Advantages and Disadvantages of Being a First Mover

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Advantages and Disadvantages of being a First Mover: The timing of entry to a particular market or industry is usually important because it helps in determining a company's returns on investment. First movers are described as the first entrants to offer or sell a new product or service category in a particular industry. Some of the major advantages of being a first mover include brand loyalty and technological leadership, exploiting the switching costs of buyers, preemption of scarce assets, and gaining increasing returns advantages. As a first mover, a firm can develop a reputation of a leader in the specific area of technology within the industry that enables it to sustain a lead when competition enters the arena (Schilling, n.d.). Such companies may also increase in market power through increased returns that could help in ultimately making it the dominant design. The other advantage of being a first mover in an industry is that an organization obtains control of resources. Despite of these first mover advantages, companies also bear some disadvantages of being pioneers in an industry. First, first movers are considerably less profitable in the long run as compared to the other entrants in the industry. Secondly, first movers experience high research and development expenses since they spend more money on exploratory research. Third, first movers have challenges associated with undeveloped supply and distribution channels that proves to be a major disadvantage. The
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