What are the advantages and disadvantages of being the first mover in an industry? Give some examples of first mover and late mover firms. Were they successful?

What will be an ideal response?

The first company to manufacture and sell a new product or service is called the first mover or pioneer. Research indicates that pioneers in industries not only tend to obtain higher market shares than do later entrants, but that they tend to enjoy a long-term advantage over their rivals. This occurs because the first mover has certain advantages: (1) The company is able to establish a reputation as a leader in the industry. (2) The company is able to move down the experience curve to gain economies of scale which it can use to under price the competition, plow into R&D to improve the product, or skim off good profits early by keeping the price high before competition moves into the industry. A good example of a first mover firm is Apple Computer - for all practical purposes the inventor of the personal computer. It was the first computer to be "user friendly." Consumers could learn how to use the PC quickly and they were fascinated with Apple's graphic capabilities. By continuing to emphasize "user friendly" personal computers using its own specially-developed software, Apple was able to keep and build the home and school markets while other competitors flailed unsuccessfully against IBM for the business market.

Late mover firms can have certain advantages as well. Like IBM in the 1980s and Dell in the 1990s, they can wait until demand has been developed by the pioneer. They can evaluate which product ideas work and which tend to fail. They can look for weaknesses in the current competition and develop a product to get around these weaknesses. IBM, for example, noted Apple Computer's difficulty in being accepted in business firms - a market where IBM had tremendous strength and customer loyalty. Instead of having to develop everything internally, IBM was able to use a large number of outside vendors, like Microsoft and Intel among others, to supply almost everything it needed (in terms of software and hardware) to make and market its IBM PC. IBM and Dell were successful because of their ability to envision trends in personal computers. Dell was able to foresee the trend toward low cost computers and was able to replace IBM as industry leader through value chain efficiencies.