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Follower/Latecomer Strategy

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Daniel Hanz
Daniel Hanz

The follower strategy involves imitating or copying successful products launched by other companies once their market acceptance is proven. This allows latecomers to benefit from the pioneer's investments in developing the new product and educating the market without having to bear these upfront costs. They can achieve higher profits and learn from the pioneer's mistakes. However, followers risk losing the market to the established leader and receive little credit for innovation. Examples include Xbox following the Wii and Facebook/Zynga entering existing social networks.

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FOLLOWER / LATECOMER STRATEGY SUPREME X
WHAT IS FOLLOWER STRATEGY? Strategy of product imitation / copy. Involves taking a 'wait and see' approach, rather than perceiving innovate on as a race in which being first to market is critical. When it becomes clear that there is high level of consumer acceptance in market or number of competing designs begins to diminish, then and only then does latecomer enter the market.
Contd. The innovator bears the expense of developing the new product, bringing in the technology, breaking entry barriers and educating the market. However, follower can come along and copy or improve on the new product.
WHAT IS THE ADVANTAGE OF THE STRATEGY? 'Free rider effect - Latecomer is able to utilize benefit of investments made by pioneer firms. - Can achieve higher profits since it did not bear the innovation expense. - Since customers are already aware of the product, the cost of educating the market is not required.
Contd 'Info spill-over effect - Arise where diffusion of technologies over time results in reduced r&d costs for latecomers. - Latecomers will be able to access the information once in public domain without having to undertake major r&d and expenditure. Gives latecomer a cost advantage over pioneer firms.
Contd Learning effects - Latecomers are able to learn from the mistakes and failures of others. - If problems associated with tech becomes more widely known and uncertainty reduces, so scope for learning becomes much greater.
WHAT IS THE DISADVANTAGE OF THE STRATEGY? Reward of all the work given to the market leader. It takes time to overtake the leader. The follower is often a major target of attack by challengers, it must keep its manufacturing costs low and its product quality and services high. Little innovation is needed to improve the product which can lead to increase in manufacturing cost.
WHAT COMPANY USE THIS STRATEGY? Wireless tech from Nintendo Wii, which was imitated over time and improved on by Microsoft Xbox. Chinese market which supplies imitation goods of branded products at throwaway prices. Facebook 'followed' Myspace, Hi5, Orkut etc. Zynga also entered and captured an existing market.

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Follower/Latecomer Strategy

  • 2. WHAT IS FOLLOWER STRATEGY? Strategy of product imitation / copy. Involves taking a 'wait and see' approach, rather than perceiving innovate on as a race in which being first to market is critical. When it becomes clear that there is high level of consumer acceptance in market or number of competing designs begins to diminish, then and only then does latecomer enter the market.
  • 3. Contd. The innovator bears the expense of developing the new product, bringing in the technology, breaking entry barriers and educating the market. However, follower can come along and copy or improve on the new product.
  • 4. WHAT IS THE ADVANTAGE OF THE STRATEGY? 'Free rider effect - Latecomer is able to utilize benefit of investments made by pioneer firms. - Can achieve higher profits since it did not bear the innovation expense. - Since customers are already aware of the product, the cost of educating the market is not required.
  • 5. Contd 'Info spill-over effect - Arise where diffusion of technologies over time results in reduced r&d costs for latecomers. - Latecomers will be able to access the information once in public domain without having to undertake major r&d and expenditure. Gives latecomer a cost advantage over pioneer firms.
  • 6. Contd Learning effects - Latecomers are able to learn from the mistakes and failures of others. - If problems associated with tech becomes more widely known and uncertainty reduces, so scope for learning becomes much greater.
  • 7. WHAT IS THE DISADVANTAGE OF THE STRATEGY? Reward of all the work given to the market leader. It takes time to overtake the leader. The follower is often a major target of attack by challengers, it must keep its manufacturing costs low and its product quality and services high. Little innovation is needed to improve the product which can lead to increase in manufacturing cost.
  • 8. WHAT COMPANY USE THIS STRATEGY? Wireless tech from Nintendo Wii, which was imitated over time and improved on by Microsoft Xbox. Chinese market which supplies imitation goods of branded products at throwaway prices. Facebook 'followed' Myspace, Hi5, Orkut etc. Zynga also entered and captured an existing market.