Strategy Vs Business Model
Lot of researchers have tried to distinguish between Strategy and Business model and the literature tries to give a definition for Strategy and Business model.
The Article “From Strategy to Business Model and on to Tactics” discuss Strategy and Business model as follows;
Business Model refers to the logic of the firm, the way it operates and how it creates value for its stakeholders and Strategy refers to the choice of business model through which the firm will compete in the market place. (Casadesus-Masanell & Ricart, 2010)
Literature identify the main difference between Strategy and Business model in two main factors. The first factor is the emphasis Strategy has on competition; Business model on the other hand
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(Zott & Amit, 2008) (Zott, et al., 2010)
Looking at the European context, the literature on strategy and business model highlights the case of Ryan air as an example.
Ryan air was close to bankruptcy in the early 90’s and the management worked on the company strategy and the business model to save the business. The top management looked in to four actions to escape the bankruptcy. One was to become the Southwest Airlines of Europe, another was to add a business class, third option was to become a feeder airline operating from Shannon airport and the last option was to exit the industry. The high-level decision of which option to choose would be the Strategy of the company. Once the strategy is chosen, say to become the Southwest Airline of the Europe, the next set of action plan carried out to realise that strategy becomes the Business model. (Casadesus-Masanell & Ricart, 2010)
Further studying on real life scenarios of how Business model and Strategy have been used, an interesting concept is brought forward by the article “Business Model - What it is and what it is not”. The article argues that “Strategy (a long-term perspective) sets up dynamic capabilities (a medium-term perspective) which then constrain possible business model (present or short-term perspective) to face either upcoming or existing contingencies. Thus, strategy entails devising dynamic capabilities able to respond to contingencies through the organisation’s
Ryanair was established in the year 1985 by the RYAN family and has grown from a small airline flying a short hop from Waterford to London, into one of the Europe’s largest carriers. The company expanded and within 4 years it had 350 employees, 14 aircraft, and carried 600,000 passengers a year. It is currently serving to 26 European Countries with 148 destinations. It operates on 794 different routes daily serving by more than 1050 flights in a day. It has totally 169 aircrafts running for different routes with 5986number of employees working in it However, Ryanair’s costs rose drastically and it recorded losses of £20 Million sover four years despite its growth. Although consumers were continuing to fly Ryanair
A business model is an important and integral part of the business a strategy of any firm whether big or small. The way a business model is developed determines and indicates the values, ethics and principles on the lines of which the business at large will be operating. It also indicates how the business is going to function and covers various internal and external dimensions of a business and the organization as a whole.
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).
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 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).
Similarly, but more simply put, Rothaermel (2017) describes a business model as a strategy translation as to how the firm plans to make money. What is evident in looking at these as well as other definitions are that there does not seem to be one accepted definition with which business literature can agree. Saebi, Lien, and Foss (2016), in surveying business literature found twelve varying definitions for the term business model, of which there were 42 different components. Also of concern to these authors is that business models appear to be the hypothesis of a company’s management as to what their customers’ need and how it should be fulfilled in order to make money. Further espoused is that just as any hypothesis need adaptability to change agents, such as the external environment, business models need to have this same adaptability, and should be updated more frequently than they usually
Management level uses the business model to establish the strategies for the company’s operation and thus create competitive advantage over the company’s rivals and make more profit.
An organisation’s strategy plays an important role of providing direction of where company wants to be and how best to allocate the company’s resources to meet its objectives. The formulation of business strategies has evolved over the years and has been made more difficult in recent by the uncertain operating environments and global financial crises.
The aim of this report is to carry out a strategic analysis of Ryanair. This will involve investigating the organisation’s external environment, to identify opportunities and threats it might face, and its strategic capability, to isolate key strengths and any weaknesses that need dealing with. Finally, a SWOT analysis will be carried out to assess the extent to which Ryanair’s strategies are suitable to what is happening in its task environment.
A business model is a company’s perception and conception of how the set strategies that a company pursues
Developing or making a strategy for a management is very complex in nature. It needs to be made in the uncertainty situations and may also affect the operational decisions. New strategy developed may also involve the change in present culture of an organisation which is difficult and may adversely affect the performance of the organisation. Strategies usually exist at a number of levels in an organisation. Let’s distinguish different levels of strategies and analyse it using Burberry’s strategies. The strategic themes of Burberry are: Leveraging the
In the business world, strategy is probably the most often used and the most often confused term. The article ‘Why Business Models Matter’ clarifies and elaborates on crucial element of any organization. The Author, who also wrote, ‘What Management is’ asserts that the business model and strategy is the basis of any organization whether it be profit or non-profit. Magretta shows the outlines of business model and strategy. To make a big success in business, the first step is making a business model, when making a new business model, managers must think about all possible outcomes. She goes on further in the article to give examples successful organizations and their use of strategies to compete within the industry.
“Competitive strategy involves positioning a business to maximize the value of the capabilities that distinguish it from its competitor’s” (Porter 1980:47). A successful business plan requires first and foremost the formation of an appropriate strategy. Through the implementation of a suitable strategy, the company is able to obtain its own industry niche and gain an understanding of its customers (Porter 1985). Whichever strategy is adopted it must be adequately integrated within the firms goals and missions to achieve a competitive advantage (Parker and Helms 1992).
However, this paper chooses this definition as theoretical perspective of analysis for this paper subject to the following modifications: A business model is overall framework and philosophy by which a company (intends or) creates value in the market place through enhancement of its own combination of raw or in-put materials to create products (tangible and intangible including services), product packaging and systematic distribution in order to generate some or the best possible profit.
Now I am going to discuss Ryan air’s (RA) current strategic position by analysing its macro (external)and micro (internal) environment.