Market – does the innovation create a new market, or address the existing market?.The type of innovation is dependent on two factors: Innovation can be classified into four types: Bigger banks could easily copy the portable mortgage if it gained customer acceptance, undermining E-Trade’s ability to profit from its first move. This innovation allowed customers to keep an existing mortgage when they move to a new home. In contrast, E-Trade Group’s creation of the portable mortgage seemed doomed to fail because it did not leverage strategic resources. Despite facing stiff competition, Viagra continues to raise about $1.9 billion in sales for Pfizer annually. For example, Pfizer enjoyed a monopoly in the erectile dysfunction market for five years with its patented drug Viagra before two rival products (Cialis and Levitra) were developed by other pharmaceutical firms. Perhaps the best question that executives can ask themselves when deciding whether to be a first mover is, how will this move provide my firm with a sustainable competitive advantage? First moves that build on strategic resources such as patented technology are difficult for rivals to imitate and thus are likely to succeed. One research study of 1,226 businesses over a fifty-five-year period found that first movers typically enjoy an advantage over rivals for about a decade, but other studies have suggested that first moving offers little or no advantages. To date, the evidence is mixed regarding whether being a first mover leads to success. Today, these firms are not even players in this important business segment that supplies screens for notebook computers, camcorders, medical instruments, and many other products. RCA and Westinghouse were the first firms to develop active-matrix LCD display technology for flat computer screens, but their executives did not provide the resources needed to sustain the products spawned by this technology. One caution is that first movers must be willing to commit sufficient resources to follow through on their pioneering efforts. In many industries, knowledge diffusion and public-information requirements make such imitation increasingly easy. Sony, Samsung, and others have built on Apple’s knowledge and creation of Airpods to offer competing products. Others may learn from the first mover’s successes and failures, allowing them to cheaply copy or improve the product. The first mover also bears the costs of developing the product and educating customers. Apple’s attempt to pioneer the personal digital assistant market, through its Newton, was a financial disaster. On the other hand, a first mover cannot be sure that customers will embrace its offering, making a first move inherently risky. Decisions to be first movers helped all three of these firms to be successful in their respective industries (Ketchen et al., 2004). Genentech’s early development of biotechnology allowed it to overcome many of the pharmaceutical industry’s traditional entry barriers such as financial capital and distribution networks and become a profitable firm. Today, KFC is the leading Western fast-food chain in this rapidly growing market. Kentucky Fried Chicken (KFC) was able to develop a strong bond with Chinese officials by being the first Western restaurant chain to enter China. For example, Apple’s creation of a user-friendly, small computer in the early 1980s helped fuel a reputation for creativity and innovation that persists today. A first-mover advantage exists when making the initial move into a market allows a firm to establish a dominant position that other firms struggle to overcome (Table 7.3). The firm’s disastrous attempt to pioneer the personal digital assistant market through its “Newton” created a loss of around one-hundred million dollars.Ī famous cliché contends that “the early bird gets the worm.” Applied to the business world, the cliché suggests that certain benefits are available to a first mover into a market that will not be available to later entrants. Not all of Apple’s first moves were triumphs. The company he pioneered-Sony-has now been a fierce electronics competitor for over a half century. Ibuka Masaru used this backdrop to build a company that would be the first in Japan to create tape recorders and transistors radios. Netscape’s web browser was a first mover that was popular in the 1990s, but nearly extinct by 2002 with the advent of Microsoft’s competitive offering-Internet Explorer.įollowing World War II, Japan’s economy laid in ruin. The firm gained a reputation as an innovator that persists today. Table 7.3 First Mover Advantage First Move SuccessesĪt a time when using most personal computers required memorizing obscure commands, Apple pioneered a user-friendly interface.
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