Equity Surplus Theory (The Purple Sky Model)

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Equity Surplus Theory (The Purple Sky Model)

  1. 1. EQUITY SURPLUS THEORY (the purple sky model) Zoe E. Fountzoula Peter J. Stavroulakis 3RD INTERNATIONAL CONFERENCE ON QUANTITATIVE AND QUALITATIVE METHODOLOGIES IN THE ECONOMIC AND ADMINISTRATIVE SCIENCES MAY 23-24, 2013 TEI OF ATHENS, GREECE
  2. 2. Porter’s Competitive Strategies M. Porter (1980)
  3. 3. 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
  4. 4. The Blue Ocean Model  An uncontested market is created, wherein competition is irrelevant  Differentiation and low cost
  5. 5. Blue Ocean Strategy can join Porter’s generic strategies Kim & Mauborgne (2005)
  6. 6. But in doing so, a natural monopoly is created Mankiw (2011)
  7. 7. Research points out the need of a new typology  “Consumer satisfaction is essential to long term business success” Jones & Suh, 2000; Pappu & Quester (2006)
  8. 8. Target Market Focus  “Brand loyalty has traditionally been conceived as a behavioral construct...” Brady, Cronin, Fox & Roehm (2008)
  9. 9. Model Formulation  Value-offering entities  Value-receiving entities  One transaction
  10. 10. What will tip the scale?  Classic decision theory (the rational consumer) implies that all members will select superior value for themselves  Oligopoly/Monopoly
  11. 11. 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
  12. 12. Comparative Myopia  Mapping and targeting of specific value systems will lead to comparative myopia, rendering eventual “superior” value irrelevant
  13. 13. 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
  14. 14. Red Ocean Model
  15. 15. Blue Ocean Model
  16. 16. Inserting the Value-system parameter  Value innovation is irrelevant  Value-offering entities’ competition is irrelevant
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. Thank you for your attention!

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