What is the Difference Between Business Strategies and Business Models

What is the Difference Between Business Strategies and Business Models Featured Image

The main difference between Business Strategies and Business Models is that a business model defines the fundamental structure of how a company creates, delivers, and captures value in economic, social, cultural, or other contexts. It is a conceptual representation that explains the architecture of the value creation, delivery, and capture mechanisms employed by the business. In contrast, a business strategy is about how a company will compete in its marketplace. It involves the tactics and action plans for achieving specific business goals and competing effectively in the market. The business strategy is the approach the company takes to implement its business model.

What are Business Strategies and What are Business Models?

Business Strategies refer to the plans and actions that a company takes to achieve specific business objectives and to gain a competitive advantage in its market. Business strategies are about making choices regarding where to compete, how to position the company in the market, and how to allocate resources to achieve these objectives. Strategies are often shaped by a company’s mission, vision, and core values. They include decisions about product development, market positioning, pricing strategies, marketing and sales tactics, and customer engagement.

Business Models, on the other hand, are the conceptual structures that support the viability of a business and explain how it operates. A business model includes the value proposition of the company (what it offers to customers), the customer segments it targets, the channels it uses to reach customers, the type of relationship it establishes with its customers, the key resources, key activities, key partnerships, and the revenue streams and cost structure of the business. A business model is a blueprint for how a company does business and generates revenue.

Key Differences Between Business Strategies and Business Models

  1. Focus and Scope: Business strategies focus on achieving competitive advantage and specific business objectives, while business models describe the overall logic of how a company operates and creates value.
  2. Implementation vs. Conceptualization: Business strategies involve the practical implementation of tactics and action plans, whereas business models are more about the conceptual framework of the business.
  3. Competitive Positioning vs. Value Creation: Business strategies are concerned with how a company competes in the market, while business models focus on how a company creates and delivers value to its customers.
  4. Dynamic vs. Static Nature: Business strategies are often dynamic and may change in response to market conditions, while business models tend to be more static, providing a long-term structural framework.
  5. Components: Business strategies encompass decisions like market segmentation, resource allocation, and value chain activities, while business models include components like value proposition, customer segments, channels, and revenue streams.
  6. Goal Orientation: The goal of business strategies is to achieve specific objectives like market share, profitability, and growth, whereas the goal of a business model is to define the way a company operates to generate sustainable revenue.
  7. Measurement of Success: The success of business strategies is measured by the achievement of specific business goals and competitive positioning, while the success of a business model is measured by its overall effectiveness in creating and capturing value.

Key Similarities Between Business Strategies and Business Models

  1. Essential for Business Success: Both business strategies and business models are essential for the success and sustainability of a business.
  2. Focus on Value Creation: Both are concerned with creating value for customers and the company.
  3. Need for Alignment: Effective business operations require alignment between the business model and the business strategies.
  4. Adaptability: Both business strategies and business models may need to adapt to changes in the market, technology, and customer preferences.
  5. Holistic View of Business: Both provide a holistic view of how a business operates and competes in the market.
  6. Decision-Making Framework: Both serve as frameworks for making informed business decisions.

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*Based on a survey of small businesses using QuickBook Online conducted September 2018.