Differences between business model and strategy?

Question

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.

Answer 1

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

Answer 2

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

Answer 3

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!)

Answer 4

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.

Answer 5

Hi!

I agree with the other coaches here!

Hope you found the answer you were looking for :)

Best,

Anto

Answer 6

Business model: How does my business make money?

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

Answer 7

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Answer 8

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