EM|Upper-Int|4. Business models

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The lecture on business strategies and business models that we listened to yesterday contained way too much information. Frankly speaking, I’m a bit lost. I don’t always understand what a business strategy is and what a business model is. What about you?

Think about the questions

1. What is a business strategy?

2. What strategies do you remember?

3. In your opinion, is a business strategy different from a business model? If so, in what way?


Listen to Emma and match the parts of the analogy

Imagine, you go on a trip. Before you set off, you need to think about the weather conditions. If we make an analogy with the business world, the weather conditions correspond to the business environment. And a strategy is your plan, the decisions you have to make: for example, what kind of trip you go on, where exactly you go, what you’ll be doing there. These decisions will help you reach your goals. And it’s the same in business. When you start a company, you have to test the business environment, choose a mission, set goals and then create a plan on how to achieve them.

Then, what is a business model? Let’s use the same analogy. When you go on a trip, you have to use the right car. A business model consists of cycles of activity that lead to the fulfilment of the company’s mission and goals. Not every car will bring you to the final destination. So, not every business model is suitable for a certain business.

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Max Emma

M: Thanks, Emma! This analogy was really helpful. Oh, I remember my trip across the USA. What a great time! Driving, admiring nature, stopping at Kmart to buy snacks…

E: I’m surprised you stopped at Kmart and not at Walmart. Walmart supermarkets seem to be everywhere. I think this chain has more stores than Kmart… By the way, why not use the example of Kmart and Walmart to demonstrate the difference between a business model and a business strategy?

Watch the video and complete the definitions with the terms

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 long-time 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 involved slashing costs by eliminating chandeliers, carpets and personal service in exchange for lower prices. While a 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.

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Max Emma

M: You know what question am I asking myself now? How to choose the right business model?

E: Well, no matter what business sector it is in, any business has certain characteristics. It has to answer specific questions. So, to choose the right business model, you need to ask yourself the right questions.

What questions would you ask yourself if you were starting a business?


Match the characteristics of a business with the questions they answer

  • feasibility — the possibility that something can be made, done or achieved
  • viability — the chance of being successful


Decide what characteristic each option refers to

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Let’s now have a look at four businesses: an online shop, a bike manufacturer, a flower shop, a bar. They are all pretty different, but as you know, they all have to be feasible, desirable and viable. Do you think they can meet these criteria? Let’s first listen to an entrepreneur answering the questions about his online shop. Use his answers as an example when talking about the rest of the businesses.

Listen to the audio and tick the correct questions for each category. Then answer the questions for the other three businesses

brick-and-mortar — existing as a physical building

Bike manufacturer Flower shop Bar

Host Entrepreneur

Host: Today in our studio is James, a successful entrepreneur, and we’ll be talking about opening an online shop. So, James, generally speaking, is it difficult to start such a business?
Entrepreneur: It’s rather difficult, more difficult than opening a brick-and-mortar shop at least.
Host: Does it require large financial, physical and human resources?
Entrepreneur: Yes, creating an online store requires the efforts of many different specialists. You’ll need a good IT team to make sure the payments through the site are secure, web designers who will make the website appealing, photographers to take quality photos of your goods, content managers and other staff. Paying all these people requires a lot of money.
Host: What partnerships will be necessary?
Entrepreneur: It depends on what you’re going to sell. If you resell something, then you find partners among the companies you buy from. If you sell something that you produce, you may focus on advertising and find partners in this area.
Host: Who are the customers of an online store?
Entrepreneur: If we don’t take into account the type of store, then, generally, a lot of people of different ages buy online nowadays. Older people who are not good with the Internet make orders with the help of their children.
Host: What problem does an online shoop solve for them?
Entrepreneur: It’s very convenient that you don’t need to go anywhere, and that your purchase will be delivered to your home. And it’s been very relevant recently, you know?
Host: Why would they value it?
Entrepreneur: It saves time and even health. They can read reviews left by other people who bought the same things and take their time before deciding to buy something. In a usual shop, we don’t have such possibilities.
Host: Is it a profitable business?
Entrepreneur: Depends on how good you’re as an entrepreneur. There’s Amazon, for example. I guess I answered the question.
Host: How will it get to market?
Entrepreneur: Any business needs a good marketing campaign and advertisement so that people know about it.
Host: Is it a scalable business?
Entrepreneur: It is, but it’s very important to choose the right business model.


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As you understand, different businesses require different business models. But each business model is comprised of certain elements. We can imagine them as one big picture where each element has its place.

