Business models and their relationship to strategy1

This chapter explores business models and their relationship to strategy. The term "business model" is being used increasingly within the domain of e-Business as more and more organizations are trying to understand how to become more successful by leveraging the Internet. However, there is a great deal of confusion and very little agreement about what the term actually means. In particular, the term business model is frequently confused with strategy. The chapter presents two perspectives of the term business model, each of which is distinguished from the term from strategy. The first perspective presents business models as abstractions of strategy, capturing aspects of individual-firm strategy that can be applied to many firms. The second perspective demonstrates how business models and strategy differ on the degree of competitive focus, with strategy focusing more on competitive positioning, and business models focusing mainly on activity systems designed to create value for their customers. The chapter provides an overview of the business model literature, particularly in terms of its relevance and relationship to strategy. Finally, the chapter discusses the utility of these two perspectives