Question

What is not an advantage of a first mover? A. Enables the establishment of significant brand image

B. increase sales volume ahead of rivals and thus reap cost advantages( i.e. economies of scale and learning effects)

C. Creates switching costs for customers if they decide to opt for an alternative technological standard.

D. is able to invest in the best technology or focus on he best market niche.

Answer 1

Correct option is D. is able to invest in the best technology or focus on the best market niche.

A first mover is the one that offers a new product or service for the first time in the market. As the product or service was introduced in the market for the first time, therefore, there is no market for it. They have to bear the economic burden of developing new markets for their products & services. The first movers have to invest a lot in research & development. First movers have heavily invested in their existing technologies, therefore, they may not be able to utilize newer technologies that becomes available.

So, apart from the advantages of being a first mover which includes establishment of significant brand image, increase sales volume ahead of rivals and thus reap cost advantages ( i.e. economies of scale and learning effects), creates switching costs for customers if they decide to opt for an alternative technological standard, etc, there are also associated disadvantages. Sometimes, it can be too expensive to be a first mover.