How Can a Firm Have First-Mover Disadvantages

Subject: Company Analysis
Pages: 2
Words: 311
Reading time:
2 min

There are two major disadvantages of the first mover, which are costs and risks. The Costs are significantly higher since a lot of money has to be spent on Research and Development (R&D) Costs, market surveying and researching, planning, organising and scheduling activities and also other significant aspects. It is akin to travelling on any uncharted journey without much knowledge or experience about routes, etc. The main aspect is also because there is no previous data or secondary data available regarding markets, customers, suppliers etc., and all this would have to be worked out from scratch.

Another aspect is with regard to the risks involved in being first movers. Managerial risks of failure of the business would weigh as importantly as financial failures due to lack of financial expertise and experience in this field. The mere fact that a company is an upstart or a first-mover does not necessarily mean that it needs to be successful. “The advantages of being first must be consolidated with resources – money, people and knowledge – to enable the advantage to be maintained and enlarged upon.” It is necessary that the cost benefits weightage have to be given before moving in for a first-mover industry or business.

Even the most optimistic of businesspersons know that business conditions are highly volatile and changing, so what may be seen as a first-mover advantage may not transpire to be one at a later stage. Similarly, challenges and threats to the business may occur from the least expected quarters. All these matters need to be weighed before decisions on the first mover are considered.” A simple example of this was Netscape’s browser vs Microsoft’s Internet Explorer. Netscape was the first-mover, gaining upwards of 90% market share, but was not able to sustain its position with the onslaught of Microsoft.”