The shakeout in microcomputers: Causes and consequences

Abstract

1985–1989 marked the beginning of a shake-out in microcomputers, an industry that had only emerged in the late 1970s. Pioneering firms sprang up to get in on the action created by industry leaders such as Apple Computers, while other firms quickly fell by the wayside. This article describes what happened to the firms that were unable to survive this shake-out. A unique data set provided information on the product-line strategies of industry competitors during this critical period, so that the passage of firms into and out of the industry could be plotted. Secondary sources provided information on the fate of the disappearing firms, and supplied insights into the processes that shaped the industry. Firms that disappeared fell into two groups. The largest group of disappearing firms exited the industry as a consequence of bankruptcy or a decision to discontinue the manufacture of microcomputers. Most of the other firms that disappeared were absorbed by other firms through acquisition or merger. Certain groups of firms fared better than others. The firms that survived the period of shake-out emphasized broader and different ranges of products and were better positioned strategically to exploit the changing conditions of the industry. The competitors that conformed to industry standards with broad lines of hardware, software, and peripheral products, or narrow lines of expensive microcomputers were more likely to survive than competitors that focused on less expensive machines or non-compatible microcomputer products.