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ACCA Applied Knowledge · Business and Technology · Technological factors

Orchid plc plans to adopt an emerging technology before any competitor and has been told this is a first-mover strategy. Which of the following is a recognised disadvantage of being a first mover rather than a follower?

A recognised disadvantage of being a first mover is bearing the high cost of developing the technology and educating the market, costs that followers can avoid by learning from the pioneer's mistakes. New technology also carries greater technical failure risk.

  1. AThe company will face fewer risks of technical failure because the technology is new
  2. BThe company bears the high cost of development and of educating the market, which followers can avoidCorrect
  3. CThe company cannot build any brand recognition or customer loyalty
  4. DThe company is prevented by law from patenting its innovations

Explanation

First movers often incur heavy development costs and must educate customers, while followers learn from their mistakes and enter at lower cost. New technology carries more, not fewer, failure risks; first movers can build loyalty; and patent protection is generally available.

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