What are the risks and opportunities of being a trendsetter or fast follower?

When designing a company strategy, it is important to define where the company would like to be placed in the market. Company leaders should decide whether it will lead or follow the market. If they decide the company will be a market leader, they must specify in what respect it will lead a certain market. The following are examples of possible definitions:

–          To be a market leader due to a firm’s advanced technology

–          To be a market leader due to special designs

–          To be a market leader because the firm occupies the biggest market share

–          To be a market leader by offering special services

–          To be a market leader by selling products with special features

–          To be a market leader due to frequently changing products

These examples show that a company has to define its main focus to be a trendsetter in a respective area. To ensure that the defined strategy comes to fruition, the organization must focus on the defined area.

However, one should not underestimate the risk that accompanies defining such a strategy. It is possible that the trends will not be accepted by the market, or they may be so advanced that the market needs time to adjust to the trend. It is especially risky to claim that a company is a trendsetter with respect to technology. Developing new technologies is very expensive. If it cannot make a return on its investment when another technology is promoted by the market, a company can quickly experience financial problems.

Let us look at some examples. Apple was a successful trendsetter. Its founder had the idea to develop user-friendly software that could be used by everybody without any IT-knowledge, and the company created modern designs. Apple’s success in the market was followed by the institution of a business model that ensured that the firm would make money with every book and every news which was bought with this computer.

There are also negative examples. The Wankel engine was a very advanced development, but it could not compete against the conventional piston design. Several times Renault introduced a car that had very low wind resistance, but they were not successful in the market. Years later, everyone in the auto industry borrowed Renault’s designs and experienced success.

If a company produces a trendsetter that is successful, it can earn a lot of money. However, there is always a risk that the trend will not be accepted by the market. Therefore, some company leaders decide to become fast followers in the market. This can be best described by providing a very well-known example. Apple was surely the trendsetter for laptops, iPhones and iPads. Many companies are now trying to follow this trend. One of the most successful fast followers of Apple is Samsung, which has introduced iPads and mobile phones that are very competitive with Apple products. Samsung is still a healthy company after investing its money in R&D to follow a proven trend. For many years, Japanese industries successfully followed European trends. Because of this, Germany’s photo industry capsized, and Toyota is now the third biggest car manufacturer in the world.

Many organization leaders who decided to become fast followers also set up successful business models as the above examples show. When a company is positioned as a fast follower, it must offer additional value. Toyota continually added valued to its products and perfected the quality of the cars it manufactured. Fast followers must do this to be successful.

In summary, a trendsetter company has the best opportunities to earn high income. However, the company leaders risk bringing a flop to the market and losing all the money they invested in R&D for the respective product. Fast followers enter the market with less risk. They need to provide additional customer values to be successful and will not have on the opportunity to bring in earnings as high as the trendsetters.

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