When It Comes to Entrepreneurship, Is First Mover’s Advantage Real?
Entrepreneurs are a major part of Hawaii’s economic engine and competition among entrepreneurs is what drives innovation and fuels markets. Entrepreneurs compete for customers, desirable contracts and resources, market share and profits. But what about the idea of first mover’s advantage? Is it true that the entrepreneur who launches first has an advantage over their slower competitors when it comes to resources, market share and the knowledge that helped it create the segment?
When it comes to entrepreneurship, is first mover’s advantage real?
In short, the answer is yes and no. A first mover does have certain advantages because they can initially capture 100 percent market share in the segment they have created. If they have a great product and build brand loyalty, this market share may be difficult for later market entrants to eat into in a significant way.
There are situations, however, where a long-standing giant and first-mover in a given market has simply stifled its initial advantage by failing to adapt to changing trends. Kodak is an example of a company that was overly confident in their products and the way that they had done business for decades. They failed to see the writing on the wall and adapt to new market players and trends. There are other businesses that dominated their market for decades and when they saw market forces coming that would affect their bottom line, chose to diversify their portfolio in order to remain competitive. There are several oil companies, for example, that have invested in renewable energy. What we see here is that a business’ decisions affect their long-term success, regardless of whether they were the “first-mover” in their market.
There have also been situations where a start-up rushed their product to market to ensure that they were the “first mover” only to expose the product’s flaws. Another company then imitates and resolves the issues with the first mover’s product and ends up with the runaway success. It’s hard to believe now, but Google did not launch the original search engine.
There are arguments to be made for and against first mover’s advantage but the bottom line seems to be that even if it is real, it doesn’t last forever. The decisions made by entrepreneurs at every stage of their start up from concept and research to established enterprise as well as how they react to impending market forces affect their share of the pie in their chosen market(s).
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