Examples of the Companies

1. Is the second-mover advantage always a good business strategy? Defend your answer with examples of the companies in this case.

This case uses many examples to illustrate that the second-mover advantage is a good strategy. On the one hand the followers can actually copy the front-runner's successful model, saving innovation cost and avoiding the risks of creating a new market; on the other hand the followers are able to mainly use their resources to analyze the existing market, learn from the front-runner's mistakes and produce superior products or services that can surpass their competitors. At this point second-mover advantage is a clever business strategy to gain market share in an easier way.

However, this business strategy does not always work. Reviewing the examples in this case, the second-movers are winners because the front-runners have significant weaknesses and leave opportunities for competitors. When second-movers notice leaders' shortcomings and surpass them with better products, the followers can easily overwhelm their competitors. For example: Salesforce.com failed because their software and customer service wasn't user-friendly, but Entellium.com offered more easy-to-use and friendly service; adopting an editor selection model, Slashdot.org was overtaken by Digg.com which applied a reader-vote model; Peerflix.com came out successful because of the combination service inspired from eBay and Netflix; Zappos.com grew fast not because they copied an existing online shoe-sale-model but because they successfully related business with real shoe stores; the reason why Jigsaw.com could gain market share from Hoovers.com was Hoovers' inefficiency. All the above examples merely indicate that second-mover advantage does work in some cases, but not that it will always work.

* Second-mover advantage may not work well in certain industries.

The case shows us how easily smart second-movers can overtake first-runner businesses. However, in other industries this may not be true. In some industries when front-runners totally control scarce assets such product materials, locations or special technologies, first-runners can easily build strong barrier for new entrants. For example, Usero, B. & Fernández, Z. (2009) argues that in the mobile telecommunications industry first-runners enjoy a sustainable advantage, which is hardly eroded by second-movers' competition. In an industry where first-mover advantage is very strong, the second-mover advantage will be relatively small. However, in web-based industries first-mover advantage is minor, but second-mover advantage might be strong (Gezinus J. Hidding & Jeffrey R. Williams 2002).

* Second-mover advantage may not apply when it is too late.

The first-mover advantage has a time limit, but so does the second-mover advantage. Gezinus J. Hidding & Jeffrey R. Williams (2002) show that the firms who want to adopt second-mover strategy should not wait very long. According to their research, in many industries the leadership firms that are second-movers entered into the market very quickly after the first-runners.

* Second-mover advantage may not be good enough to overtake scale economies.

In the article "Economics of scale and barriers to entry" (1981), the author suggests that large-scale economies can strengthen first-mover advantage significantly so that the second-mover advantage tends to be minor. In our case most of the front-runners have not grown large-scale economies so second-movers can relatively easyily challenge their position. But eBay and Netflix had grown so large that Peerflix's success only lasted for a couple years.

* Second-mover advantage cannot guarantee a permanent leading position.

If we look into the real word of these five second-movers, we will find that the second-mover advantage may not last for long. Entellium has gone bankrupt because of fraud; Digg.com still needs to adopt effective measures to focus on profitability; Peerflix has already disappeared. Zappos is doing well, not because the second-mover advantage, but because of its company culture and outstanding customer service.

In conclusion, second-mover advantage is a good strategy. But a company that wants to achieve sustainable success needs to figure out how to maintain the best product or service, otherwise third-movers and fourth-movers can easily challenge them.

2. What can a front-runner business do to foil the assaults of second movers? Defend your answer using the examples of the front-runner companies in the case.

Copying is usually easier than innovating. Getting into a new market without paying innovation cost and buyer education, smart second-movers will more likely to free ride on front-runners from. However, front-runners also have certain advantage of controlling market resources. When front-runners failed to optimize the first-mover advantage, second-movers will have chance to surpass front-runners. Strategies here are what front-runners should adopt to maintain their leadership.

* Maintain and improve customer friendly service.

Customer friendly service plays the key role in business successes. When Johnson knew Salesforce wasn't easily used, he found his competitive advantage. If Salesforce created a user-friendly service to increase its customer loyalty, Entellium might not exist. Zappos also apply customer-orientated service which helped them gain large market share. When companies do offer good service, users will be more likely grow accustomed to their service which will raise the barriers for new competitions.

* Track customer satisfaction and keep sensitive to market need.

Great customer satisfaction raises switching cost. When a company is willing to reach close