Whether you have built a business, spent even a day working in a corporate role, or researched how competing businesses operate within their respective industries, you already understand the concepts of business model and business-level strategy. Defining the two terms is where we will start, but the trick to strengthening your business and launching it into its profitable future is understanding where the two terms overlap and where there are clear distinctions between them. Leveraging this knowledge with a clear and actionable vision will help you to create a clear path for your business.

A business model is a blueprint behind how an organization operates. It illustrates how that organization creates and delivers value, and it is the structure within which a company provides products or services to customers, generating revenue in return. A carefully crafted business model includes identification of target customers, definition of the value proposition, determination of revenue streams, and a thorough comprehension of the costs and resources required to operate successfully.

Key Components of a Business Model

A well-defined business model will include the following components:

• Value Proposition

  • What problem the company solves or the benefit that it provides customers.

• Customer Segments

  • Who the company serves.

• Revenue Streams

  • How money comes into the business (sales, subscriptions, licensing, etc)

• Cost Structure

  • Major expenses required to operate.

• Channels

  • How products or services reach customers.

• Key Resources and Activities

  • Assets, skills, or processes needed to deliver value.

• Partnerships

  • Strategic relationships that serve to facilitate or strengthen operations.

Examples of Business Models

Each of the following models describes how value flows through a business and how income is generated:

Subscription-based software platforms

Subscription-based software platforms are businesses that provide digital tools or applications to users in exchange for recurring payments, typically monthly or annually. Instead of purchasing software outright, customers pay for ongoing access, updates, and support. This model creates predictable revenue for the company while giving users flexibility and continuous improvements without large upfront costs.

E-commerce retail

E-commerce retail refers to the sale of products through online channels rather than physical storefronts. Businesses operating under this model use websites or digital marketplaces to showcase inventory, process transactions, and deliver goods directly to customers. It allows companies to reach broader audiences while offering convenience and accessibility to consumers.

Franchise operations

Franchise operations involve a business owner (the franchisor) granting independent operators (franchisees) the right to use its brand, systems, and processes to run their own locations. Franchisees typically pay fees or royalties in exchange for training, marketing support, and a proven business framework. This model allows organizations to expand while maintaining brand consistency across locations.

Marketplace intermediaries

Marketplace intermediaries are platforms that connect buyers and sellers without directly owning the goods or services being exchanged. They facilitate transactions, provide infrastructure, and often earn revenue through commissions or listing fees. By creating an ecosystem where multiple parties interact, these businesses focus on enabling exchange rather than producing products themselves.

Direct-to-consumer manufacturing

Direct-to-consumer manufacturing describes companies that design and produce their own products and sell them directly to customers without relying on third-party retailers. By controlling production and distribution, businesses gain closer relationships with their audience, maintain greater pricing control, and gather direct feedback to inform product development.

Service-based consulting

Service-based consulting businesses generate revenue by providing expertise, guidance, or specialized support to clients rather than selling physical products. These organizations leverage professional knowledge and experience to solve problems, improve operations, or support growth initiatives. The value delivered is rooted in insight, strategy, and execution rather than tangible goods.

A business-level strategy is the creative approach that an organization employs in order to highlight its unique value propositions. The strategy serves to exploit the organization’s resources and advantages in the most effective way in order to maximize its competitive edge.

Gaining and Sustaining Competitive Edge

Achieving a competitive edge is not sufficient in the fast-paced nature of today’s market, regardless of industry. With an overabundance of available information, insight, and analytics, an organization must not only gain its competitive edge but sustain it. And it must be impervious (or as impervious as possible) to the informational overload to which all competitors have access.

An organization’s business-level strategy is built upon the company’s ability to differentiate itself and highlight its truly superior value to its intended audience. In other words: the business-level strategy places the value proposition front and center!

Core Strategic Approaches

Organizations often pursue one or a combination of the following strategic positions:

• Cost Leadership

  • Competing by offering lower prices through operational efficiency.
    
    

• Differentiation

  • Competing through unique features, quality, brand, or experience.
    
    

• Focused/Niche Strategy

  • Targeting a specific segment with tailored offerings.
    
    

Business-level strategy involves ongoing analysis of market conditions, competitors, customer expectations, and internal capabilities. It’s dynamic and responsive, adapting as environments shift.

Key Elements of Business-Level Strategy

• Competitive positioning

• Pricing approach

• Branding and perception

• Product/service uniqueness

• Customer experience focus

• Market targeting

• Operational efficiency decisions

These elements shape strategic and operational decision-making throughout an organization’s various departments. It is this company-wide approach to truly effective business-level strategy that confirms the requirement that the strategy must align with the organization’s vision.

The Core Differences Between the Business Model and Business-Level Strategy

Although connected, the distinctions between business models and business-level strategies become clearer when viewed side by side.

1. 1. Purpose
   Business Model: Defines how value is created and monetized
   Business-Level Strategy: Defines how value is delivered competitively
   
   Summary: The model establishes the structure; the strategy determines competitive execution within that structure.
   
