What is a 'First Mover'

First mover is a term that describes a certain competitive advantage a business obtains by virtue of being the first to bring a specific product or service to market. Among other things, being first typically enables a company to establish strong brand recognition and customer loyalty before other entrants to the market arise. Another advantage is the additional time a first mover business has to perfect or improve its product or service.


Examples of businesses that obtained a first mover advantage include innovators such as Amazon.com and eBay. Amazon.com created the first online bookstore and was immensely successful. By the time other retailers established an online bookstore presence, Amazon.com had already achieved significant brand name recognition, and parlayed its first mover advantage into marketing a range of other products besides books. eBay established the first major online auction site in 1995. Other auction websites have followed, but none have anything close to the brand recognition of eBay.

First movers in an industry are almost always followed by competitors that attempt to capitalize on the first mover's success and gain a share of the market for themselves. However, it is often the case that the first mover has established sufficient market share, customer loyalty and other advantages to enable it to maintain the lion's share of the market.

Elements of First Mover Advantage

The first mover advantage is not usually a single advantage but rather a set of advantages that a company obtains by being first to develop and market a product.

Brand name recognition is one of the main first mover advantages. Examples of extremely strong brand name recognition established by first movers can be seen in the history of companies such as The Coca-Cola Company, auto-additive giant STP and boxed-cereal producer Kellogg's. Brand name recognition not only engenders loyalty among existing customers but also draws new customers to a company's product even after other companies have entered the market.

Economies of scale represent another first mover advantage. This is particularly true in regard to manufacturing or technology-based products. The first mover in an industry has a longer learning curve that frequently enables it to establish more cost-efficient means of producing or delivering a product.

Switching costs is another common first mover advantage. Once the first mover sells its product to a customer, the costs of switching to a rival product may be considered prohibitive by the customer. For example, a large company that uses computers with the Windows operating system is unlikely to change over to another operating system because of the cost required to retrain its employees in using the new system.

Being first enables a company to obtain a number of prime advantages that strengthen its position in the marketplace. A first mover often has the opportunity to lock in relationships with suppliers, leaving few necessary resources for potential rivals. First movers also have first choice in things such as location, website names and key personnel.

  1. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
  2. Brand Recognition

    The extent to which the general public (or an organization's ...
  3. Brand Loyalty

    When consumers become committed to your brand and make repeat ...
  4. Brand Identity

    Brand identity is the way a business wants consumers to perceive ...
  5. Brand

    A distinguishing symbol, mark, logo, name, word, sentence or ...
  6. Market Leader

    A company that has the largest market share in an industry, and ...
Related Articles
  1. Managing Wealth

    How To Save Money When Moving

    Moving doesn't have to be as expensive as you think. Here are some great ways to save money on moving costs.
  2. Small Business

    3 Secrets Of Successful Companies

    Make smart investments by spotting up-and-coming success stories early.
  3. Small Business

    Explaining Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent.
  4. Insights

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  5. Investing

    Understanding Revenue Recognition

    Revenue recognition is an accounting term describing how and when a company records revenue in its accounting records.
  6. Investing

    What's a Competitive Advantage?

    A competitive advantage is an advantage a firm has over its competitors.
  7. Investing

    What are The Best Ways to Save on Moving Costs?

    Because buying a house isn’t cheap, funds might be limited during your move. So, to avoid additional stress, here are seven money saving tips.
  8. Small Business

    How Can Companies Increase Market Share?

    Companies that increase their market share enjoy a competitive advantage. They receive better prices from suppliers, and they’re able to produce goods faster.
  9. Small Business

    How Companies Create A Brand

    We take a hands-on approach to creating a brand, and see what it can mean as an investor.
  10. Small Business

    Understanding Product Lines

    A product line is a group of related products manufactured by the same company.
  1. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  2. What are some of the benefits of positive brand equity?

    Learn how having positive brand equity enables companies to make a higher margin on sales and spend less money on marketing ... Read Answer >>
  3. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ... Read Answer >>
  4. How does brand image and marketing affect market share?

    Building a positive brand image is a must for companies that want an edge over the competition. Learn how marketing and branding ... Read Answer >>
  5. What impact does brand equity have on profit margins?

    Learn how both positive and negative brand equity affects profit margins by influencing profit per customer, sales volume ... Read Answer >>
  6. What are some real life examples of absolute advantage?

    Learn about absolute advantage, comparative advantage and their impact on trade through a real-world example involving call ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center