Business Model and Business Strategy: Telling a story using VARS framework

Business Model and Business Strategy: Telling a story using VARS framework 

Questions addressed by this article:

  • What is the difference between business model and business strategy?
  • What is the VARS framework?
  • Examples of Business Model & Business Strategy?
  • What is Walmart's Business Model and Business Strategy?
  • What did Euro Disney's Business Model and Business Strategy fail?

What is a business model anyway - Joan Magretta, in her piece "Why Business Model Matters", akins it to telling a story about a firm that wants to create a product or service for a market that needs it.  Additionally, it should also cover how the created value by the firm can be leveraged to realize the value for the firm i.e they have to be supported by the numbers test.  Furthermore, a viable business model also describes how different pieces of a business fit together.  Since the same business model can be utilized by incumbents and new venture alike, business strategy is what differentiates a firm from its competitors.   

Of all the frame-works that try to define what a business model is, VARS as defined by Professor Deepak Somaya at UIUC, is one I find to provide somewhat of a comprehensive view to make sense of it.  Also, what I like about VARS is that it allows one to craft the whole story vs certain pieces of it. VARS is defined as:

V = Value proposition.
A = Activities (inclusive of capabilities and resources).
R = Realized Value.
S = Scope of the firm.

Does it have to be in this order, may be not, as Value proposition should talk about creating value, segment and realized value, but if you fall short there, then others will force you pick the slack. Here are a couple of examples where VARS frameworks can be seen in action.

Wal-Mart: The example of Wal-Mart best describes the distinction between business model and strategy.  The discount-retailing business model entailed cutting costs, thereby lowering prices for the self-serving customers.  This business model took shape in the 1930’s and was utilized in the 1960’s by Sam Walton, around three decades later.  The strategy employed by Sam Walton is what differentiated his offerings than his competitors.  Instead of focusing on the large metropolitans, Sam Walton focused on small towns, where the consumer needs still existed, but difficult of the any other competitor to penetrate and stay profitable.  He also ensured to deliver national brands without relying on special price promotion…etc.  This was accomplished by streamlining almost every aspect of operations.

✔ V: Cost Leadership, self serving customers accessible to all.
✔ A: World class logistics, though a phenomenal value network.
✔ R: High margins through economies of scale.
✔ S: Retail Industry
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Euro Disney: Used the same business model as Disney’s U.S parks.  The assumption was the Europeans would follow the same pattern as their American counterparts.  The narrative made sense, but did not pass the numbers tests as Europeans were accustomed to eating lunch and dinner at the appropriate hours, which overloaded the facilities and created customer dissatisfaction.  Only once Disney made the appropriate changes, did the narrative and numbers tests passed for EuroDisney.

✖ V: Missed.
✔ A:Tacit Knowledge available to function an amusement part.
✔ R: Expansion (Globalization is something I'll cover in subsequent blogs).
✔ S: Entertainment Industry.

From a practical applications perspective, a novel idea does not automatically translate into a viable business, unless it is able to describe the value, target segment and price points.  Once in place, the differentiation factor i.e competitive strategy will ensure success in the market place.
Read: 9 business models to capture the big opportunity
Ref: Ketchen, D., & Short, J. (2011). Chapter 2 Leading Strategically (except sections 2.3, 2.4 and 2.5). Mastering Strategic Management. Retrieved from: