Which of the following is a disadvantage of being a first-mover in a market?

• A. Ability to set industry standards
• B. Access to scarce resources before competitors
• C. High initial costs and risk of market uncertainty
• D. Establishing strong brand recognition early

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a first-mover advantage and disadvantage. A first-mover is the first company to enter a new market or industry, which can lead to benefits like setting industry standards, accessing scarce resources first, and establishing strong brand recognition.
2. Step 2: Identify the potential advantages of being a first-mover, such as the ability to set industry standards, early access to scarce resources, and building brand loyalty before competitors enter the market.
3. Step 3: Recognize that despite these advantages, there are also disadvantages. One key disadvantage is the high initial costs involved in pioneering a new market, including research and development, marketing, and infrastructure setup.
4. Step 4: Consider the risk of market uncertainty faced by first-movers. Since the market is new, demand is uncertain, and consumer preferences may not be well understood, increasing the risk of failure or losses.
5. Step 5: Conclude that the disadvantage of being a first-mover is primarily the high initial costs and the risk associated with market uncertainty, which can outweigh the benefits if the market does not develop as expected.