Understanding the Difference between Business Model and Business Strategy
In the world of business, two commonly used terms are ‘business model’ and ‘business strategy’. While the two may seem interchangeable, they are actually distinct concepts that play critical roles in a company’s success. It’s important to understand what each of these terms means and the differences between them, in order to develop a comprehensive plan that achieves the company’s goals.
Business Model:
A business model refers to how a company operates and generates revenue. It is an overall plan that outlines the ways in which a business creates, delivers, and captures value. A business model considers the target market, customer needs, and the industry landscape to create a sustainable and profitable approach to revenue generation. A business model describes how a business creates, acquires, and maintains customers while generating revenue streams.
For example, take Apple’s business model. Apple creates technology products that are designed to be stylish, user-friendly, and high-performance, and their primary revenue stream is through product sales. They generate repeat business through the creation of customer loyalty, and they continuously introduce new products to stay relevant and attract new users.
Business Strategy:
A business strategy is a plan for achieving a company’s long-term objectives, it is a plan of action that sets out how a business will achieve its goals. The strategy outlines the steps that a business takes to achieve its goals, as well as its overall vision for success. A business strategy considers the market, competition, trends, and customer needs to formulate the best approach to achieving long-term success.
An example of a successful business strategy is the approach taken by Walmart. Walmart’s business strategy involves reducing operating costs through the use of an efficient supply chain management system, economies of scale, and aggressive pricing. They engage with customers through a strong focus on customer service and by offering a broad range of products at an affordable price. Walmart’s business strategy has enabled them to achieve their goals and remain competitive in a constantly evolving retail industry.
Key differences between Business Model and Business Strategy:
Business model and business strategy are often used interchangeably but they are two separate concepts that that work together. The key differences between them are as follow:
1. Purpose – A business model is meant to generate revenue and create value, whereas a business strategy is the plan for achieving long-term goals and objectives.
2. Focus – A business model is customer-focused, while a business strategy is market-focused.
3. Timeframe – A business model is focused on immediate financial returns, while a business strategy takes a longer-term view driven by overall goals and objectives.
4. Implementation – A business model is implemented at the operational level while a business strategy is implemented at the strategic level.
In conclusion, understanding the difference between business model and business strategy is essential for any business owner. Both are integral for developing a comprehensive plan that will help a business succeed in the long term. A successful business model will generate steady revenue while a successful business strategy will position a business within the industry and marketplace. By understanding the differences between the two, developing a strong plan to achieve both will be much easier.
