- 5 Marks
Question
Innovation can be a major source of competitive advantage for business firms, even though it comes with a burden of cost and uncertainty. Management would have to decide whether it would be a leader or follower in the industry regarding innovation.
Required:
State FIVE competitive advantages associated with being a first mover in product innovation in an industry. (5 marks)
Answer
1. Establishing a Strong Brand Identity: Being the first to introduce a new product or service allows a company to establish a strong brand identity and become synonymous with the innovation. This can create a lasting impression in the minds of consumers, leading to brand loyalty and recognition.
2. Capturing Market Share: First movers have the opportunity to capture a significant portion of the market before competitors enter. By being the first to offer a new product or service, a company can attract early adopters and secure a loyal customer base, which can be difficult for later entrants to dislodge.
3. Setting Industry Standards: First movers often have the ability to set industry standards and influence the direction of the market. By introducing a new product or service, a company can establish the benchmarks for quality, pricing, and features that other competitors must follow.
4. Achieving Economies of Scale: As the first mover, a company can achieve economies of scale by being the first to ramp up production and distribution. This can lead to lower costs per unit and higher profit margins, giving the first mover a cost advantage over later entrants.
5. Gaining Learning and Experience Curves: First movers benefit from the learning and experience curves associated with new technologies or processes. The more a company produces, the more efficient it becomes, leading to cost reductions and improvements in product quality. This accumulated knowledge can create barriers to entry for competitors.
(Total: 5 marks)
- Tags: Competitive Strategy, First Mover Advantage, Innovation
- Level: Level 2
- Topic: Strategic alternatives, analysis and selection
- Series: NOV 2017
- Uploader: Theophilus