Strategy Formulation

by Jeraldine Jankowski, June 2014

900 words

3 pages


The following report comprises a concise analysis of the two most broad starting business theories, including their pros and cons as well examples in currently running companies. The names of these theories are “First-Mover” theory and “Late-Mover” theory as they respectively refer to the possible way of entering the marketplace on either being a pioneer who offers a brand new product/service, or a follower who proposes the already existing product/service.First Mover (FM) Theory.FM Advantages:

1. Impression on consumers. When a new product or service emerges in the market, consumers tend to get interested in it. This is a matter of people`s nature of being curious and anxious about new things, especially if these things relate to their interests and habits.

2. Efficient brand positioning. Undoubtedly, the early entrants are able to achieve strong recognition of their brand, as it does not yet have competitors.

3. Gaining massive market share. The gained market share is likely to be substantial because of the marketplace hit, which engenders viral marketing and widening the brand awareness.

4. Establishing the technology leadership. Mostly includes innovations` patents.

5. Smaller start-ups. The investments might be lower because absence of necessity for extensive marketing, broad product range, discounts and other methods used by late movers to overcome competitors.

6. Revenues. Due to the absence of competitors the first-movers retain solid profits at least until the followers emerge.

7. Access to the industry resources.

FM Disadvantages:

1. High risk. It is always risky to enter the marketplace with a new product or service. You may never know how the consumers are going to respond.

2. High costs. Usually, the prices for brand-new products or services are high because there is no need to equal rates with the competitors.

3. Inability to learn on mistakes of predecessors. The knowledge and experience of similar companies are vital. Unfortunately, first-movers can only rely on their own experience and try not to repeat mistakes.

4. Lower profit position in a long-term run. Generally, the business researchers link their studies in one conclusion – although first movers gain higher revenues in the starting years of their lifecycle, they lose optimistic positions after a while.

FM companies that succeeded:

1.Microsoft Corporation. Succeeded because of the development the innovative Operational System.

2.Macintosh. Succeeded because created first personal computer.

3. Pixar. Created the first animation movie.

4.FedEx. Made e-commerce possible because of reliable shipping service worldwide.

Late Mover (LM) Theory.LM Advantages:

1. Lower risk. Logically, late movers are able to observe predecessors, hence overtake only the legitimate actions, based on analysis of mistakes of first movers.

2. Clear market state. At the time the late movers enter the market, the situation within it is clear and certain, which can foster growth of the company.

3. Ability to apply number of various technologies. The following company normally uses different approaches and techniques in order to overcome the competitors. The late movers are more diverse compared to first movers.

4. Lower prices. While chasing the goal of obtaining sales and gaining competitive advantage, the late movers normally put lower prices and capture consumer`s interest with their help.

LM Disadvantage:

1. …

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