It is known widely that R & D is much valued in technological firm which increases value of the firm. Patents are looked upon as an offensive and a defensive asset. Offensively, it aids a technological company to earn licensing royalties and/or seeking an injunction to halt a competitor from shipping a product. Defensively, patent portfolio provides leverage to negotiate for a more favorable settlement. Hence, according to Coombs (1996), it is important for innovation firms to have their patent portfolio in line with their corporate strategies.
For a first-to-market innovation strategy, patents act as an offensive role in the early stage to achieve market monopoly. However, this is not true for a recent example. Creative's core competency in the portable media player industry lies in its innovative capability to create value through innovations. It was reported that Creative was the first to market its first generation of portable media player in 2000. However, Creative neither achieves market monopoly nor dominates the market currently.
After the patent was awarded to Creative in 2005, Creative sought an injunction that stop Apple from selling the iPod. The outcome was that Apple would pay US$100 million licensing royalties to use Creative's "Zen patent" for an MP3 player interface. Creative Technology's profits were then raised a record 11 times due to the lump sum payment from Apple. (News of the profit can be found at http://www.marketwatch.com/news/story/apple-profit-rises-78ipod/story.aspxguid=%7BCCF6CF6B-D2C6-435B-A5B2-E6D92872F777%7D) In this case, "Zen patent" helped to increase Creative's profits in the year of 2006, enhancing its roles. This agrees well with Robinson (1988) where pioneer firms benefit from patents to a greater extent than second-to-market and last-to-market firms. However, Creative Zen's market share is surprisingly lower than Apple iPod.
Even though Apple lost to Creative in the court, Apple continued their patent filling for another invention: iPhone. More than 300 patents were applied for iPhone, proving that second-to-market firms do find ways to improve their technologies.
On the other hand, last-to-market firms exit earlier than the first-to-market and second-to-market firms in the industry. Late-to-market firms might also have to pay licensing fees to first-to-market or second-to-market firms for the usage of their patents. For them to stay in the industry, they need to have more innovative products with new features which are able to define themselves. One example is Dell who entered the industry in 2003 and made the exit in year 2006. (The news was found in http://www.pocketlint.co.uk/news/news.phtml/) Unlike Apple, Dell was not able to come up with new products.
2.2 Marketing strategy
Marketing strategy allows an organization to pool its resources on opportunities to achieve a sustainable competitive advantage. Creative Zen was outshadowed by Ipod in the market even though Creative Zen was the first portable media player in the market. It was reported that Apple dominated the MP3 player market in 2007 with 72.3 % market share. Creative Labs was 2.7 % market share while Dell was not even in the top 5. (News of the market share is found in http://www.bloomberg.com/apps/newspid=conewsstory&refer=conews&tkr=AAPL:US
&sid=aggTRzHFt1Do) The market