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EQUITY SURPLUS THEORY
Zoe E. FountzoulaPeter J. Stavroulakis
(the purple sky model)
3RD INTERNATIONAL CONFERENCE ON QUANTITATIVE AND QUALITATIVE METHODOLOGIES IN THE ECONOMIC AND ADMINISTRATIVE SCIENCES
MAY 23-24, 2013 TEI OF ATHENS, GREECE
Porter’s Competitive Strategies
M. Porter (1980)
The Red Ocean Model
In the red ocean model competition prevails and resources are spent on weakening each of the parties within a market
Differentiation or low cost
The Blue Ocean Model
An uncontested market is created, wherein competition is irrelevant
Differentiation and low cost
Blue Ocean Strategy can join Porter’s generic strategies
Kim & Mauborgne (2005)
But in doing so, a natural monopoly is created
Mankiw (2011)
Research points out the need of a new typology
“Consumer satisfaction is essential to long term business success”Jones & Suh, 2000; Pappu & Quester (2006)
Target Market Focus
“Brand loyalty has traditionally been conceived as a behavioral construct...” Brady, Cronin, Fox & Roehm (2008)
Model Formulation
Value-offering entities Value-receiving entities One transaction
What will tip the scale?
Classic decision theory (the rational consumer) implies that all members will select superior value for themselves
Oligopoly/Monopoly
Superior Value?
Superior value is dependant of value-systems
If our value system dictates that superior value may de-stabilize said system, then this superior value is considered as a perturbation
Comparative Myopia
Mapping and targeting of specific value systems will lead to comparative myopia, rendering eventual “superior” value irrelevant
Comparative Myopia will lead to Uncontested Loyalty Based not only on value offered, but
how value offered is interwoven with the value system of the value-receiving entity
Value-based loyalty implies the perception of superior value which may very well be contested, whereas value system-driven loyalty is uncontested loyalty
Red Ocean Model
Blue Ocean Model
Inserting the Value-system parameter
Value innovation is irrelevant Value-offering entities’ competition is
irrelevant
Value Systems
A parameter that extends competitive advantage and value innovation
Competition is not only irrelevant when new and uncontested markets are created, but when there is value innovation and absence of comparative myopia
The underlying factor of a sustainable competitive advantage is the target market’s value system
Equity Surplus
Uncontested loyalty within a market, which is caused from the abundance of value-offering entities delivering targeted value to specific value systems
Equity surplus will derive from comparative myopia and uncontested loyalty
Future Directions
Survey concerning the usability and effectiveness of the conceptual model from various firms
Further analysis of the model for the extraction of a complete interdisciplinary evidence-based typology
Custom applications for different types of industries
Thank you for your attention!