Business Model V. Strategy

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Business Model v. Strategy There is an increasing confusion in the use of the words strategy, and business model. These terms are used interchangeably in many instances. However, to better understand if these two terms mean the same exact thing in a business context, if they overlap to some extend, or if they are completely different, we must first define them. After studying many different definitions of the term strategy, I have created a simple definition that, in my opinion, unites the main goals a strategy pursues: “Strategy is the science of integrated decision-making and concrete planning to establish a business in a long-term competitive advantage.” Three definitions of business model from Magretta (2002), Weill and Vitale (2000), and Applegate (2000, 2003), respectively: “Business models describe, as a system, how the pieces of a business fit together. But they don’t factor in one critical dimension of performance: competition.” “A description of the roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of product, information, and money, and the major benefits to participants.” “A description of a complex business that enables study of its structure, the relationships among structural elements, and how it will respond in the real world.” It is important to note that neither of the business model definitions makes reference to strategy or competition. In fact, the underlying concept in these three definitions is the relationships a business will create. A business model is not the same thing as strategy even when the terms are often used interchangeably. Business models are representations of a firm’s strategy. Therefore, business models are found within a business strategy. Strategy is specific to a firm. In contrast, different firms can use the same business model successfully. A firm can adopt different business models. Strategy   Business

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