Article Review: Why Business Models Matter

Strategy refers to an organization’s “overall efforts to gain and sustain competitive advantage” (Rothaermel, 2013, p. 9). An organization’s business model, on the other hand, “details the [organization’s] competitive tactics and initiatives”, which includes the steps necessary to put the organization’s strategy into action (Rothaermel, 2013, p. 11). The strategy is the theory of how the organization will make money, while the business model is the action necessary to achieve the theoretical strategy (Rothaermel, 2013).

Strategy is a set of complicated tactics formulated by the executives of a company directed towards the achievement of company’s goal (Salmela, 2002). It is about all the path ways that a company would follow to reach its ultimate goal. It is a company’s strategy which helps to identify what it does better than the other companies in the industries, which may be different from what it does best. For successful strategy formulation and implementation, a company should know the needs of customers and should have knowledge of its competitors. Through a good strategy a company would identify that opportunity which makes it different from the others (Thompson, 2005).

The company should be proud of its business model. A business model refers to how and why the business will generate revenues, cover costs, and produce profits and a positive ROE. Annual sales in 2006 of $11 billion from $1.5 billion in 1995 and an average compound growth rate of 24% during the decade speak volumes. However attention is required in addressing the following:

A business model is a company’s perception and conception of how the set strategies that a company pursues

Business model design and innovation is a multi-faceted topic that goes beyond the products or services a company sells. It requires the firm to analyze the desires of the customers, required and available resources, and to subsequently develop a business model in line with these findings. The ultimate objective of this exercise to create growth and obtain greater profitability. Business model innovation is derived from one of the four strategic objectives outline the textbook by Osterwalder and Piqneur. These four objectives include identifying and solving a need which the market has not resolved, offering a new product or service that customers did not have access to before, to improve options available to the existing

Business models have a huge impact on how an organizations operate. It is crucial that an organization chose a business model before inception in order to succeed. Basically, business models have become the new basis of competition, replacing product features and benefits as the playing field on which companies emerge as dominant or laggards (Plantes, 2013).

Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.

Actually is how the company may accurately take the position of its condition, and what the accurate strategy is. Therefore, business strategic model is significanntly required. Strategic management Strategic management is different from strategic planning, in which popular in 1960’s up to 1970’s. Strategic management covers three stages, namely: formulating, implementing, and evaluating stages, whereas strategic planning is only limited to strategic formulation. David (2003:5) defines strategic management as: “the art and science of formulating, implementing and evaluating cross functional decisions that enable an organization to achieve its objectives.” The relative similar definition also found in some other references, such as in Thompson and Strictland (2001:3). Definition of strategy is conveyed by some experts (David, 2003; Hamel and Prahalad in Gibson, 1998; and Grant, R.M., 1991), in which essentially refer to any means to achieve goal. Thus, strategic planning almost always started with “what may be happened”, not from “what happened”. The new market innovating acceleration, and consumers’ pattern change require core competencies. The company needs to find these core competencies in its

According to Slack et al. The corporate strategy or business strategy is the guide lines for the whole corporation’s businesses in relation to its markets, customers, and the competitors (2007). In the same context, the same authors discussed the link between the corporate strategy and

Business is an organization or a company that produces goods and services to satisfy the demands of society in order to create wealth and prosperity. In this case, employment opportunities are created in order to enhance the life of society. However, there are some of the businesses are not for profit such as schools, hospitals, charities and so on. Therefore, business can be divided into two categories there are profitable business and non-profit business. There are both risks and benefits involved either in a new business or a stable business. Thus, it is very important for a business to have a strategy if it plans to survive and prosper in long term.

For an engineering firm, this may be producing high-quality software efficiently. Key Resources discusses the various physical, intellectual, human, and financial resources an organization requires to sustain its operations. Key Partners outlines a firm’s use of outside resources. In particular, which key resources or key activities is a firm acquiring from its partners? 12 Lastly, Cost Structure lays out the most important costs inherent in a firm’s business model. Which key resources and activities are most expensive, and where is there room for optimization? We applied this structured approach to business model innovation to our project and additionally utilized an online tool, LeanLaunchLab21, to electronically save and update our canvas week to week. Each week consisted of our team “getting out of the building” and talking to real customers to gain real feedback on our business model. We utilized a variety of techniques to obtain enough sources of validation to iterate our business model canvas. At the beginning of the project, we relied more heavily on in-person visits to get a more personal feel for our customers and their pain points and to build up an early adopter user base for our eventual

From the above mentioned examples, we can validate that Game-Theoretic modeling plays an invaluable role as a metaphorical approach to strategic management (Saloner, 1991). Game Theory provides measurable simulations of what could happen to enable rationalization of the best course of action without incurring the heavy costs of a true trial and error method. With that said, as noted in our introduction, while game theory

In the book “Good Strategy and Bad Strategy”, Richard Rumelt illustrates examples of success and failure of business management to explain the true meaning of the strategy, and tells companies how to develop a correct strategy and adhere to core of management strategy. He also emphasizes the central role of strategic management as to remind the readers to understand the huge difference between a good strategy and bad strategy. This book has three sections: good and bad strategy, sources of power, and thinking like a strategist. I will be evaluating strengths and weaknesses under these topics. After finish reading the book, I had gained a better understanding of what a good strategy means to the success of a company. According to Rumelt, a good strategy is coherent, where companies pursue multiple objectives that are connected with each other. Rumelt points out that a good strategy consists of three elements: diagnosis, guiding policy, and coherent action. (71) First, diagnosis means to define the obstacles and challenges that the companies are facing, and guidelines help the people to overcome the obstacles. Lastly, coherent action is the activities or actions that company did to be consistent with its guiding policy. Today, many of us lost the focus of the strategy, which results in the downward of businesses and organizations. Rumelt has defined the strategy as acknowledging the main problems and take coherent action to overcome the problems. Moreover, he illustrates

A business model is defined as a process of an organisation to create, deliver and capture value. In any context, a business model is interrelated to a business strategy [8].

This school sees strategy formation as a visionary process and is fell under the descriptive school of strategic management. The chief architect of the strategy is the CEO of a company. This school took formal leadership seriously and CEO is responsible for strategy formulation. It stressed on mental state and processes such as instinctive knowledge, belief, wisdom, experience and insight of a single leader. The leader should be visionary in formulating strategy. The entrepreneurial school promotes strategy as a process which has a clear image and sense of direction which can be termed as a vision. Entrepreneurial strategy often occurs in startup companies and organizations in trouble and needing a