Walmart: Competing on Capabilities : The New Rules of Corporate Strategy

Summary

Competing on capabilities : The new rules of corporate strategy

2014123039

김가현

Before, Kmart was the king of the discount retailing industry by focusing on a few product- centered strategic business units, each a profit center under strong centralized line management. Also, they evaluated its competitive advantage at each stage along a value chain and subcontracted activities that managers concluded others could do better. However, Wal-mart did not follow the classic textbooks and have become the largest and highest profit retailer in the world.

There are a lot of visible reasons why Wal-mart succeeded. For instance, everyday low prices and greeters, big stores that offer economies of scale and a wider choice of merchandise, and genius of founder Sam Walton.

But such explanations cannot be the real secret of Wal-mart’s success, which is called “Capabilites based competition”.

To start with, Wal-mart needs to satisfy the customer needs. Wal-mart’s goals were providing customers access to quality goods, making these goods available when and where they want them, developing a cost structure that enables competitive pricing, and building and maintaining a reputation for absolute trustworthiness.

To achieve these goals, Wal-mart acts out on a logistics technique, the “cross-docking”. It is a system where goods are continuously delivered to warehouses, selected, repacked, and dispatched to stores often without ever sitting in inventory. This reduces Wal-markt’s cost of sales by 2 to 3 percent. Low price also means that Wal-mart can save more by eliminating the expense of frequent promotion.

Another key component of Wal-mart’s logistics insfra structure is the company’s fast and responsible transportation system which deliver goods from warehouse to store in less than 48 hours.