Business model and strategy

Excerpts from the article: T. Doligalski, Internet Business Models in the Consumer Market – a Typological Approach, „Marketing i Rynek”, 12/2018.

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The notion of business model with reference to strategy and revenue model

There are numerous definitions of business model. For the purpose of this reasoning, we apply the definition referring to the systemic approach, according to which business model is a simplified image of an company, which presents its essential elements and relations between them (Doligalski, 2014). The look at the company from the perspective of business model, according to R. Amit and Ch. Zott (2010), is characterised by the analysis of how the company creates value rather than what exactly it offers to its customers and where and when it operates. It is based on the holistic approach to the company without focusing on a selected function or resource.

The notion of business model is often compared to business strategy. In management science, strategy is understood in many different ways. The most frequently indicated common features of the definitions of strategy are the specified goal, the method of its pursuit, measurability, timing, and reference to various stakeholders (depending on the type of strategy: customers, competitors, employees, shareholders). In somewhat simplified terms, it can be said that a business model presents what a company is, while a strategy describes what the company wants to achieve and how it intends to do that (Cf. Tab. 1). A disputable issue is the popularity of company attributes such as business model and strategy. It is often declared that a company is seeking its business model (meaning: it has not established the final configuration of its most significant components or a long-term form of its relationships with stakeholders yet). This approach is opposed by Ch. Baden-Fuller and M.S. Morgan (2010), who argue that each and every company has its business model. The aspect of the popularity of strategy application is also interesting. If it is assumed that a strategy is a formalised set of long-term goals and plans, then probably not all entities have it in place. If viewing this term in broader terms, that is as a general concept of operations enabling its context-related interpretation and application (Pindelski, Obłój, 2006), the use of a strategy is more common. However, such a definition of strategy brings it closer to the notion of business model, e.g. as proposed by J. Magretta (2002), according to which the notion of business model is underlain by stories of how companies operate.

 

Table 1. Business model and strategy – summary of differences and similarities

Business model Strategy
describes what a given company is specifies strategic goals and methods of their pursuit
presents a given organisation’s image captured at one point in time has a time dimension and a certain direction of changes
resembles a state resembles a flow
is often oriented towards a company’s inside, the basic logic of its operations, and creation of an economic value is often created with respect to other market players, it points to the issue of positioning and competitive advantage
each company has a business model not all companies have strategies defined as a set of long-term goals and plans in place
concerns the crucial aspects of business operations
rather unchangeable over a short period of time

Source: based on T. Doligalski, Model biznesu z perspektywy ogólnej teorii systemów, [in:] T. Doligalski (ed.), Modele biznesu w Internecie. Teoria i studia przypadków polskich firm, Wydawnictwo Naukowe PWN, Warszawa 2014, p. 22.

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