Difference Between

Strategy & Business Model

Strategic Management

Muawiya Younus

Institute of Business
Management

2014

What is Strategy?
It can be defined as the means by which an organization sets out to achieve its desired ends. According
to Porter, It means deliberately choosing a different set of activities to deliver a unique mix of values.
Another author Henry Mintzberg describes strategy as a plan and a position an organizations decides to
follow and keep.

What is a Business Model?

It can be defined as a plan for the successful operation of a business, identifying sources of revenue, the
target market, products, and details of financing. In other words, we can define it as a systematic
method to generate revenues after carefully analyzing various significant business factors.

The Differences Between Strategy and Business Model

The terms business model and strategy are often used interchangeably in the business world; however,
they are not the same. Although there is a great deal of overlap in the two terms, we should know how
and why they are different to effectively apply either concept strategically.
On the basis of above given definitions of both the terms, we can simply differentiate the terms by
saying, a business model is concerned with the core processes of a business itself, while a business
strategy is focused on the means by which the business competes.
A company's business model is a part of its business' overall strategy: It is the working parts behind how
the company plans to achieve its goals, such as making a profit. A company can change its business
model over time as a part of its strategy.
Apart from basic definition based differences , we can differentiate both these terms by the following
key criteria.

Timing of development
A business model typically is conceived prior to the start of operations. Founders frame the systems for
earning profit, including locations, products, services, workers, organizational structure and potential
customer markets. While companies sometimes modify elements of the model, the initial structure
usually remains. Founders establish business strategies when a company starts as well, but they put new
strategies in place over time when needed. Top management meet over time to review current plans for
achieving goals and decide whether to maintain, revise or change strategies.

Scope of Influence
A business model is a bigger concept than a business strategy. The model covers the entire scope of how
the company makes revenue and reduces costs to gain a profit. It comprises of every aspect of business
plan, goals and strategies. A strategy is integral in achieving a goal and success. Leaders develop one or
more strategies as a plan for reaching each business objective. Though important, the scope of a
strategy isn't quite as broad.

Conclusion
A firms strategy is specific to that firm and that firm alone. By contrast, a business model can be
conceived as an abstraction of a firms strategy. This same business model could then apply to more
than one firm. Equally well, a firms strategy can be represented by any number of business models.
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