   

2. 2. Scope

Business Model: Broad and structural

Business-Level Strategy: Focused on market competition

Summary: A business model outlines the organization’s operational blueprint. Strategy focuses specifically on market positioning and advantage.

3. 3. Stability vs. Adaptability
   
   Business Model: Typically more stable and long-term
   Business-Level Strategy: More flexible and responsive
   
   Summary: Companies may refine strategies frequently while keeping the same model. However, changing the business model often represents a significant transformation.
   
   

4. 4. Questions Answered
   Business Model
   - Who do we serve?
   - What value do we provide?
   - How do we earn revenue?
   - What resources do we need?
   
   5. Business-Level Strategy
   - How do we outperform competitors?
   - How do customers choose us?
   - How do we position ourselves?
   - How do we deploy those resources effectively?

5. 6. Organizational Impact
   Business Model: Impacts structure, operations, and financial mechanics
   Business-Level Strategy: Impacts marketing, positioning, and competitive choices
   
   Summary: One shapes the system. The other shapes the approach to winning within that system.
   
   

Why Understanding the Difference Matters

For leadership teams, entrepreneurs, and consultants, clarity between these concepts improves decision-making in several ways.

1. 1. Strategic Alignment

Confusing model and strategy often results in solving the wrong problem. A struggling company might attempt competitive repositioning when the true issue lies in a flawed revenue structure.

Understanding which layer needs adjustment prevents wasted effort.

2. 2. Innovation Opportunities
   
   Business innovation can occur at two levels:
   
   Model Innovation
   
   Introducing entirely new ways of creating or capturing value
   
   Strategy Innovation:
   
   Finding novel ways to compete within an existing structure
   Organizations that recognize both pathways expand their capacity for growth.

3. 3. Resource Allocation
   Different decisions require different investments:

• Business model changes may require infrastructure shifts

• Strategy changes may require marketing or branding adjustments

Clear categorization improves planning and budgeting.

4. 4. Communication Across Teams
   
   When leadership clearly distinguishes between model and strategy:

• Teams understand priorities

• Goals become more actionable

• Execution becomes more cohesive
  
  

Ambiguity, by contrast, creates misalignment and inefficiency.

When Businesses Need to Revisit Each

Understanding when to evaluate or redesign each element is just as important as understanding their definitions.

Revisit Your Business Model When:

• Revenue streams are declining structurally

• Market disruptions shift industry economics

• Technology enables new value delivery methods

• Scaling becomes unsustainable

• Customer needs fundamentally change

These signals suggest foundational reconsideration.

Revisit Your Business-Level Strategy When:

• Competitors gain market share

• Customer preferences evolve

• Brand positioning weakens

• Pricing pressure increases

• New segments emerge

These situations call for repositioning rather than structural reinvention.

How a Business Model and a Business-Level Strategy Work Together

Rather than existing in isolation, business models and business-level strategies are interdependent. If the business model serves as the blueprint for how a company is constructed and functions, then the business-level strategy represents how that space is intentionally used to achieve the best possible outcome. The blueprint defines the structure — the layout, materials, and purpose of the building — but the strategy determines how occupants arrange the space, highlight its strengths, and make it more appealing or effective than neighboring structures.

In this sense, a business-level strategy is about thoughtful positioning and execution within the framework already established. It guides decisions about presentation, differentiation, and value delivery, ensuring the organization stands out in a competitive environment. While the blueprint ensures the building is sound and functional, the strategy ensures it is optimized, distinctive, and aligned with its intended purpose.

It is for this reason that the organization’s vision is of the utmost importance.

Together, the two concepts work in tandem: the blueprint provides the foundation and boundaries, and the strategic choices bring the structure to life by shaping how it performs and how it is perceived.

Practical Questions Leaders Should Ask Themselves (Again and Again)

To keep both dimensions healthy, leaders can regularly assess their organization through targeted reflection.

Business Model Questions

• Does our value proposition remain relevant?

• Are revenue streams diversified and stable?

• Are operational costs aligned with growth?

• Are we reaching customers effectively?

Strategy Questions

• What makes customers choose us?

• Where do we outperform competitors?

• How strong is our differentiation?

• Are we targeting the right segments?

These checkpoints maintain clarity and adaptability.

While closely related, business models and business-level strategies serve different roles in shaping an organization’s success. The business model provides the blueprint for how the company creates value and how income is generated. The business-level strategy defines how the organization competes within those structures to win market share.

Treating these concepts as interchangeable can cloud important decisions, as they are distinctly different concepts. Recognizing their distinctions and overlap equips leaders to innovate and compete effectively, maximizing resource allocation.

Ultimately, thriving organizations don’t choose between focusing on one or the other. They cultivate both in order to build solid structural foundations while continually refining their competitive approach.

The goal has always been (and will always be) to achieve and maintain operational viability by continually analyzing optimal leveraging of competitive advantage.

Take five minutes today and get clear on what’s holding your business back.

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