market early on, you have more time to plan how you will achieve success. This is particularly important if there are no other companies already operating in this space, as they will be able to see where mistakes have been made by previous entrants and learn from them. If there are already competitors in the market, you will need to work out how to differentiate your offering from theirs.

Suppose you are thinking of opening a restaurant, research where your target customers eat out and why. If they already have favorite restaurants, what makes them choose those other than yours?

Be First To Identify Customer Needs – 

By being first to market with your product or service offering, you have the opportunity to understand what customers want without having other businesses influencing their buying behavior. This means that you can meet their needs before competitors even know that these needs exist.

Identify New Opportunities Early On – 

Being first into a new market gives you an advantage as there may be whole areas of untapped demand that current market players have not yet identified. Second movers can target these areas, but it will be much harder for them to develop an effective strategy without knowing what they are up against.

Develop a First-mover Advantage – 

Being early into the market is by no means an automatic success. There are still competitors out there with their offering, and you need to think about how you will offer something better than theirs, whether in terms of price, service, or some other factor. Your goal should be to establish a firm position in the market before any rivals have time to react.

Often it is easy to get carried away with the benefits of being first movers and consider only the positive aspects. Yet, there are also some risks involved in moving early into an unproven market:

Develop Your Brand – 

First movers need to build their brand identity, mainly if they are not well known outside this new area. This takes time to achieve, and you need to be committed long-term if you want to see success. There may be short-term gains through having a head start but getting that advantage will not be without its challenges.

In addition, once customers have become loyal to buying from you, it can take a lot of effort and investment to replace those customers if they stop buying from you due to a move by a competitor.

Research the Competition – 

You need to research what your current and future competitors will do about this new market opportunity. If you have early access into that market, it is more difficult for them to build up momentum as long as you keep one step ahead of them at all times. In addition, look out for large companies moving in from other areas who may have significant resources available to help them consolidate their position.

Take Home Message:

– Research your chosen target market carefully before deciding whether or not entering early will give you a distinct advantage over existing and potential competitors.

– Have a clear plan of how you will differentiate yourself from those. This may be through offering better value, pioneering new technologies, or simply being in a different location.

– Monitor competitive activity in the market so you can react quickly to any moves they make.

– Once you are established, make sure that your offering constantly evolves to maintain customer interest.

Startups and First Movers have a lot in common. Just as any startup faces multiple challenges, so does a first mover. Successful startups and companies think like first movers: they’re agile and roll with the punches when necessary to continue moving forward and pushing boundaries.

First, Movers’ advantage usually comes from their deep understanding of the market’s needs and how they can become indispensable by solving those problems better than anyone else. As we see with Amazon, success isn’t measured by revenue alone; it’s more about the total customer experience, including everything from product choice to user interface (UX), device compatibility, delivery speed, etc. 

Amazon understood that even before e-commerce was popular. And now Amazon is striving to be everywhere their customers are throughout all devices and platforms.

There are many advantages to being a First Mover, but what isn’t so glamorous is the work to become one. It’s hard to beat those who have been in the game for years. Facebook understands this all too well as they try to take on Buzzfeed and Vice News with their new Original Programming offerings despite not having as much experience as those media companies do. Sometimes you need luck, and other times you just simply need perseverance, tenacity, and never give up attitude — just like any startup CEO would tell you.

In Conclusion:

As the article states, it is often necessary for a business to go first to find out what customers want without having any other companies influencing their buying behavior. It also seems as though going first can be advantageous because there may ‘be whole areas of untapped demand that current market players have not yet identified.’ 

These are valuable opportunities that would be much harder for a second-mover to identify and develop an effective strategy without knowing what they’re up against. Overall, I think being a first mover has its positive and negative aspects, but by using the advice presented in this article, one should increase their chances of success.