VHS players were the first entrants in the market of digital video devices, followed by the DVD players that have saturated the market in the recent decade. However, according to Ian Williams from The Inquirer, research states that shipments of Blu-ray devices, which are relatively new market entrants, are starting to account for a significant chunk of the disc player and recorder market, but it’s going to be four years or more until they start to overtake those of DVD players, which currently stand at about 90 million units a year.
Similarly, the article by Ian Williams states that although Blu-ray players are more expensive than DVD players, Blu-ray revenues are currently four times larger than DVD sales. This suggests that new technological innovation can result in market share dominance and product saturation as although DVD players have dominated the disc player market, their large market share is in jeopardy with the growing popularity of the innovative Blu-ray player which streams movies in high definition.
This highlights that being a first mover does not guarantee market share dominance. In order to be a market leader, a product must constantly evolve and be innovative in line with changes in technology as failure to do so will lead to a product becoming obsolete, which the VRC player is currently experiencing. According to Frost and Sullivan 2001, though there are approximately 40 companies making DVD players, the market share is concentrated among three manufacturers, mainly because of high costs of research and development hindering smaller companies from gaining greater market share, similarly, large companies have distribution ability and component solutions needed to dominate most DVD applications. This emphasizes that it is very difficult for a new company successfully enter the competitive DVD player market and gain market share.
However it also suggests that a company with funds necessary to fund research and development costs can form a joint venture with a current manufacturer , as there are only a few, and combine resources to further innovate the DVD player and gain higher market share due to new product development. As a result, this highlights that companies with financial resources can take advantage of first mover firms by using their industry know-how to further develop and innovate a product by forming a strategic alliance.
Given the examples of the case study from the two industry sectors (MP3 and Video Player); we conclude that competitive advantage is not solely rooted in the ‘first mover’ advantage, as seen by the example of Apple and that competitive advantage and market dominance is reliant on the firm’s ability to constantly innovate and develop a unique product that is difficult for competitors to imitate. This suggests that although being a first mover creates many advantages.
While the advantages themselves are not complete myths, they are not solely attained by the first movers. In reality, it is not crucial to be the first but to satisfy the market needs, regardless of the time of entry into the market. The enduring outcome largely depends on firms abilities to continuously pursue improvements; innovations and strategising in order to sustain the competitive advantage in the respective market.
Robinson, W.T. ; Fornell, C. (1985): “Sources of Market Pioneer Advantages in Consumer Goods Industries”, Journal of Marketing Research, Vol. 22(Aug): 305-317.