FREE online courses on Competitive Strategies - A Model of Competitive
Rivalry - First - Second and Late Movers
The timing of competitive actions and
responses also influences an industry's competitive dynamics. Companies taking competitive actions can
be classified as first, second, or late movers.
First movers are the
companies that take an initial competitive action, either strategic or tactical.
First movers are companies that have the resources, capabilities, and core
competencies that enable them to gain a competitive advantage through innovative
and entrepreneurial competitive actions. By being first, the first mover hopes
to gain a sustainable competitive advantage, earn above-average returns until
competitors respond effectively and gain customer loyalty, thus creating a
barrier to entry by competitors.
Any advantage gained generally will vary
based on the type of competitive action and type of industry as also to the
extent to which the action is difficult to imitate because of the difficulty of
imitation, first mover actions based on core competencies should be sustainable
for longer periods than actions based on other factors.
There also are dangers or disadvantages of
being a first mover. There are
three major ones:
- There are risks related to being first because of the inability
to predict success of the action.
- Second movers through reverse engineering or imitation can avoid
high development costs.
- Extent and range of marketplace competition yields greater
potential risk.
In some instances, companies that delay
their response to a competitive action fail to compete effectively and their
performance suffers. However, that
may not always be true since it may be more appropriate to be a second or late
mover.
Second movers are companies
that respond to a first mover's competitive action, often through imitation or a
move designed to counter the effects of the (first mover's) action. How fast a
second mover responds may influence its results. Before following the first
mover, a second mover should evaluate initial customers' reactions to the
first-movers actions and analyse markets to identify critical issues.
Responding quickly may enable the second
mover to capture some of the initial customers and gain a degree of brand and
customer loyalty and avoid some of the risks faced by the first mover. It will
also help him to learn from the first mover's mistakes and successes and avoid
market development costs (paid by the first mover).
However, a rapid response may not be
possible if the product introduced by the first mover is beyond the capability
of competitors to successfully imitate and competitors do not have the resources
or capabilities that will enable them to quickly move into action.
Late movers are companies
that respond to a competitive action, but only after considerable time has
elapsed after the first mover's action and the second mover's response. And there is a danger in moving late as
a late mover's performance generally suffers relative to the performance of
first and second movers. As late movers are the last ones to respond to the
first and second movers' actions, late movers tend to be poor performers and
often are weak competitors.
