In today’s highly competitive market, being the first to introduce a product or service can be a game-changer. This strategy, known as the first-mover advantage, allows companies to establish brand recognition and set industry standards before competitors enter the scene.

Gojek is one of the prime examples of this in the Indonesian market. Launched in 2010 as a motorcycle taxi (ojek) booking service, Gojek capitalized on the lack of organized and convenient ride-hailing solutions. By the time competitors like Grab and Uber entered the Indonesian market, Gojek had already built strong brand recognition and customer loyalty among Indonesian customers.

Along with its benefits, first-mover advantage also poses several risks that may not guarantee the success of early entrants. Let’s delve deeper into what is a first-mover advantage and its benefits and risks.

What is the First-Mover Advantage?

First-mover advantage (FMA) is a competitive edge gained by a company by being the first to enter a new market or by introducing a new product or service to the market. This advantage helps companies establish brand recognition, customer loyalty, and secure resources earlier than their competitors. Generally, companies gain the first-mover advantage through rigorous marketing and advertising that positions their product not only as the first in its field but also as the best option for customers when competitors inevitably enter the market. 

What are the Examples of First-Mover Advantage?

Examples of the first-mover advantage can be found in various industries, showcasing how early entrants can shape markets and establish strong positions. Here are some notable examples of first-mover advantage:

Amazon

Despite not being the first-ever business to sell books online, Amazon has set the standard for e-commerce, establishing strong brand recognition and loyalty among its customer base. Amazon’s introduction of features like two-day shipping through Amazon Prime has become an industry norm in delivering customers’ goods, influencing customer expectations across the online retail sector.

Google

By being one of the original search engines, Google utilized first-mover advantage to gain control of the search engine industry. It revolutionized online search by implementing an effective ranking system for web pages based on relevance and popularity. Google was also able to build a reputation for quality and reliability by providing more accurate and pertinent search results than its rivals, allowing it to dominate the market.

Netflix

Starting out as a DVD rental business, Netflix then introduced a new way for customers to enjoy entertainment by offering subscription-based streaming services in 2007. This has helped Netflix gain a first-mover advantage in the streaming industry. It allowed Netflix to secure a place in customer’s minds, build a dedicated customer base, and gain market dominance, even as new streaming services emerged.

Why is the First Mover Advantage Important?

First-mover advantage is a strategic move for companies to differentiate themselves from their competitors. First-mover advantage is a benefit that companies can get by being the first in introducing an innovative product or service or entering a new market. This will help companies establish a strong foothold in the market early on, along with other benefits such as establishing early brand recognition and customer loyalty.

As business competition remains an inevitable aspect of any industry, securing a market presence early through first-mover advantage is very important. By being pioneers, first-mover companies can capture a significant market share, making it challenging for later entrants to compete. First movers also often benefit from lower customer acquisition costs as they face fewer competitors in the initial stage.

Additionally, first-mover companies can capitalize on the opportunity to learn from their initial experiences in the market. They can refine their products, understand customer preferences, and innovate based on real-world feedback. This will allow them to stay ahead of the competition and strengthen their market position.

What are the Benefits and Risks of First Mover Advantage?

Being a first-mover business offers significant advantages and several inherent risks that can be harmful if not handled carefully. We will explore both the advantages and potential drawbacks of being a first-mover:

Benefits of First-Mover Advantage

• Brand Recognition: Being the first mover allows companies to establish strong brand awareness and loyalty among customers early on. This recognition can be leveraged for long-term success. This will make the process of building trust in the product or service easier as there are only a few competitors.

• Setting Industry Standards: By being the first, companies can set industry standards for products and services, establishing benchmarks that later entrants must follow. This includes not only the product itself but also the manufacturing processes and marketing practices.

• Higher Profit Margins: Early entrants often can set the prices for their products, which can create a pricing standard in the market. First movers often have the opportunity to set the price higher due to the lack of competition. This can result in higher profit margins.

• Patents and Resource Control: First movers can secure patents and control scarce resources. This will create barriers for later entrance and enhance first movers’ competitive position.

Risks of First-Mover Advantage

• High Development Costs: Being a first-mover often requires massive investments in research and development without any assurance of market demand. These initial costs can be burdensome, especially when the market is unproven and the products do not succeed.

• Vulnerability to Competition: Later entrants can learn from the mistakes of first-movers, allowing them to introduce an improved version of existing products at a lower cost. This is called the “fast follower” strategy, which can erode the advantages held by the first-movers.

• Customer Education Costs: The first movers are shouldering the burden of educating the customers about their new products or services. This process can be time and money-consuming, as potential customers may not initially understand the product’s value or functionality. In contrast, later entrants can capitalize on this situation without incurring similar expenses.

• Complacency Risks: First-movers may become confident due to their early success, leading to stagnation in innovation. They will be unable to innovate or adapt to changing market conditions, making later entrants to outperform them.

Effist Suite Office: Your Trusted Office Solutions in Effortless Business Expansion to Indonesia

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In our serviced office, we offer fully-equipped office spaces with complete equipment, including ergonomic working station, high-speed internet, executive office equipment, meeting rooms in various sizes, business lounge, pantry, and secretarial and cleaning services. You can focus on your core business activities, while we handle your office needs.

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For more information regarding our serviced office and virtual office, contact us through email contact@effist.com or visit our “Book Tour” page.

Editor: Irnadia Fardila