Wednesday, April 10, 2013

Wal Mart and Strategic Capability

Wal-Mart's size and influence is known by most people living in the US today. . But how did Wal-Mart get there? How does Wal-Mart create its competitive edge and maintain its everyday low prices?

Wal- Mart relies on a logistics technique called cross docking. In this process, goods rarely spend anytime in the warehouse and shipped from one loading dock to other, where the name "cross- docking" comes from. By using this style of logistics management  the company is able to reduce the cost of its purchases by 2-3%. In order to make cross docking possible, Wal Mart had to dump a lot of money into a interlocking support system. The price tag would have pushed many other organizations away.

So why did wal mart make this investment? Wal-Mart recognized that in order to create a strategy, it needed the capabilities to carry the strategy out in the first place. Strategic capability has become so essential to a organizations success, many organizations are placing a higher value on strategic capability than the strategy itself.

This makes sense. In the article " Does your organization have the capabilities to execute its strategy" highlights the importance of having strategic capabilities. The first step in the articles four step approach to planning around capabilities includes identifying what your strategic process is. This includes figuring what people, process and technology is needed to ensure the company has its strategic capabilities. The next step is to evaluate where the gaps in your strategy exist  and then the company has to prioritize ways it can close these gaps.

This is Wal Mart did. Recognizing that order to its mission and provide is customers with the lowest prices, it had to invest in tools (capability) in order to make a strategy that accomplished its mission.

In a world were up to date responses to customers needs is critical to remaining a leader in your industry, strategic capability should be the starting point of any good strategy.

Competing on Capabilities: The New Rules of Corporate Strategy.
http://som.xjtu.edu.cn/2010yjssqxx/upload/2010/6/2592820171.pdf

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