First-Mover Disadvantage

A situation in which a company (usually a vendor) with a sizable indirect-sales channel takes the lead in circumventing those partners, either by selling a new product direct or by embracing an alternative business model that reduces the channel’s sales role. Vendors in this scenario likely will face a rebellious legacy channel and aggressive competition from rivals looking to capitalize on the channel backlash.

In a broader business context, the first-mover disadvantage can be defined as the negative results of being a market pioneer. The disadvantages of being a first mover arise from several sources, including risk exposure, inertia, so-called “free-rider effects,” and shifts in technology and customer needs. (See related topic: First-Mover Advantage.)


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