First Mover Advantage

First Mover Advantage (FMA) is the advantage gained by the initial (“first-moving”) significant occupant of a market segment. It may be referred to as Technological Leadership.

This advantage may stem from the fact that the first entrant can gain control of resources that followers may not be able to match. The first mover has the opportunity to capture the Innovators and Early Adopters market segments (as defined by the Consumer Adoption Curve) and foster brand loyalty with them. This can be done with such tactics as loyalty programs, long term deals, exclusive contracts, etc. As a result, sometimes First Movers are rewarded with huge profit margins and a monopoly-like status.

Oftentimes, the first mover is not able to capitalize on its advantage, leaving the opportunity for another firm to gain Second Mover Advantage. The Second Mover has the advantage of learning from the initial mover’s market entry mistakes. Also, the second mover is now entering an established market, whereas the first mover had to create the market. Thus, the second mover is benefiting from much of the marketing expenditures, consumer education, and product diffusion contributed by the first mover.

Business frameworks like First Mover Advantage are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.

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