ANSWERS TO OPENING CASE DISCUSSION QUESTIONS
1. Why did the first social networking sites fail? Is there anything they could have
done to survive?
The early social networking sites exhibited most of the classic first-mover disadvantages:
Uncertain customer requirements, immature distribution channel (i.e., broadband did not
2. What factors made MySpace more successful than Friendster and SixDegrees.com?
What factors enabled Facebook to overtake MySpace?
MySpace got a jumpstart in installed base by leveraging the 20 million subscribers of
eUniverse. Myspace also enabled customization of users’ pages, and had more
functionality than SixDegrees.com. Facebook took customization in a different direction;
3. Are there significant switching costs that lock users into a particular social
networking site?
Switching costs are very low for social networking sites. Since most are free and
4. What will determine if Google+ can overtake Facebook?
Students may argue that better organization of contacts into groups and video chatting
could be big advantages for Google, but others will likely point out that Facebook could
ANSWERS TO DISCUSSION QUESTIONS
1. What are some of the advantages of entering a market early? Are there any
advantages to entering a market late?
Early entry can afford the first mover the opportunity to establish brand loyalty and
technological leadership, both of which can increase its installed base. And if the market is
2. Can you think of an example of a successful a) first mover, b) early follower, and c)
late entrant? Can you think of unsuccessful examples of each?
Students should come up with a variety of examples from their previous experience. Identifying
1. Visicalc led in the creation of spreadsheet software, only to lose to Lotus 1-2-3 and later
2. The Xerox Star computer was the first PC with a graphical user interface. Has anyone
3. The first Jet Airliner in passenger service was the DeHavilland Comet. Boeing and Airbus
An example of an initially successful (but ultimately unsuccessful) first mover and successful
early follower can be found in the market for arterial stents (a tube that opens arteries during
angioplasty). Johnson and Johnson was the first to market in 1994 and initially captured 90% of
3. What factors might make some industries harder to pioneer than others? Are there
industries in which there is no penalty for late entry?
Industries that are characterized by a new-to-the-world technology or functionality (the Segway
provides an example here) are likely to be harder to pioneer than others. A firm that invests in
new-to-the-world technology will incur not just the costs of the successful technology but also