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First mover advantage
Definition
When a company launches a new product or a service in a market that is uncontested it is said to have a first-mover advantage. It can be simply understood by looking at a marathon race analogy. The runner who moves first at the sound of gunfire will have a significant head start and increase in winning the race as opposed to runners who move second or third fastest.
How is it useful?
FMA gives an edge to the company, as they’ve been in the market for a longest time than any of their competitors. It indicates a higher probability of success or dominating the market. However, having the first-mover advantage in businesses doesn’t always lead to success.
Example
Apple
Apple was the first company to build a smartphone. They got a significant first-mover advantage in the smartphone space as no other competitors existed at the point of unveiling. This helped them gain initial success and build one of the most valuable companies in the world, as they increased their revenue from $37.4 billion in 2008 to $65 billion in 2010. As of 2022, 52% of Apple’s revenue comes from smartphone sales.