Which of the following is true of first movers in a market?

• A. They typically have less information about consumer preferences than later entrants.
• B. They can gain a competitive advantage by establishing brand recognition and customer loyalty before rivals enter.
• C. They are guaranteed long-term market dominance regardless of subsequent competition.
• D. They always face lower production costs than later entrants.

Answer: (B)

Verified step by step guidance

1. Understand the concept of 'first movers' in a market: these are firms that enter a market before any competitors.
2. Analyze the typical advantages of first movers, such as the ability to establish brand recognition and build customer loyalty early on.
3. Consider the limitations of first movers, including the fact that they may not have complete information about consumer preferences compared to later entrants who can learn from the first mover's experience.
4. Recognize that first movers are not guaranteed long-term market dominance because later entrants can innovate or improve on the first mover's offerings.
5. Evaluate cost structures: first movers do not always have lower production costs; later entrants might benefit from improved technology or economies of scale.