CTFblog: Markets as systems – Toward a research agenda2017-09-11
What is the first thing that comes to your mind when you think about the word ‘market’?
Usually, everybody will have an idea of what a market is and can give a specific meaning for the word. However, if you look closer, these meanings and the assumptions connected to it can be very different from one another. This is true for both the “everyday” and “academic” use of the word.
In a recent article “A systems perspective on markets – Toward a research agenda” published in Journal of Business Research, we discuss the assumptions marketing scholars have about markets when trying to understand what markets are and how they function.
Traditionally, markets have been seen as something rather static that exist “out there”. In marketing, for example, the term market is often used to refer to a group of consumers that share a desire for a particular product. We argue that, although helpful in some case, this view is too narrow, if the aim is to understand how markets work in the current turbulent business environment.
We argue that, instead of stable law-like entities, markets are continually changing complex constellations of interconnected actors, resources and institutions. Viewing markets merely as simple as groups of consumers, leaves out a lot of the complexity in both the entities and their relationships making up markets. Therefore, to really make sense of the workings of markets, we need to take a systems perspective on them. In other words, we need to look at markets as dynamic systems.
The core idea here is that if one thinks in terms of systems, one sees different things than when one thinks mechanistically.
Think of an apple tree.
If you have a mechanistic perspective, you think that apple trees just exit in the forest and your job is to find them so that you can pick all the apples. You might also cut down the tree to be able to reach the apples in the top of the tree.
If you have a systems perspective, you understand that apple trees are living entities that have a life cycle and one day will cease to exit. You also know that the apple tree needs water, sun light etc. to flourish and make apples. You know that you can grow more trees and try to give them the best conditions, to make sure that you will also continue having apples in the future.
The same applies for markets.
With a mechanistic perspective on markets, you are preoccupied in identifying existing markets comprising consumers desiring a particular type of solution. Once found, the main aim is to gain the attention of these consumers and beat your competitors by getting the consumers to buy your solution. Hence, a firm’s goal is to maximize its profits and the gain as large share of that market as possible, without paying much attention to the wellbeing of the other parties connected to the market.
If you have a systems perspective, you view markets as evolving constellations of connected actors that are dependent on one another. Markets have a life cycle through which they can stabilize for a time period, but one day they will cease to exit. You know that you can shape existing markets and make new ones by fostering conditions that enable you as well as other parties gain from the exchanges the market facilitates.
More specifically, we argue that thinking of markets as systems implies four fundamental perspective shifts that change the focus from (1) the parts of markets to markets as wholes, (2) market objects to relationships, (3) market structures to processes and (4) from measuring markets to mapping them. Based on these perspective shifts, our paper connects several, previously disconnected research streams on markets and identifies key challenges and questions for future research viewing markets as systems.
For more information see:
Stephen L. Vargo, Kaisa Koskela-Huotari, Steve Baron, Bo Edvardsson, Javier Reynoso, Maria Colurcio (2017) “A systems perspective on markets – Toward a research agenda”. Journal of Business Research, Vol. 70, No. 10, pp. 260-268.
The article is a part of the Journal of Business Research special issue on “Emergent topics
in service research” that contains several articles that originate from the International network of service researchers meeting held last year CTF, Service Research Center at Karlstad University. It is published as an open access article (courtesy of the University of Liverpool), therefore freely available for everyone.
PhD student in Business Administration at CTF