Unit 3 Individual Project
Dana J. Walker
Strategic Management
October 13, 2013
American Intercontinental University

Abstract
The following paper will be a comparison of the advantages and disadvantages of the first mover theory and the last mover theory. It will show examples of real firms that have been either successful or a failure as they have employed one of the theories at their company. In my conclusion I will give my recommendation on which theory I think should be used and I will support that with not only details but also an example of a company that I feel validates my claim.

The first mover theory can be summed up as “being the first in a new market allowing for an advantage over ones potential rivals” (First-Mover Advantage,” 2013). Doing this will allow for both advantages and also disadvantages to the business that adopts this mind set and then proceeds on that course of action.
First Mover Advantages: * Ability to capture market share majority – This is important because “the market’s perception of the product or service is driven by your market share and that determines you prerequisite for growth” (“Why is Large Market Share,” 2008). * Ability to become the low cost leader – Doing this means the firm can minimize your cost to pass the savings on to the customers. This builds customer loyalty to you brand or service. * Create and protect intellectual property – The creation and protection of intellectual property allows the firm to be set apart from your competition. This makes your brand unique from anyone else in the market. * Ability to set the standard of rules for the market – This will allow the firm the ability to set how the game is played so to speak.

Boulding and Christen (2001) stated, “Although pioneers in a market do enjoy sustained revenue advantages, they also suffer from persistently high costs, which eventually overwhelm the sales gains.”

First Mover Disadvantages: * First to make mistakes – The competition has an opportunity to learn from first mover mistakes and adjust their strategy so they don’t make the same errors. * High developmental cost – Being the first means you have no guidelines to help you calculate what you should be spending so you will always spend more than those coming after you to put your product into the market. * Customer loyalty – There is a chance you will not have product that meets the expectation of the customer so you brand will be left without a base to support it. * Intellectual property circumvented – There is always the chance that the technology that a firm has developed to use in the new market will not be patentable or protected under the law.

The last mover theory is the advantage “a company will gain by being the last to sell a product or service when the cost is lower and technology is better” (“Last-Movers Advantage,” 2013).
Last Mover Advantages * Hind sight – The firm is in the position to learn from all the companies’ mistakes that have preceded them in the market. * Timing – A firm is able to gauge if the market is worth entering and the exact time to jump in with their new product or service. * Customer base – A firm can make sure that there is a solid customer base that will allow them to build brand loyalty by offering something the competition may not have. * Price – A firm can come in with a price that is lower than the competition because they have had time to research and compare costs to assure they are getting a lower cost for materials which will help them save in production and then pass those savings on to the customer.

Last Mover Disadvantages: * Resources – Coming into the market last may pose the problem of getting the industry resources that are needed in the areas of talent, office space, and resources for production. * Acceptance – Last movers will almost always have to overcome the popularity of the first mover’s products and services. * Learning curve – The last mover must come in a build a network, learn the business, and establish themselves in a market that is already moving and thriving. * Identity – The last mover must have a product that the consumer can differentiate from the competition. If there is no difference than there will be no reason for them to switch products or services.

There have been companies that have enjoyed great success as first movers but have also endured failure as a first mover, and on the other side of the coin there have been companies that have enjoyed success as last movers and definitely failure as last movers.
First Mover Successful Companies: * Ebay – Auction Site * Amazon – Internet Book Store * Ford – Car Company * Overture – Now part of Yahoo
First Mover Failures: * Netscape – Internet Browser * Tivo – DVR company * Brown Box – Video Game Console * Gotham Concierge – Professional Organizing Service
Last Mover Successful Companies: * Toyota – Car Company * Google – Internet Search Engine * Gillette – Shaving Accessories * Facebook – Social Media Community
Last Mover Failures: * Batamax – Video Recorder * SwissAir – National Airline * Woolworth’s – Retailer * Tucker Automobiles – Car Company

My recommendation would be to use the last mover theory as the way to enter a market with a new product or service. I believe this will allow a firm to enter a market and avoid the blind side punch. A firm will have the view of the market leaders and their mistakes which will give them an advantage in closing the gap of seniority in the market held by the other firms. Thiel (2012) stated, “First mover isn’t what’s important – it’s the last mover. Like Microsoft was the last operation system and Google was the last search engine” (p.1). Those are both excellent examples to the last mover theory. But my example is Instagram who is the last photo sharing service and they have cornered the market. Instagram sat back and looked at the photo sharing market and then took advantage of the explosive growth of mobile phone pictures and the consumers love for sharing them with friends and family. So they tailored there company to enhance and offer what the consumer wanted in the photo sharing market. This was a very successful move and that claim is backed up by the more than 150 million people that share their photos in the Instagram global community.

References
First-Mover Advantage. (2013). Retrieved from http://www.peasoned.co.uk/Bookshop/article.asp?item=312
Why is Large Market Share Important? (2008). Retrieved from http://www.healthmr.com/january-feature/
Boulding, W., Christen, M. (2001). First-Movers Disadvantages. Retrieved from http://hbr.org/2001/10/first-mover-disadvantage/ar/1
Last-Mover Advantage. (2013). Retrieved from http://lexicon.ft.com/Term?term=last_mover-advantage
Gilbert, T. (2012). Peter Thiel on the ‘Last Mover Advantage’. Retrieved from http://pandodaily.com/2012/04/19/peter-thiel-on-the-last-mover-advantage/