Question

1. What is the difference between homogeneous capital and heterogeneous capital? Why Would a theory of the entrepreneur make more sense if capital is heterogeneous rather than homogeneous?

2. Explain why first mover is or is not a good strategy for an entrepreneur.

Answer 1

The firm which is the first company in order to establish itself in any market or industry is termed as First Mover. Similarly, an entrepreneur initiates some kind of venture in a certain industry as the first one; he will be termed as the first mover. In most of the cases, it is expected that a substantial competitive advantage is achieved by the first movers as there is no competitor in the industry

There are both advantages and disadvantages of being the first mover which are explained as below:-

Advantages

• The first mover has the advantage of having the long-lasting impression on the customers which can create a strong brand loyalty and recognition,
• There is relatively long time for the first mover to refine their processes and to make their products perfect and as per the requirements of the customers.
• For the first mover, he can have the advantage of controlling the resources for example strategic location or an exclusive contract with key suppliers or talented employees
• A sustainable advantage can be gained by the first mover if the cost of switching to other brand is quite high for the customers.

Disadvantages

• The economic burden and risk associated with the development of new market and informing the customers about the products is on the first mover.
• The followers have the advantages of getting improved technology and learning from the experience of first mover.
• The competitors can come up with the latest technology and sophisticated products.
• Most of the first movers find it very hard to change their strategy and technology which can make them redundant in the industry.
• There is always a risk of product failure.