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First-Mover Advantage
Definition
A sometimes insurmountable advantage gained by the first significant company to move into a new market.
Information
It is important to note that the first-mover advantage refers to the first
significant company to move into a market, not merely the first company.
For example, Amazon.com may not have been the first seller of books online, but
Amazon.com was the first significant company to make a entrance into the
online book market.
First-mover advantage was initially touted as crucial in the Internet
economy, although now there is a growing backlash against it. First-mover
advantage can be instrumental in building market share, but this may
or may not translate into business success.
Basically, being a first-mover only makes sense if the rewards
justify the risks. Some industries reward first-movers with near-monopoly
status and high margins. Other industries do not offer similar rewards,
allowing late-movers the chance to compete more effectively and efficiently
against early entrants.
Synonyms
FMA
Related Terms
network effect
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