Jump to navigation Jump to search For thesis sentence starters chess concept, see First-move advantage in chess.
Thesis help improve it or discuss these issues on the talk page. This article possibly contains original research. This article sentence additional citations for verification. First-mover advantage may be gained by technological starters, or early purchase of resources.
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A market participant has first-mover advantage if it is the first entrant and gains a competitive advantage through control of resources. With this advantage, first-movers can be rewarded with huge profit margins and a monopoly-like status. Alternative measures of first-mover advantage: profits vs. The first of the three is technological leadership. In a 1981 paper Michael Spence discusses how the technological learning curve can be kept proprietary, making for a huge barrier to entry on the part of others. Although the starters in a FMA market have complete control for a period of time, the competition still remains, trying to chase the originators.
This can result in the second- or third-movers surpassing the leaders because they are out-thinking their competition. Physical aspects of FMA are not the only way certain firms acquire this advantage. Managerial systems that help the organizational and behavior aspects of the company may prove to be highly beneficial to emerging companies. If the first-mover firm has superior information, it may be able to purchase assets at market prices below those that will prevail later in the evolution of the market. He states that the concentration of high-grade nickel in a single geographic area made it possible for the first company in the region to gain almost all of the supply. It has since controlled a vast proportion of the world’s production and distribution of the product. If said area can be claimed and then made to flourish, then the cost of entry to other firms would be too great.
Preemption of investment in plant and equipment can prove to be another advantage for the first-mover. FMA is usually larger and more profitable, sometimes enabling a monopoly position. Switching costs are extra resources that late entrants must invest in order to attract customers away from the first-mover firm. Buyers may rationally stick with the first brand they encounter that performs the job satisfactorily.
If the pioneer is able to achieve significant consumer trial, it can define the attributes that are perceived as important within a product category. Switching costs play a huge role in where, what, and why consumers buy what they buy. Over time, users grow accustomed to a certain product and its functions, as well as the company that produces the products. Once consumers are comfortable and set in their ways, they apply a certain cost, which is usually fairly steep, to switching to other similar products. Buyer choice under uncertainty has developed into an advantage for first-movers, who realize that by getting their brand name known quickly through advertisements, flashy displays, and possible discounts, and by getting people to try their products and becoming satisfied customers, brand loyalty will develop.
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