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!