Business Model and Strategy

Business model and business strategy are used interchangeably in the business world; however, they are not same. There is some difference between the two, a management professional should know how and why they are different to effectively apply either concept strategically. In simple terms, a business model is concerned with the core processes of a business, while a business strategy is focused on the means by which the business competes. The business model involves the inner working of the business; this may contribute to the execution of a particular business strategy, but it constitutes only one component. Keeping this in mind when developing the model for a business is crucial in that it will aid in the development of a strategy that takes advantage of the business model in place (such as an efficient product distribution system) and/or will help develop a business model that contributes to the business strategy (such as the capability to process customized orders). Which comes first will depend primarily on the industry the business exists in, the competitive environment it operates in and the core competencies of the business itself. Overall, most business will already have some sort of business model and business strategy in place.


The information age is characterized by an influx of IT, which has become an integral part of modern business models. Companies adapt by adding technology and reorganizing business structures to include IT. There are four basic types of business models: Brokers, Creators, Distributers and Landlords. There are four types of assets that the basic models deal with: Human, Financial, Physical or Intangible. When you mix a business model with an asset, you get the refined model type, also called the “specialized variation.” For example, a Human Creator business model would work for an artist, a grocery store would use a Physical Distributer model and a bank lender uses a Financial Broker business model. This problem is especially severe for business models dealing with Human or Financial assets because personal and fiscal information is susceptible to attacks. Businesses such as banks and hospitals have had to switch over to IT systems to keep up with current practices, but these companies have also had to spend an inordinate amount of money to protect and secure their information databanks.

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