FIRST vs. LATE MOVERS Strategic Management

First vs. late-mover theory

First mover theory seems intuitively 'correct' given the commonly-cited cliche that the 'early bird gets the worm.' This could also be interpreted as 'the early bird gets the customers,' as was the case in the VHS-Beta wars of the 1970s. Despite second-mover Beta's superior technology, Sony VHS's first-mover advantage in locking in customers proved insurmountable (Wong 2003: 8-9). 'Switching costs' for consumers also keep consumers' locked into their initial choices, as can be seen with the oft-maligned Microsoft Windows. Because computer operating systems are so difficult and costly to switch, many people and organizations cannot afford to start from scratch. First movers get to shape the use of the available technology to their needs, just as Apple was able to have great influence upon the shaping of legally downloaded music, fusing...

Finally, consumer preferences based upon habit can be very easy to 'lock in,' as is seen in how Coca-Cola, one of the first mass-marketed soft drinks, is now synonymous with soda (First mover definition, 2012, Investopedia).
However, not all firms make use of their first-mover advantage. Sometimes being first gives insufficient time for the firm to solidify its approach to consumers. This was the case of the first company formed by Alexander Bell, American Bell Telephone Company (ABT). "ABT chose to extract its monopoly rents and continued to charge high prices throughout the period of its patent monopoly. Consequently, competitors were able to effectively enter the market by the turn of the century" and lower prices (Wong 2003: 13). First mover status can lock a company into a particular business model, allowing it to grow quickly out-of-date, as was the case of AOL as a dial-up…