Team 13 - Lily Cheng, Jing Hu, Shirley Kum, Miranda Wong, Jiyeon Yoo, Mingyu Zhang

Phillips, D. J., & Zuckerman, E. W. 2001. Middle status conformity: Theoretical Restatement and Empirical Demonstration in Two Markets


I. Introduction

In the article published in 2001, “Middle-Status Conformity: Theoretical Restatement and Empirical Demonstration in Two Markets”, Damon. J. Phillips and Ezra W. Zuckerman stated that “conformity is high in the middle yet low at the top and bottom of a status hierarchy”, forming an inverted U-shaped curve (Phillips and Zuckerman, 2001, p. 379). In order to validate this IUS relationship between status and conformity, Phillips and Zuckerman developed a theoretical framework to indicate the existence of three possible statuses: high, middle, and low. Moreover, they argue that IUS conjecture only holds under the following scope conditions: social-psychological, structural, and action. By applying this framework, we propose to answer the following question, “Do organizations always act similarly?” by identifying Phillips and Zuckerman’s arguments, evaluating and challenging the assumptions with real world organizational phenomena.

II. Scope Conditions

Social-Psychological Scope Conditions:

Phillips and Zuckerman propose that the variance in the value for conformity creates the inverted-U-shaped curve. They argue that the key conditions for social-psychological orientations can be explained by different behavioral orientations among organizations where high- and middle-status organizations have a greater identification with the status hierarchy than lower-status organizations. Therefore, low-status organizations are less likely to follow industry norms. In addition, Phillips and Zuckerman states that high-status organizations experience more security in their current position, which lowers the value of conformity for high-status organizations. Moreover, conformity is of no value to lower status organization as the audience does not consider them as a participant. Therefore, the middle-status organizations have highest desire for conformity.

Structural Scope Conditions:

Phillips and Zuckerman proposed four aspects of the structural scope conditions regarding the nature of the status hierarchy. First, they claim that an organization’s status is steady in order to ensure their security in the status structure. As long as their status is stable, high-status organizations will be able to rely on the default legitimacy and maintain their status position among audiences. The second condition emphasizes that the audience should be able to distinguish between high-, middle-, and low-status organizations. Thirdly, Phillips and Zuckerman argue that middle-status organizations face the risk of being downgraded to low-status; thus, they have a high level of conformity. Finally, the last structural scope condition explains that middle-status organizations are at risk of being punished when they violate the standard.

Actions Scope Condition:

The most challenging scope condition involves a deviant action. Middle-status organizations reflect not only the desire of classification as a legitimate organization, but also the fear of demoting to low-status. Therefore, middle-status organizations have to conform in order to solidify their social standing. However, this is not an issue to high-status organizations since they are relatively fixed in their identities regardless of their actions.

III. Real World Phenomenon

Yellow Tail

Yellow Tail is a wine brand created by a family-owned winery, based in Australia, called Casella Winery. When Yellow Tail joined the U.S. market in 2001, they were considered as a low-status player because they were new and unknown; thus, they expected to sell only 25,000 cases of wine (The Global Wine Industry, n.d.). According to the social-psychological orientation, low-status organizations are considered to be outsiders since they are non-players and are excluded as players in the industry regardless of their actions. Therefore, Yellow Tail should not be able to advance in the status hierarchy.

In 2001, Yellow Tail unexpectedly sold 200,000 cases which challenges the social-psychological scope condition. Through innovation, Yellow Tail differentiated themselves from traditional wineries by introducing sweet, fruity and affordable wines. Due to this innovation, Yellow Tail created easy drinking, ease of selection, and added a sense of fun and adventure to the wine environment which created a consumer friendly alternative for new wine drinkers (The Global Wine Industry, n.d.). This expanded Yellow Tail’s target market to a broader population.

In “Grafting Winning Strategies in a Mature Market: the US Wine Industry in 2001”, it highlights that, within the price range of $7 to $14, Yellow Tail held a total 16% of the U.S. total wine consumption in 2001. Compared to the top eight wine companies in U.S. and approximately 2500 other wineries, which makes up 75% and 25% of the total annual wine production respectively, we can assert that Yellow Tail became a middle-status player in the U.S. wine industry in 2001. Although Yellow Tail produces low-end wines, their success in 2001 allowed them to be classified as a middle-status organization.

