Be a First Mover in E-Commerce Market !

[Question A]

Be a First Mover in E-commerce Market !

1. What is “First Mover” and “FMA”?

In the business world, a first mover is a company that aims to gain an advantageous and perhaps insurmountable market position by being the first to establish itself in a given market. First-mover advantage (FMA) is the advantage gained by the initial major occupant of a market segment. This advantage comes from the fact that the first one to get to that market segment can gain control of the resources that the followers may not be able to match. However, the first mover is not able to capitalize on its advantage and leaves the opportunity wide open for another player to gain the second-mover advantage. “Originally made apparent by the ever booming Internet phenomenon, it has recently been on the decline due to the recent economic downturn. It is important to note that the first-mover advantage refers to the first significant company to move into a market, not necessarily the first company. In order for a company to try and become a first-mover that company needs to figure out if the overall rewards outweigh the beginning/underlying risks. Sometimes first-movers are rewarded with huge profit margins and a monopoly-like status. Other times the first-mover is not able to capitalize on its advantage, leaving the opportunity for other firms to compete effectively and efficiently versus their earlier entrants. These individuals then gain a "second-mover advantage". [1]

First-mover advantage can arise from three primary sources- Technological leadership, Preemption of scarce assets, and Switching costs and buyer choice under uncertainty. A company can gain FMA when it has an upper-handed breakthrough in its research and development (R&D). Though starters in an FMA market have complete control for a period of time, there is competition that competes to reach the originators. First-movers will usually sell their products below cost in an effort to gain better understanding of...