Elements of a business model

Listen to the audio and choose the correct elements for each category

If you look at a business model as one big picture, at its very top you’ll see the mission, which is basically the reason why the company exists. The company’s mission leads all the employees in the decision-making process.

Then, you move down to the targets. The targets are composed of the markets and geographies where the company is present and the customers, or the target audience, who need what the company produces. Clear targets help companies to develop successful business models.

Next comes the value proposition — what the company offers, including products, services and pricing. And then there is the go-to-market, divided into distribution, sales and marketing. The go-to-market increases the value proposition and helps attract new and loyal customers.

Finally, you can see the organization. It defines how things are done, so everything the organization does is a process executed by the team, the partners and the infrastructure. The purpose of the organization is to fulfill the customers’ needs more effectively and efficiently than competitors. And all this has the purpose of achieving the mission.


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Match the elements with the questions they answer


Describing a company

Write a question about each component

If you are taking this lesson with a teacher,

  • ask your teacher the questions you wrote;

  • guess the company your teacher is talking about.

If you are taking this lesson by yourself, choose any company you want and answer the questions about it.

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Max Emma

M: I also wonder how many business models there are. I’ve seen a list of at least 30.

E: There are as many business models as there are types of businesses. I’ve seen a list of more than 50. Here’s the 🔗link.

4 major business models

Read about 4 business models and choose the correct options to complete the text


Match the businesses with the types of business models


8 more business models

Read the descriptions of 6 more business models and complete them with their names. Then answer the questions

The bricks-and-clicks model

A company that has adopted this business model is present both offline and online. It allows its customers to order online and then pick up their order from the physical stores. Such a model gives more flexibility to a business and helps attract customers who live in the areas where the business does not have a store.

The inverted razor and blade model

Apple is an example of a company that uses the inverted razor and blade business model. Platforms like the App Store and iTunes, created by Apple, sell apps, songs and movies for a reasonable price. At the same time, Apple sells its devices — iPhone, iPad, and Mac — for a high price. So, that’s the case of «a razor costing more than a blade».

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Now you know at least 12 business models. Let’s see how well you can tell one from another. You are going to listen to a business owner talking about her bookstore. She’s used a number of business models and she’s going to share her experience with the listeners of a business podcast.

Listen and choose which business models the company has had

We started our business quite a while ago. We just rented the premises and opened a bookstore. We were buying books from publishers or bigger bookstores and reselling them in our store. That seemed to be the easiest way to start a business, but it didn’t give much profit. So, we were constantly thinking of how to develop and what our next step would be. At some point, it became obvious that we had to be present on the Internet. We had no intention of becoming a big player, so we had to create some additional value to our customers. We started with creating an online bookstore, which was actually more than just a store. That was a platform where users could get personalized recommendations, get points for leaving reviews that they could later spend on purchases, discuss books on the forum and participate in contests. We had lots of visitors and soon started earning good money on advertisements placed on our website. Unfortunately, we started to get complaints from some users who were annoyed by the ads. Getting rid of the ads was not an option — that would have had a really bad impact on our profit — so we decided to introduce a premium service. Any customer could pay a fee to stop seeing the ads on our website. It went surprisingly well; we had no complaints about that and didn’t lose customers. I guess it’s mostly due to our social responsibility — we make donations to help educate unprivileged children. So, if you want to be part of this, buy books in our bookstore. You can order online and pick up your book at one of the numerous points we collaborate with or use pick-up lockers.


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It’s time to provide your expertise! Your friends are going to launch a startup. Their goal is to become number one in online education. But they need your help to understand how realistic it is to achieve this goal and how they can make a profit.

Read the task

SkyApp is a tech startup. It’s now working on a platform for online learning that would allow teachers to give online lessons one-on-one or to a class. It has great aspirations: the platform should allow video connection, hand-written text recognition, self-correction of certain tasks, a grade book where teachers can grade their students. Ideally, it should be free for its users.

Think about this project, choose the best business models for it and prepare to write about it. Follow the steps:

1. Evaluate the feasibility of the project

2. Evaluate the desirability of the project

3. Evaluate the viability of the project

4. Say what business models the startup can implement and why

5. Use some of the words and phrases from the wordlist

Wordlist|L4

Write your reply (about 150 words)

«SkyApp business models»

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This is the final step of today’s lesson. We hope you found it interesting and productive. Let’s talk about your results!

Choose the correct statements


Wordlist|L4

Урок Homework Курс
  • It's like a trip
  • A business model vs a business strategy
  • The DFV method
  • Different businesses
  • Elements of a business model
  • Types of business models
  • Which ones have they used?
  • Choose business models
  • Assess your progress