According to the social-psychological scope conditions, the audience will penalize middle-status organizations that deviate from group norms. Therefore, Yellow Tail’s best option is to conform. However, judging by the success of Yellow Tail, it is apparent that the conjecture does not apply to all organizations. Yellow Tail reached its status through a substantial change which can also be seen in the case of Blackberry.
Blackberry

Blackberry (formerly known as RIM), one of the four major smartphone brands in the world, along with iPhone, Windows Phone, and Android, is most famously known for producing smartphones with a “QWERTY” keyboard. In 2011, Blackberry controlled 41% of the smartphone market in Canada, whereas iPhone controlled 23% (Financial Post, 2013). However, due to intense competition and the popularity of smartphones with a touch screen keyboard, such as iPhone and Android devices, Blackberry’s popularity dropped drastically. Blackberry’s keyboard phones were no longer in demand, thus, its worldwide sales declined by 33.6% from 2011 to 2012 (Financial Post, 2013). As a result, Blackberry has been downgraded to a middle- or even a low-status organization.

As consumer preferences shifted, Blackberry needed a new plan to remain in the smartphone market. In January 2013, Blackberry released the Blackberry Z10, a smartphone that contained a touch screen keyboard. As a result, Blackberry’s Canadian market share increased to 13.5% in the first quarter of 2013 (Epstein, 2013). By conforming to the industry standards and consumer preferences for the smartphone, Blackberry has been able to recapture some of its lost market share. This example shows that scope conditions in which high-status organizations “see less value in conformity” and have “greater role incumbency” do not hold (Phillips and Zuckerman, 2001, p. 388). Blackberry’s situation demonstrates that high-status organizations are pressured to conform to other high-status organizations’ actions in order become retain their stability.

IV. New Theoretical Insights

Phillips and Zuckerman’s conjecture appears to be straightforward to the average man, but after careful consideration, we have concluded that their ideas cannot be applied to the complex and dynamic market of the 21st century. There are too many conditions that need to be met in order for IUS conjecture to be valid.

In today’s society, organizations promote change and find new ways to make an impact on their audiences. It is unlikely for low-status organizations to remain as a non-player. In addition, organizations in all parts of the status hierarchy need to keep innovation in order to hold their position or advance upwards. Phillips and Zuckerman should consider how innovation or technological advances can affect the company and their status, as shown in the Yellow Tail example. Low-status players can utilize their internal and external opportunities, such as research and development and advertisement, to create new products or improve current products and be able to gain recognition from the audience.

From the conjecture proposed by Phillips and Zuckerman the middle-status conformity theory cannot be conclusive because there are various types of audience that view the identity of the “players” differently, such as investors, competitors, and consumers. For example, investors determine an organization’s status by what an organization does, costs of operation, size, and sales, whereas a competitor will establish an organization’s status based on the relative threat they experience when new products or innovations are revealed to the public.

Organizations do act similarly in the way they all need to continually innovate if they want to maintain or advance their status. Moreover, the type of similarity that these organizations share differs from the aspects outlined in the IUS conjecture. Thus, the two cases in this memo presented challenges Phillips and Zuckerman’s IUS conjecture as being too limited.

REFERENCES

Casella Wines: Yellow Tail. (n.d.) The global wine Industry. Retrieved from https://web.duke.edu/soc142/team5/compyellow.html

Epstein, A. 2013. BlackBerry Market Share CANADA Q1. 2013. Boy Genius Report Media, LLC. Retrieved from

http://bgr.com/2013/05/17/blackberry-market-share-canada-q1-2013/

Full Glass Research. 2011. The economic impact of the wine and wine grape industries on the oregon economy. Economic impact of oregon state wine. Retrieved from http://industry.oregonwine.org/wp-content/uploads/2011/07/OR-EconReport-2010-Final-2.pdf

Hopton, J. 2009. Grafting winning strategies in a mature market: the US wine industry in 2001. Blue ocean strategy. Retrieved from http://hbr.org/product/crafting-winning-strategies-in-a-mature-market-the/an/BOS018-PDF-ENG

Phillips, D.J., & Zuckerman, E.W. 2001. Middle status conformity: theoretical restatement and Empirical Demonstration in Two Markets. American Journal of Sociological Review, 107(2): 379-429

Reuters. 2013. BlackBerry’s smartphone market share declined more than 33% in 2012. Financial Post. Retrieved from http://business.financialpost.com/2013/02/13/blackberry-smartphone-market-share-declined-44-in-fourth-quarter-gartner/?__lsa=2d9f-44bf

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