Designing Around to Build Competitive Edge

Innovation in product development, technological breakthrough, and market entry plays a key role in firms’ competition, and the merits of innovation are quite obvious such as taking a first-mover advantage or earning lion’s share. However, innovation pays more and push firms dedicate more resources and commitments to it. Though it is a good strategy for firms to grow and profit, it isn’t an optimal choice for all firms to adopt. Small and medium firms (SMEs), unlike dominant firms, don’t have abundant resources to develop diversified kinds technologies and products, they confront more fierce pressures from peers’ competition and dominant firms. SMEs have to invest more precisely in specific area of R&D strategies to sustain their unique market positions. Therefore, imitative strategy is a viable way to enter into profitable markets for SMEs through reducing heavy burdens of developing pioneering products, but imitative strategy doesn’t mean firms could earn stable profits without regarding to innovate under a specific kind standard. If market is profitable and low technical entry barrier in the short run, other imitators will enter and share revenues; on the other hand, dominant firms will guard their oligopoly revenue by utilizing several kinds of strategies such as filing litigation, lawsuits and so on. Printer accessories markets (e.g. ink cartridges and kits or laser jet toner cartridges and kits) are with highly profits and they are oligopoly patterns occupied by incumbent printer manufacturers, who provide after-sale services and protect themselves by filing a lot of patents surrounding their products to prevent other competitors entering into compatible accessories markets (e.g. toner cartridges). SMEs who are interested in compatible accessories markets are vulnerable heavily if they ignore incumbents’ “patent traps”. Not only is imitating strategy feasible, but getting rid of incumbents’ disturbances is SMEs’ strategic focus. This paper tries to envisage how SMEs in Taiwan use imitative strategy nimbly and take advantage of “design around patent strategy” in printer accessories markets to build up SMEs’ unique technological position where incumbents can’t take SMEs away. All in all, “designing around” strategy helps SMEs survive and get stronger, intellectual property management (IPM) in “design around” could be the case for SMEs to learn on competing with incumbent firms.