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What is the first-mover advantage?

Definition: First-mover advantage is an advantage that a company achieves by being the first company to introduce a new product or service into the market, or market segment.

This refers to a company’s advantage in capturing a bigger market share and early customers, establishing brand recognition, locking in suppliers, and building and controlling distribution channels.

First-movers have the advantage of setting and controlling prices and creating a barrier to entry, making it more difficult for competitors to enter the market.

However, being a first-mover isn’t a guarantee for success. First-movers face risks of product failure due to insufficient product awareness, changing market conditions, increased competition from later entrants, and high marketing and development costs.

First-mover advantage vs. Second-mover advantage

While first-mover advantage refers to the benefits a company can receive from being the first to enter a market, second-mover advantage happens when the company following the first-mover managers to capitalize on their product or service despite coming later.

Some of the benefits second-movers gain are learning from the first-mover's mistakes, improving upon the first-mover's offerings, and capitalizing on the first-mover's market development.

While first movers have to establish and promote new solutions to people’s needs, second movers have the advantage of entering a market with already established demand and much clearer market landscape.

There isn’t a clear judgment over which move is more advantageous, as both depend on the company’s strategy and offering.

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Article FAQs

What are three advantages associated with first-movers?
Three advantages associated with first-movers are establishing brand recognition, creating barriers to entry, and setting prices. This way, first-movers gain a competitive advantage and protect their market position.
Is Coca-Cola a first-mover advantage?
Yes, Coca-Cola can be considered to have a first-mover advantage in soft drinking industry. Coca-Cola was among the first companies to introduce a carbonated soft drink to the market in 1886 and has since established itself as a dominant player in the industry.
Is Amazon a first mover?
Yes, Amazon is a good example of a first-mover advantage in the digital space for online shopping, which established its online shop in 1995 and has successfully maintained its position in the market since.
Can the first mover lose its advantage to later entrants?
Yes. The first mover can fail to effectively capitalize on their early advantage and may eventually lose their position to later entra
What is a late mover?
A late mover is a company that enters a market after many companies have already established themselves. Late movers have to compete with established brands with strong market positions and customer loyalty. They will have a higher difficulty

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