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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

 

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

 

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

 

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.

 

 

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