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.
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
Hope this helps! You can message me directly if you need further support
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!)
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.
Business model: How does my business make money?
Business strategy: How to shape my business to make money?
Hi!
I agree with the other coaches here!
Hope you found the answer you were looking for :)
Best,
Anto
Hi Florian, would you recommend any reading material similar to Micheal Porter’s?
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.