Closely related to the concept of strategy is the concept of a company’s business model. A company’s business model sets forth the economic logic of how an enterprise’s strategy can deliver value to customers at a price and cost that yields acceptable profitability. A company’s business model is management’s storyline for how and why the company’s product offerings and competitive approaches will generate a revenue stream and have an associated cost structure that produces attractive earnings and return on investment.
The concept of a company’s business model is consequently more narrowly focused than the concept of a company’s business strategy. A company’s strategy relates broadly to its competitive initiatives and business approaches while the business model zeros in on whether the revenues and costs flowing from the strategy demonstrate business viability.
CORE CONCEPT: A company’s business model deals with whether the revenue-cost-profit economics of its strategy demonstrate the viability of the business enterprise as a whole.
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