First Mover Advantages: The Endogenous Growth of Skype in the P2P and VoIP Industry

Abstract

Skype is a well known company and their services are used by hundreds of millions of people around the world. A company does not just grow to this size and sustainability by chance alone. Although, as you will see, chance does play a role in the early phases of a company’s development, the real distinctions lie in a company’s core competencies, efficiency, and strategic decisions. When a company decides to enter the market with their products and services they always hope that increased profits and majority market share can be achieved. In looking at these factors it is quite easy to show what companies are successful and which aren't. In fact, what’s more interesting is the journey a company takes to get to where it is today.

When a company decides to pursue a first mover strategy, they put themselves at risk with high R&D costs, imitation from competitors, and the underlying dynamics of the external factors which dictate consumer behavior. It is not easy to be a first mover and achieve the advantages that may come with it. Most companies fail to succeed with a pioneering strategy and the reasons are not easily identifiable. However, every so often, a company can implement its resources and efficiency in the right places after the decision to become a first mover is made.

Skype is an example of one of these companies. They have seen great success in the very competitive market of mass communication. In addition, they started early when network effects were just beginning to become a trend in the online world. They created a market that never before existed. Free long distance communication wasn't possible until the emergence of the internet. When Skype developed its technology and made it available for free to the public, they had started a network effect that hadn't been seen since the telephone was first introduced. Skype basically replaced the land line communication network throughout the world and allowed people fully utilize the World Wide Web in a way that no company had before.

Skype is a well known company and their services are used by hundreds of millions of people around the world. A company does not just grow to this size and sustainability by chance alone. Although, as you will see, chance does play a role in the early phases of a company’s development, the real distinctions lie in a company’s core competencies, efficiency, and strategic decisions. When a company decides to enter the market with their products and services they always hope that increased profits and majority market share can be achieved. In looking at these factors it is quite easy to show what companies are successful and which aren't. In fact, what’s more interesting is the journey a company takes to get to where it is today.

When a company decides to pursue a first mover strategy, they put themselves at risk with high R&D costs, imitation from competitors, and the underlying dynamics of the external factors which dictate consumer behavior. It is not easy to be a first mover and achieve the advantages that may come with it. Most companies fail to succeed with a pioneering strategy and the reasons are not easily identifiable. However, every so often, a company can implement its resources and efficiency in the right places after the decision to become a first mover is made.

Skype is an example of one of these companies. They have seen great success in the very competitive market of mass communication. In addition, they started early when network effects were just beginning to become a trend in the online world. They created a market that never before existed. Free long distance communication wasn't possible until the emergence of the internet. When Skype developed its technology and made it available for free to the public, they had started a network effect that hadn't been seen since the telephone was first introduced. Skype basically replaced the land line communication network throughout the world and allowed people fully utilize the World Wide Web in a way that no company had before.