First mover effect is vital for startups. Do you want to know why?

Posted on July 21, 2007
Filed Under Business tutorials, Online business |

Those of you who study economics probably know the concept of first mover effect. It basically means that a company that is willing to internationalize is likely to succeed on condition that it is the first one to move to a given market.

Something similar takes when launching . In this case you have three stages:

1. stage one - no competitors at all.

That’s the stage when the company is able to monopolize the market in the short run. Other companies will need to catch up, but it will take them at least some time to do it. Developing appropriate , hiring people, etc. takes a bit of time.

2. stage two - fierce

This stage usually takes place a couple of months after a new product got launched. 3-4 2.0 will be created and the market share of the first company is likely to drop from 100 to 60-70% within a brief period of time.

3. Attempt to mantain competitiveness

Stage three is vital to mantain competitiveness. The market leader will now have 50-60%. The market itself will be now mature and will be very fierce. The first company to have launched the product or service will still be the one most likely to be on 1 position, but at this point followers will have reduced know how and organizational distance.

To sum up, the first mover effect is important at all stages of development. You should keep in mind that being the first to launch a product or service will help you stay competitive and you will probably have access to widest media coverage. is not static however, so keep in mind that the first mover effect is not enough.

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One Response to “First mover effect is vital for startups. Do you want to know why?”

  1. ChandraB on July 22nd, 2007 4:34 am

    First mover advantage does little good if your a innovate company with little (monetary) resources. If a another company comes in, with better resources I’m not sure I’d put my money on the first mover. (As much as I like to).

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