Wal-Mart major competitive core competence is its superior logistics system

Essay by abnruth July 2006

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You see it everywhere in magazine articles and advertisements, but what exactly is a core competence? At its simplest, a core competence is a unique capability that affords some type of competitive advantage. It corresponds to a business process, and involves underlying skills, functions, systems and knowledge. To determine if something is of core competence, one must ask, "Does this 'thing' give the company a unique advantage over its competitors and help make the company profitable"? Capabilities, on the other hand, refer to a firm s skill at effectively coordinating its resources. In other words, resources are the source of a firm's capability; and capabilities refer to a firm s ability to bring these resources together and to deploy them advantageously. Every organization possesses many capabilities that enable it to perform the activities necessary to provide its products or services. Some of these activities may simply be performed adequately, while others may actually be performed rather poorly.

However, successful organizations conceivably possess certain capabilities allowing them to perform key activities exceptionally well. Moreover, these are the distinctive capabilities that support a market position that is valuable and difficult to imitate.

At Wal-Mart, its major competitive core competence is its superior logistics system. Wal-Mart is one of the biggest global retailers in the world, operating in several different countries around the world, with multiple formats, all tied together by a state-of-the-art retail distribution system known as a Retail Link. No other mass retailer or trading community - domestic, foreign, or global - has developed a system even close to Wal-Mart's capabilities in supply chain and distribution management and optimization. However, the possibility of competitors having allocated significant resources to developing state-of-the-art data warehouses that, like Wal-Mart's, goes beyond collecting point-of-sale data to drive replenishment, exist. In looking at...