The Second Mover Advantage in Business

The second mover advantage is now the new buzzword in the corporate arena and this is especially amplified in online related businesses. Real world scenarios are full of cases where second movers have outsmarted and out-competed industry leaders. The paper shall look at whether this is a good business strategy and what first movers can do to outsmart such moves. The five case studies shall be used as a basis for justifications on the second mover advantage in business.

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Whether the second mover advantage is always a good business strategy

The second mover advantage may not always be a good business strategy but if combined with the right confidence, strategy and product, then one may be well on one’s way to becoming a force to reckon with in one’s respective industry. A second mover business strategy often works because it is relatively easy to start up and start recording profits. This is made possible by the fact that the first mover may already have opened up the markets to what one has to offer. An example is Entellium which out-competed first mover Salesforce.com. The latter company was able to do this by studying what was needed to make their services more efficient, cheaper and faster and then offering it. For instance, it knew that its competitor were a bit pricy and therefore opted to give consumers a forty percent discount. Besides that, it improved usability of its product through the use of borrowed elements from other web businesses. Lastly, it made its products easier to use through the availability of twenty-four assistance. One can therefore assert that Entellium enjoyed second mover advantage because it understood what its target market was missing and proceeded to provide it in a better way than the first movers. (O’ Brien, 2004)

Another company that demonstrates why a second mover advantage is a good business strategy is Zappos. This company engaged in online shoe sales. As a second mover the latter company realized that its competitors largely dwelt on small market sizes. Therefore, the consumer base was quite small and there was a need to look for solutions for dealing with this – they opted to get clients from brick and mortar stores. Also, they found a problem with inventory and to solve this, they decided to form a partnership with suppliers. In other words, it can be said that Zappos enjoyed second mover advantage because they were savvy enough to expand their business and were transparent enough with their suppliers. In the second mover strategy one may be offering similar products but it may be necessary to think of anyway to offer the product that differentiates one from preexisting competitors. (Birger, 2006)

The second mover advantage is a good business strategy in this day and age owing to the fluidity of the current job market. This is especially the case in online related businesses. Competition has become cut throat and being a second mover places one in a rare position where one can establish oneself as a viable alternative to the big first movers. In fact, business analysts assert that these days being a first mover implies that one will definitely be a natural target for all other players in one’s line of business. Given all this negativity surrounding the first mover, there is a need to find out why the first mover advantage is not that significant. Analysts have claimed that most inhabitants of the developed world resent the status quo. There is a big outrage against capitalism with large scale multinationals being the ultimate symbols of this capitalism. First movers such as Walmart are identified as exploitative employers keeping more profits and infringing the rights of their staff members. On top of the latter, such companies normally bully their competitors with their price strategies thus leaving little room for local stores to thrive. Huge corporations receive a lot of backlash from the general public for more philosophical than practical reasons. This implies that the public is always on the lookout for an alternative from these capitalism symbols and this is where the second mover advantage comes in. (Kopel & Loffler, 2007)

Second movers are rarely under a lot of scrutiny like first movers. Their employee policies, business strategies may not be so different from their predecessors but they have the advantage of getting away with it. It can be said that today’s job markets are quite fluid. Potential employees are often on the lookout for new and up coming corporations. This means that the forces that drew them to first movers such as Microsoft are now the forces that are causing them to leave such institutions. These individuals happen to very talented and this is why they would like to work for institutions that would present them with large opportunities for growth. In the end, underdogs or second movers are more likely to stand out than these large industry leaders. Therefore with the support of a large and talented employee base and an equally supportive public, second movers are likely to do well in comparison to their counterparts.

