Market followers are essentially firms which enter Into a known market which has been well established. The firms would start off with a smaller market share but are able to benefit from the marketing efforts which are already in place by the leading firms. 2. 2 Advantages and Disadvantages of First Mover Advantages The advantages are that the first mover would be able to capture a greater market share if the product or service Is received well by the consumers. It would be able to yield high profit margin as It would be the one to determine the cost price of the product or service.
It would have a upper hand In term of technological leadership as it would be able to enhance its research and development function earlier than the late entrants. The firm would have the advantage to set the market entry barriers if it is able to successfully monopolies the market with its brand. Disadvantages However, there are certain amounts of risks involved in being the first mover. The study of the untested market would need to be comprehensive before embarking on the business as a failure would totally destroy the market or serve as a lesson learnt for the second mover and the followers thereafter.
The first mover would need to constantly adapt to customer change in needs or else the competitors would move in the develop something better for the customers which in turn would deplete the market share. 2. 3 Advantages and Disadvantages of Market Followers Leveraging on the disadvantage of first movers, market followers would be able to ride freely on the consumer education efforts and technological advancement in the product or services which are initiated by the first movers.
Market followers are able to carefully study the market and customer trends before entering into the market. The most Important aspect Is that the market followers are able to learn from the experiences of the first movers and may not need to Incur high research and development cost if they are able to create similar products on their own. The market followers have an advantage to bring the first mover’s product from the niche market to the masses. Disadvantages Barriers to entry and monopolizing by the first movers are key disadvantages of the market followers.
Furthermore, market followers might not have the capital adapting other competitive advantages to gain a bigger share of the market. 2. First Movers VS. Market Follower The question is always which is better, a firm being the first mover or a market follower. There are several examples of companies who have made it as a first mover and also those who made it as a market follower. An example of a first mover is the well known eBay. Com which is the first company to provide online auction processes when it started in operation in 1995.
It has since maintained its market share as an online auction firm. At the time it entered into the online auction market, it was the first to take the leap in creating the market and it made a hit. It then added new features and improved its services along the way. Following which we now see the likes of Alabama. Com and many other smaller competitors. An example off market follower is Amazon. Com. The originator of the idea of selling books online was initiated by Books. Com however they were not able to sustain the market when Amazon. Mom penetrated the market with extensive marketing. Eventually, Amazon. Com who came in as a market follower managed to gain most of the market share and is a leading online book store. It is such not an easy task to determine which is better, the first mover or market follower but given most of the circumstances and historical evidences a market follower would have a better chance of survival as the market follower is able to perform lucrative study on the first mover and the customers’ demands before staging a move into the market.
It also give a great advantage from leveraging on the educational efforts put in by the first mover to market the product and services whereby the market follower would Just have to produce similar product or services and find an alternative competitive advantage such low cost strategy in building its market share. 2. 5 Conclusion It is essential to adapt a competitive advantage strategy in business.
Careful study of the market is essential determine if creating a new market or entering a known market is more profitable. Monopolizing the niche market is key to maintain the market share when it comes to first mover and ensuring the there are high barriers to entry. This would deter potential late entrants in the market and ensure that the firm stay profitable with very minimal competition.