Strategic approaches and business models
Domain 3 - Strategic approaches and business models
This domain tests how organizations choose and articulate a business model, and which strategic approach suits a situation. Expect questions on Business Model Canvas components, generic strategies, and the risks attached to each model pattern.
Core content
- The Business Model Canvas has nine blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. Its value is coherence: a change in one block forces changes in others.
- Porter's generic strategies: cost leadership, differentiation, and focus on a narrow segment. Being stuck between them usually erodes margin.
- Blue ocean seeks uncontested space through value innovation, using eliminate-reduce-raise-create to break the trade-off between cost and differentiation.
- The Ansoff matrix maps growth: market penetration, product development, market development, diversification - increasing risk in that order.
- Strategy formation may be deliberate (top-down, planned), emergent (bottom-up, learning-led), outside-in (market and customer driven) or inside-out (capability driven). Mature organizations blend them.
Worked example
A training company shifts from one-off course sales to a subscription plus a platform hosting third-party trainers. On the canvas: revenue streams move to recurring fees; key partners become trainers and platform providers; key activities shift to curation and quality assurance; customer segments broaden to corporates. Reasoning: this is differentiation through convenience and breadth rather than price, with product development and some diversification under Ansoff, so the new cost structure and partner risk must be assessed.
Traps
Filling the canvas as a checklist without testing internal coherence; confusing blue ocean with ordinary differentiation; treating emergent strategy as an absence of strategy; adopting freemium or platform models without modelling cost structure and liquidity.