Differences between business model and strategy?

Internal Strategy
New answer on Sep 24, 2021
6 Answers
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Anonymous A asked on Sep 22, 2021

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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Florian
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replied on Sep 22, 2021
#1 rated McKinsey Case and PEI Coach | 5 years at McKinsey | Mentorship Approach | 120+ McK offers in 18 months

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

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Anonymous A on Sep 22, 2021

Hi Florian, would you recommend any reading material similar to Micheal Porter’s?

Florian on Sep 22, 2021

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.

Calvin
Expert
replied 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

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Ian
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replied on Sep 22, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

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!)

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Pedro
Expert
replied on Sep 22, 2021
Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter

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.

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Agrim
CoachingPlus Expert
Content Creator
replied on Sep 24, 2021
BCG Dubai Project Leader | I will transform your thinking about Consulting Interviews

Business model: How does my business make money? 

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

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Antonello
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replied on Sep 23, 2021
McKinsey | MBA professor for consulting interviews

Hi!

I agree with the other coaches here!

Hope you found the answer you were looking for :)

Best,

Anto

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Florian gave the best answer

Florian

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