- No competition - by definition you have created a market that did not previously exist and therefore for at least the initial stages have no competition. Assuming the market that was created thrives it will only take so long before the fast-followers catch on and try to move in.
- Control the technology - if the product or process is innovative enough then the first-mover will gain control of the intellectual property (IP) and can establish patents that will last for 20 years. This will make it tough for others to quickly gain a competitive advantage.
- Set the rules for the game - The first mover also has the ability to set the rules for the game so that any competition that arises will have to play by those rules.
- Ability to acquire assets for less money - First-movers can capitalize on low demand for supplies to get them at a cheaper rate. After the market has been established for awhile and as competition moves in these prices will increase as demand for the same supplies increases.
Unfortunately, there are also some disadvantages to being the first-mover.
- No established market segment - Because the first-mover establishes a completely new market segment they must deal with the risks associated with this. The financial penalties associated with entering a previously unestablished market can be significant.
- Room for improvement - Unless the first-mover enters the market with a product that meets all of the customer needs right from the start they are leaving themselves open for competition to enter the market with a product that is superior to their's.
- Complacency - The first-mover should be aware to not rest on the success of their accomplishments and must continue to strive to improve their product for fear that competition will arrive and overtake them.
Coca-Cola and eBay are examples of first-movers and they cornered the market in cola beverages and online auctions respectively for a while before competition could enter. Fortunately, for both the competition was not able to take away from their competitive advantages.
With the iPod Apple was a fast-follower. Other MP3 players existed at the time when Apple introduced the iPod, but Apple was able to surpass them by making significant improvement to the product. Having had a Diamond Rio 600 MP3 player that had 32MB of storage I can attest to the significant leap that Apple was able to make with the iPod which allowed users to store 1,000 songs. I quickly switched to the iPod and haven't looked back since.
In the end I would say that unless the first-mover is able to deliver a product that meets all of the customers' needs and upon which little improvement can be made, then they have left the door open for the fast-follower. The first-mover takes all of the risk in establishing a previously non-existent market. The fast-follower can capitalize on this and in the door is open, move in and create a better product and thus nullify any advantage that the first-mover gained.
In the end I would say that unless the first-mover is able to deliver a product that meets all of the customers' needs and upon which little improvement can be made, then they have left the door open for the fast-follower. The first-mover takes all of the risk in establishing a previously non-existent market. The fast-follower can capitalize on this and in the door is open, move in and create a better product and thus nullify any advantage that the first-mover gained.
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