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Strategies to Turn Adversity into Profits

January 15, 1999 | Allan Afuah | Leadership

Despite a downturn in the U.S. semiconductor industry in the 1980s, Intel, Micron Technology, and Texas Instruments exploited innovative technology and unique capabilities to shape their local environments and maintain their competitiveness. They employed combinations of the following generic strategies:

1. Blocking. A firm prevents others from imitating its innovation. Tactics include defending intellectual property in the courts and establishing a reputation for retaliating against new market entrants.

2. Running. Whereas blocking may give competitors time to catch up or leapfrog the innovator, running ensures that the innovator stays ahead by introducing new products, even if by "cannibalizing" its own products.

3. Teaming up. The opposite of blocking, teaming up encourages collaborative entry into markets to improve the chances of establishing an industry standard or dominant design.

These strategies intertwine with a firm's competencies and endowments (brand name, patents, distribution channels), its national environment (enactment and enforcement of laws to protect copyrights, patents, trade secrets), and the nature of the technology underpinning a firm's innovation.

Intel strategically allied itself with other companies, defended its intellectual property, speedily developed newer generations of microprocessor, and enhanced brand recognition with its "Intel Inside" advertising campaign.

Unable to out-manufacture its Japanese rivals, Micron focused on its advanced design capabilities and successfully filed suit against six Japanese chipmakers for dumping below-cost chips on the U.S. market. Its success set the stage for the establishment of Sematech, a consortium funded by member firms and the U.S. government to build a local environment conducive to semiconductor manufacturing and related industries.

Texas Instruments vigorously protected its voluminous patent portfolio, collecting royalties that exceeded operating income for a seven-year period. The firm also negotiated cross-licensing agreements and alliances to obtain manufacturing capabilities in Japan.

Strategic corporate decisions in defense of profits work in tandem with national environment to ensure industry well-being.

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