First-mover advantage enables a company or firm to establish strong brand recognition, customer loyalty, and early purchase of resources before other competitors enter the market segment.
With the short lifetime of any technological advantage, patent-races can actually prove to be the downfall of a slower moving first-mover firm.
The enlarged capacity of the incumbent serves as a commitment to maintain greater output following entry, with the threat of price cuts against late entrants.
Some examples of pioneering brands in product categories include Coca-Cola soft drinks, Kleenex tissues, and Nestlé foods.
The ability to get ahead of the market through technical breakthroughs, the use of materials that were low in cost, as well as their general manufacturing proficiency and distribution channels, allowed P&G to dominate the disposable diaper industry.
Simple examples such as a research "mistake" turning into an incredibly successful product (serendipity), or a factory warehouse being burned to the ground (unlucky), can have an enormous impact in some instances.
Initially, Procter and Gamble's lead was aided by its ability to maintain a proprietary learning curve in manufacturing, and by being the first to take over shelf space in stores.
Large increases in the birth rate, in the years that Procter and Gamble's first disposable diapers were released, also added to their industry profits and first-mover advantage.
The imprecision of the definition has certainly named undeserving firms as pioneers in certain industries,[citation needed] which has led to some debate over the real concept of first-mover advantage.
Another common argument is whether first-mover advantage constitutes the initiation of research and development versus the entry of a new product into the market.
Typically the definition is the latter, since plenty of firms spend millions in research and development that never result in a product entering a market.
[6] In turn, market shares and rates of company survival are typically used as alternative measures since both are commonly linked to profits.
Second-mover advantage occurs when a firm following the lead of the first-mover is actually able to capture greater market share, despite having entered late.
The product lines were quickly expanded to VHS, DVD, CDs, computer software, video games, furniture, toys, and many other items.
It is considered to be the very first online bookstore; despite this, Bezos and Amazon were more successful due to the concurrent dot-com bubble and prudent marketing strategies.
Thus, the pioneer strategy is not necessarily a route that just any firm can take, but with the right resources, and the proper marketing approach, it can result in lasting profits for the company.
An alternate method is to create an entirely new market segment and distribution channel, to establish a foothold in the industry, and then employ the me-too strategy.
Many studies have been done that try to identify all possible "pioneering advantages" that are available to a first-mover, but the results so far have provided only a basic framework without any clearly defined mechanisms.
[4] There is still much more research that can be done to provide future generations of marketing teams with concrete evidence to show that first-mover advantage is well-defined.
[4] Before this research can be completed, crucial management decisions, such as the optimal time for to produce and market a product, need to be studied.
New information is needed to support any acceptable theories relating to the mechanisms, advantages, and disadvantages that first-movers are thought to have at their disposal.