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First mover advantage


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First mover advantage

  1. 1. First mover advantage: perspective of CVM model There is a very interesting phenomenon which is that in a competitive market first mover advantage relates directly to cost of the product. As shown below high involvement products are considered to be high on cost and hence offer first mover advantage in a competitive market to manufacturers. High involvement products usually have a very complex value matrix structure which is offered to the customers. Having said that we need to understand why high involvement products have first mover advantage? As shown below complex value matrix is something which is difficult to replicate immediately and hence in turn gives enough time to manufacturer to fetch profits. From the perspective of a manufacturer to make customer understand this complex value matrix is very important. In absence of which perceived risk factor of using the product in the minds of customers may go up which may inturn works against the company. Hence often manufacturer prefers to operate with the product with a clear and simplified value offerings to the customers. But to gain a competitive edge by having first mover advantage products value offerings are made complex.
  2. 2. To have sustainable competitive position in the market CVM should be regularly worked out from the perspective of a manufacturer. To summarize, Cost of the product is directly promotional to margin of "first mover advantage" which is regulated by VM of a particular product. What is CVM and how it ensures first mover advantage? Value offerings of any product are divided into 2 parameters – tangible and intangible. There is a relation between value offerings and cost of the product (high and low involvement). For an example, suppose I have to buy a chocolate I will only make a purchase based on taste which is a tangible offering. But if I have to buy a car I will not just look for its performance but also for brand association, image in society etc which are intangible associations. Hence an inference can be made that with increase in product cost preference towards intangible offerings increases. CVM: (Illustration) Intangible values relates to brand in a big way. Brand building is comparatively an expensive affair and hence becomes difficult for lot of companies to play in that area. It is one of the strong reasons why it ensures first mover advantage. Inference: Any product with strong intangible offerings will have first mover advantage compared to a product with tangible offerings in a particular market.