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  • Today, "business model" and "strategy"

  • are among the most sloppily used terms in business,

  • but these are separate concepts with enormous practical value.

  • And when it comes to concepts so fundamental to success,

  • no organization can afford fuzzy thinking.

  • The term "business model" emerged when personal computers

  • and spreadsheets became common, says

  • Joan Magretta, a longtime editor at Harvard Business Review.

  • Managers could use these tools to literally "run

  • the numbers" to see models of how various decisions might affect

  • the bottom line.

  • A new business model might hinge on either a different way

  • to make something or a different way to sell something.

  • Take discount retailers like Kmart and Walmart, for example.

  • These pioneers applied "supermarket logic"

  • to the conventional department store

  • and developed a discount retail model

  • which involves slashing costs by eliminating chandeliers,

  • carpets, and personal service in exchange for lower prices.

  • While business model is a description

  • of how your business runs, a competitive strategy

  • explains how you will do better than your rivals.

  • So for example, part of Walmart's unique strategy

  • was to prioritize rural customers.

  • In founder Sam Walton's own words,

  • he "put good sized stores into little one-horse towns"

  • which everybody else was ignoring," and it worked.

  • Focusing on rural areas let Walmart buy up land for cheap,

  • target customers no one else was going after,

  • and preempt other discount stores from entering

  • the market in those areas.

  • Their customer strategy thus reinforced other parts

  • of their competitive strategy.

  • In contrast, Kmart tried to appeal to everyone,

  • and that's not a distinctive strategy.

  • So while they may have a good business model,

  • without a clear strategy they've struggled to stay competitive.

  • So to get ahead of your rivals, you not only

  • need a good business model and a clear strategy,

  • you also need a clear understanding of the difference

  • between the two.

Today, "business model" and "strategy"

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B1 US business model strategy model walmart discount competitive

The Explainer: What is a Business Model?

  • 58 3
    jbsatvtac1 posted on 2019/08/16
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