What Is the Risk Associated with Being a First Mover

question 8

Multiple Choice

What is the risk associated with being a first mover?

• A) If customer loyalty is very high, critical relationships may be established and a barrier to entry into the market already established.
• B) Competition is based on cost and it may be difficult to be profitable.
• C) Costs of establishing the market are hard to recover.
• D) These industries and nations have low customer loyalty.

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Definitions:

Contribution Format

A type of income statement that categorizes costs as variable or fixed and computes a contribution margin.

Common Fixed Expenses

Expenses that do not vary with the level of production or sales, shared across different segments of a business, such as rent for the corporate office.

Sales Mix

The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.

High-margin Items

Products or services that generate a significantly higher percentage of profit compared to their cost of production or acquisition.