Innovation can be a major source of competitive advantage of business firms, even though it comes with a burden of cost and uncertainty. Management would have to decide whether it would be a leader or follower in the industry regarding innovation.
Required:
State FIVE competitive advantages associated with being a first mover in product innovation in an industry. (5 marks)
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- A reputation for innovation will attract early adopters, though it depends in part on promotional efforts by the firm.
- Customers may find that they are locked in to innovative suppliers by unacceptable costs of switching to rival firms.
- The learning (or experience) curve effect may bring cost advantages to the innovative firm.
- The first mover firm may be able to define industry standards.
- A price skimming strategy can bring early profits that will be denied to later entrants.
- Legal protection, such as patents, for intellectual property may bring important revenue advantages.