Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?
Which of the following is a major benefit of engaging in free trade
It gives countries access to products that they cannot produce
David Ricardos theory of comparative advantage explains global trade in terms of the
International differences in labor productivity
Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?
Which of the following observations is consistent with Michael Porters theory of national competitive advantage?
Factors such as domestic demand and domestic rivalry determine nations' dominance on production
Which of the following is a theory that can be used to justify limited government intervention to support the development of certain export oriented industries?
Which of the following is a major flaw associated with mercantilism?
Mercantilists view trade as a zero-sum game
A country has an absolute advantage in the production of a product when it
Is more efficient than any other country in producing it
According to Adam Smith, A country should specialize in the production of a good when it has
An absolute advantage in the production of the good
According to Ricardos theory of comparative advantage, a country should produce goods
That it produces most efficiently
Diminishing returns to specialization occurs when
More units of resources are required to produce each additional unit
What will happen, according to Paul Samuelsons critique, if a rich country enters into a free trade agreement with a poor country?
The poor country will rapidly improve its productivity
Which of the following terms refers to the extent to which a country is gifted with such resources as land, labor, and capital?
Which of the following terms refers to the unit cost reductions associated with large sized outputs?
Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Wal-Mart to offer greater discounts to its customers. In this case, Wal-Mart benefits from
Which of the following theories suggests that first mover advantage is significant in the export of a good?
Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?
Which of the following factors, according to Porters national diamond, is most likely to give a country competitive advantage over another country?
Porter argues that a nation firms gain competitive advantage if
Their domestic consumers are demanding
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- What Is a First Mover?
- Key Takeaways
- Examples of First Movers
- Advantages of First Movers
- Disadvantages of First Movers
- Which of the following theories suggests that government policies should be used to support certain export oriented industries?
- What theory that supports the view that in some cases countries export because in certain industries the world market can support only a limited number of firms?
- Which theory predicts that countries will export those goods that make?
- Which theory predicts that countries will export those goods that make intensive use of factors that are locally abundant?
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What Is a First Mover?
A first mover is a service or product that gains a competitive advantage by being the first to market with a product or service. Being first typically enables a company to establish strong brand recognition and customer loyalty before competitors enter the arena. Other advantages include additional time to perfect its product or service and setting the market price for the new item.
First movers in an industry are almost always followed by competitors that attempt to capitalize on the first mover's success and gain market share. Most often, the first mover has established sufficient market share and a solid enough customer base that it maintains the majority of the market.
Key Takeaways
- A first mover is a company that gains a competitive advantage by being the first to bring a new product or service to the market.
- First movers typically establish strong brand recognition and customer loyalty.
- The advantages of first movers include time to develop economies of scale—cost-efficient ways of producing or delivering a product.
- The disadvantages of first movers include the risk of products being copied or improved upon by the competition.
- Amazon and eBay are examples of companies that enjoy first-mover status.
Examples of First Movers
Businesses with a first-mover advantage include innovators, Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY). Amazon created the first online bookstore, which was immensely successful. By the time other retailers established an online bookstore presence, Amazon had achieved significant brand recognition and parlayed its first-mover advantage into marketing a range of additional, unrelated products. According to Forbes's "The World's Most Innovative Companies" 2019 ranking, Amazon ranks second. It has annual revenues of $280 billion and, through the end of 2019, had a 20% annual sales growth rate.
eBay built the first meaningful online auction website in 1995 and continues to be a popular shopping site worldwide. It ranked 43rd on the Forbes list of innovative companies. The company generates $287 billion in annual revenues, with a 2.8% annual sales growth rate.
Advantages of First Movers
Being the first to develop and market a product comes with many prime advantages that strengthen a company's position in the marketplace. For example, a first-mover often gains exclusive agreements with suppliers, sets industry standards, and develops strong relationships with retailers. Other advantages include
- Brand name recognition is the main first-mover advantage. Not only does it engender loyalty among existing customers, but it also draws new customers to a company's product, even after other companies have entered the market. Brand name recognition also positions companies to diversify offerings and services. Examples of dominant brand name recognition of a first-mover include soft drink colossus Coca-Cola (NYSE: KO), auto-additive giant STP (NYSE: ENR), and boxed-cereal titan Kellogg (NYSE: K).
- Economies of scale,particularly those regarding manufacturing or technology-based products, is a massive advantage for first movers. The first mover in an industry has a longer learning curve, which frequently enables it to establish a more cost-efficient means of producing or delivering a product before it competes with other businesses.
- Switching costs let a first-mover build a strong business foundation. Once a customer has purchased the first mover's product, switching to a rival product may be cost-prohibitive. For example, a company using the Windows operating system likely would not change to another operating system, because of the costs associated with retraining employees, among other costs.
Disadvantages of First Movers
Despite the many advantages associated with being a first mover, there are also disadvantages. For example, other businesses can copy and improve upon a first mover's products, thereby capturing the first mover's share of the market.
It costs approximately 60% to 75% less to replicate a product than it costs to create a new product.
Also, often in the race to be the first to market, a company may forsake key product features to expedite production. If the market responds unfavorably, then later entrants could capitalize on the first mover's failure to produce a product that aligns with consumer interests; and the cost to create versus the cost to imitate is significantly disproportionate.
Which of the following theories suggests that government policies should be used to support certain export oriented industries?
Both the new trade theory and Porter's theory of national competitive advantage can be interpreted as justifying some limited government intervention to support the development of certain export-oriented industries.
What theory that supports the view that in some cases countries export because in certain industries the world market can support only a limited number of firms?
New trade theory stresses that in some cases countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms.
Which theory predicts that countries will export those goods that make?
The Heckscher–Ohlin theory predicts that countries will export those goods that make intensive use of factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce.
Which theory predicts that countries will export those goods that make intensive use of factors that are locally abundant?
Heckscher–Ohlin model It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce.