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Differences between business model and strategy?

From the book Understanding Michael Porter;

A business model highlights the relationship between your revenues and your costs. Strategy goes an important step further. It looks at relative prices and relative costs, and their sustainability. That is, how your revenues and costs stack up against your rivals’.

May I know what does the above text mean?

Would appreciate any insights to further understand the differences between a business model and strategy.

Thanks.

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Top answer
Florian
Coach
on Sep 22, 2021
1400 5-star reviews across platforms | 600+ offers | Highest-rated case book on Amazon | Uni lecturer in US, Asia, EU

Hey there,

There are tons of definitions of business models out there and unfortunately not one universally agreed on. In fact, Porter does not even like the concept of business models at all as he argues it is ill-defined and animates faulty thinking.

Anyway, to answer your question with a bit more practical input: Think of business models as the translation of the strategy into action.

An example:

Strategy: Become a low-cost airline

Business model: Low ticket prices, only direct sales, P2P traffic, homogeneous fleet, etc.

Hope you get the idea! :-)

Source: I wrote my Ph.D. about business models.

Cheers,

Florian

Anonymous A
on Sep 22, 2021
Hi Florian, would you recommend any reading material similar to Micheal Porter’s?
Florian
Coach
on Sep 22, 2021
1400 5-star reviews across platforms | 600+ offers | Highest-rated case book on Amazon | Uni lecturer in US, Asia, EU
Not for consulting interviews, only if you are more interested in that concept. A relatively practical approach is the business model canvas by Osterwalder and Pigneur.
Deleted
Coach
on Sep 22, 2021
Experienced interviewer | Roland Berger Project Manager| Cambridge University | Super intuitive approach
  • Business model: How does the company make revenues and profits
  • Strategy: There are different “strategies”. E.g., 
    • Pricing strategy: how to price a product to maximize profits
    • Growth strategy: how to grow revenues via new/ existing products and/ or new/ existing geographies
    • etc.

Hope this helps! You can message me directly if you need further support

Ian
Coach
on Sep 22, 2021
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

I'd like to put it more simply…

Business Model = How do I make my money

Strategy = What is my goal/direction

I see you're asking a lot of other coaches for reading material. Quite frankly, these types of concepts are far better learned when taught/discussed. I recommend coaching to further build up your business knowledge (it's really hard to just purely read this stuff!)

Pedro
Coach
on Sep 22, 2021
Bain | EY-Parthenon | Former Principal | 1.5h session | 30% discount 1st session

A business model is how the company works and how it makes money. 

A strategy explains where does the company use that model, why, and what it plans to do to reinforce (or change) that business model.

on Sep 23, 2021
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi!

I agree with the other coaches here!

Hope you found the answer you were looking for :)

Best,

Anto

Agrim
Coach
on Sep 24, 2021
Top Awarded Coach | BCG Dubai Project Leader | Master Casing in only 3 Hours | 10y in Consulting | Free Intro Call

Business model: How does my business make money? 

Business strategy: How to shape my business to make money?

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