What a front runner business can do to foil the assault of second movers

Front runners need to revisit their business strategies when second movers attempt to out-compete them. This is largely because original premises or business ideas that drove first movers to success in the first instance may sometimes be rendered irrelevant in the face of competition. For example in the case study, a technology news website Slashdot was a frontrunner that eventually became outpaced by newcomer Diggs. If the latter company wanted to stay ahead of the second mover Diggs, then it should have revisited their ways of doing business. This company offered the same product in more or less the same manner. If it had been sensitive to changes in its environment and borrowed from those environments, then chances are that the company would be doing much better than the second mover. For example, Diggs realized that social networking websites were becoming quite common; they therefore embraced this model in their new product offering. Slashdot ought to think of ways in which it can outsmart such a move by also utilizing a relatively new model of doing business. They need to do this by venturing into other segments of business that may not even be related to technology news provisions. (O’ Brien, 2004)

Whether second movers always have the advantage in web based business success

Second movers always tend to have the advantage in web based businesses because of several reasons. First of all, the second mover is in a unique position to be able to learn from the mistakes of the first mover. In other words, one can take up the position of an observer and an analyst that looks into all the failures and successes of the first company. In this regard, such companies can identify some of the features within a certain product or service that have not been utilized and then decide to offer them. This means that second movers can then be spared from wasting time in side work.

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An example of how this was depicted was the case of Jigsaw – an online marketing shop. The latter company watched from the sidelines as first movers such as Digital movers depended on online databases for corporate information to get their contact lists. Jigsaw – the second mover – opted to rectify this mistake by asking their clients to contribute towards their own contact lists by charging them a fee. In the end, the latter company was able to successfully grow its consumer base (ten thousand new contacts daily) and this was reflected in it sales growth.

The other advantage of being a second mover is that one always concentrates on revising rather than creating a new product. First movers spend a lot of time studying the market, deciding on the right quantities for their products, selecting the most reliable suppliers and many other functions but most importantly, first movers always own the initial idea of a certain product. While the latter group may have the advantage of thinking up the idea for their product, they may not necessarily do a good job of delivering it or improving it for their clients and this is where second movers come in. The corporate arena is full of examples of top notch companies that imitated first mover’s ideas but improved them instead. For instance, Apple was a second mover that borrowed the idea of an MP3 player and converted into a better product known as IPod. Also, Google was a second mover that used the concept of a search engine and made it faster and easier to use. (Pearson, 2005)

The latter advantage has been utilized by two major corporations in the real life case studies examined. For example, when Entellium entered into the customer relationship management software business they borrowed the major concept of the business from Salesforce.com. Nonetheless, they outperformed these first movers by improving their product in that they made it less risky, included social networking features and was easier to use. Peerflix was also a second mover in the online movie rentals business. It outsmarted its competitors by revising their ideas i.e. it offered mechanisms for renting DVDs while at the same time allowing clients to exchange them at a fee. The element of exchanges is what made their service outstanding and this led to their growth.

Another reason why second movers have an advantage in business is because of the element of surprise. Most companies that entered into virgin markets have to concentrate their time and efforts to convince clients that there is a need for the product – this means that clients have to put up with continuous reminders on why their products are necessary. This eventually eliminates the element of surprise. On the other hand, second movers need not do this; they usually start business with a preexisting market base. They can therefore surprise these clients by adding a new product as soon as they commence. For example, in the case studies, Zappos surprised both their competitors and the consumers with their new element which was creation of an inventory model where it would target traditional shoe stores. This is what set the latter company ahead of the pack. (O’ Brien, 2004)

Conclusion

Entellium, Digg, Peerflix, Zappos and Jigsaw have all enjoyed success in e-commerce as second movers because of a number of reasons. First of all, they did not have to spend a lot of time and energies in creating a new product because it had already been made. They instead dwelt on improving the product by making their services easier to use, more efficient and cheaper. The trick behind these case studies was that they found a new way of delivering old services. They incorporated an element of surprise while at the same time revised business models that were synonymous to other industries to conduct their businesses. It is therefore incumbent upon first movers to reconsider their start up ideas and technological premises in order to curb competition from second movers as well.

References

O’ Brien, J. (2004). Electronic Commerce Systems. New York: McGrawHill Companies

Birger, J. (2006). Second mover advantage. Fortune Magazine, 13

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Pearson, E. (2005). Second mover’s advantage. Web.

Kopel, M & Loffler, C. (2007). Commitment, first mover and second mover advantage. Working paper L13

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