First or Late Mover Theory

Running head: FIRST OR LATE MOVER THEORY

AMERICAN INTERCONTINENTAL UNIVERSITY

Gary Thomas

Strategic Management

Revised

5/15/2012

First or Late Mover Theory

Management has called a meeting to discuss which way to go with either

developing a new product or service, or competing with an existing product or service.

They want to know if they should follow the “first-mover” theory or “late mover “theory.

As a new consultant for the firm, I have been assigned the task to develop a neat and

organized report for the meeting, thoroughly describing my suggestions, with supporting

facts and evidence that agree or disagree with these theories.

In my research, I find that many organizations and firms have been very

successful with the first mover theory because it gives them the opportunity to be the first

company to offer the product or service to consumers. In organization, time is

everything. Choosing the right time to release a product could give them a competitive

edge. First mover gives them the high ground to establish a loyal consumer base and on a

brand name. Some other advantages of being the first mover is gaining market shares,

securing access and commitments to rare resources, obtaining new knowledge of critical

success factors and issues, positioning in the best location, establishing and securing

long-term relationship with customer, suppliers, distributions, and investors. For

example, Apple, Inc. is one of these types of first mover companies. Based in Santa

Clara, California, Intel is a first mover firm in terms of introducing new production

processes sooner than competitors. First movers’ advantages tend to be greatest when the

competitors are roughly the same size and possess similar resources. However, there are

some risks associated with being a first mover, such as unexpected and unanticipated

costs that occur from the first firm doing business in the new market (David, 2007).

First or Late Mover Theory

Success Firms First Mover Theory

Apple, Inc. was successful with the IPhone, Intel was successful with producing

and introducing the processor, IBM was the first significant company to introduce the 16-

bit business personal computer and Charles Edgar Duryear was the first to introduce the

gas powered car (Who Invented, 2010).

Late Mover Theory Successful

Nokia, the world’s largest mobile phone maker by units, has been a late mover in

the smartphone industry by introducing the Nokia N8 smartphone, followed by Apple,.

Also, Hewlett-Packard (H-P) introduced its first tablet computer and first smartphone in

2011, well behind Apple and Google. Apple sold 14 million IPad computers before the

H-P announcement. In 1901, instant coffee was invented by Satori Kato and the first

brand marketed in 1909 which was called Red E Coffee (Ries, 2007).

Unsuccessful First Movers

Unsuccessful First Movers are companies that first had the invention and the first

to move but lost the market. Companies like Motorola, was the first cellular phone

company, could not hold the market from Apple, Nokia, or Samsung (Einhorn &

Crockett). Salk was an online grocery service in business for 11 years that faced

financial losses and could no longer survive because the company Fresh took over.

Creative Technology, Ltd. was the first to introduce the MP3 player and later out-

marketed by Apple, Inc. (David, 2007).

Pros and Cons to Both Theories

The pros to the first mover theory is to be the first invent, be first at establishing

the patents, choose the best locations, build customer loyalty, develop a brand name and

First or Late Mover Theory

launch aggressive campaigns. The cons are high investment, marketing, technology

investment, manufacturing failures. The pros to late mover theory are allowing the first

mover to establish the market, educate the market, and invest the money. The cons are

losing to loyal customer, brand name, customer satisfaction and law suits (David, 2007).

The late mover theory has some benefits as well as does the first mover theory.

One of the benefits of being late is taking the free ride on the first mover’s investment.

They could also imitate the products that were introduced by the first mover. It is less

expensive than innovation, which is already being paid for by the first mover (David,

2007).

In my position as a new consultant, based on the initial information that I was

given about the company and its managers’ personalities, and after considering all the

pros and cons surrounding the first mover and late mover theories, I would recommend

the late mover theory. Additionally, I find it to be in the company’s best interest to take

the late mover approach with the ground work already established, cutting down on costs

for the company, and allowing the company to enhance the product and/or service.

First or Late Mover Theory

(David, F. 2007). Strategic Management: concept and cases (11th Ed.) Upper

Saddle River, New Jersey: Pearson Prentice-Hall.

Abegglen, J.C. and G. Stalk. Kaisha, the Japanese Corporation. Basic, Book,

New York, 1985

Bell, D.F. “Strategic Windows.” Journal of Marketing, Vol.42 (July, 19780,

pp.21-26.

Carpenter, G.S.and Kakamoto, K. Market Pioneer, consumer learning, and

Product Perceptions: A theory of Persistent competitive Advantage.” Research

paper, Columbia University and University of California, November 1986

(David, F.D. 2011), Strategic Management, concepts and cases (14th ed.), Boston

First or Late Mover Theory

(David, F. 2007). Strategic Management: concept and cases (11th Ed.) Upper Saddle

River, New Jersey: Pearson Prentice-Hall.