Harbor Freight in the UK - Internal and External Environment - Research Paper Example

Global Business Plan for Harbor Freight in UK Affiliation Global Business Plan for Harbor Freight in UK Introduction Harbor freight was first introduced into the market as a mail order business in 1977 by Eric Smidt and his father. It has its central business seat in the state of California, USA. The harbor freight has approximately five hundred stores. It offers more than seven thousand related products to various sectors in the economy, including but not limited to healthcare, machinery, entertainment, cosmetic and electronics (Harborfreight.com, 2015). In the US, the Harbor Freight has more than eleven thousand employees for the purposes of running its day to day activities. The company specializes both in eCommerce products and a chain of mail order. In 1980, Harbor Freight changed its business name to Harbor Freight Tools (Harborfreight.com, 2015). It was only until 1985 that the company started operating a retail store. The first one was opened in Kentucky. The company’s vision is to offer the best services to its customers in an easy manner and hence making the customers to develop customer loyalty. This vision has been in existence for the last thirty five years and it is working pretty well for the company. Kotler (2000) indicates that the company has been able to capture a wider market base of more than twenty million customers. The incredible satisfaction that the customers have received over the years has made them to develop trust in the company and hence, loyalty. This has aided in the company’s market growth and it has a competitive advantage has it happens to be the largest tool and equipment multi-retailer in the United States. As a retail counter in the United States, Harbor Freight has established itself deeply and there is therefore a need to expand its business operations to the European countries, particularly the United Kingdom. UK is the best option since the number of tool and equipment retailers are very few. It also has a large populace which can offer a wider customer base for Harbor Freight and as such, enable it to improve its profitability and acquire a wider market base as compared to its competitors. Internal Environment The internal environment largely determines the business growth and development of a company. As such, it is a significant factor that ought to be considered. The internal environment encompasses planning, leading, organizing, implementing and controlling. Planning For a global expansion of a business, planning plays a central role without which the expansion would not be a success. As I have earlier indicated, Harbor Freight enjoys a good established in the United States market. For it to be successful in the UK market, planning has to be done at each of its departments so as to evaluate its efficiency and effectiveness. Some of the departments that need to be considered are the distribution department, the marketing department, the finance department and the logistics and operations department. Research and development will also be conducted to evaluate the effectiveness of entering the UK market. Specifically, the marketing department has the duty to analyze the UK market and introduce a novel advertising strategy that will enable it to succeed in the UK market. Pereira (2010) contends that a good advertising strategy will aid in the success of an organization in a new market. Leading Leading has both a direct and indirect influence on an organization. As regards to Harbor Freight, the marketing department will be responsible for the leading. It will be responsible for consolidating all the efforts of the other internal departments so as to come up with an effective corporate planning that will increase its chances of succeeding in the UK market. The establishment of an effective marketing strategy is very critical in approaching a new target market failure to chance the chances of success are reduced to the bare minimum. Organizing Organizing will also be the major responsibility of the marketing department. It will be charged with the responsibility of coming up with objectives of entering the UK market and how the same can be successfully achieved. The marketing department will research on the general tendencies of consumer behavior in the UK such as the pricing strategy and the product loyalty. The marketing department will also identify the target customer base and the methods in which they can easily create customer loyalty in the UK. Controlling The departments that will be responsible for controlling are the marketing department, the finance department and the logistics and operations department. The departments will initiate control mechanisms for the purposes of monitoring, measuring and reporting on the success of the company’s objectives. The control mechanisms will also determine if the specific goals of Harbor Freight as regards to the UK market are being met. Implementing The operations and logistics department will be responsible for the implementation of the business plan. This will be in accordance with the objectives laid out by the marketing department. External Environment The external environments that shall be considered include the economic, political, legal, cultural, business, religious and competitive environment. This shall be used to determine the success of Harbor Freight in the UK market. Economic Environment The UK is a developed economy and as such, it will offer a good market for Harbor Freight. A developed economy will ensure increased profitability for the company and reduce the chances of making losses. The economy is stable and favorable enough to support the entry of a foreign business (Allen & Salim, 2005). Political Environment The UK has a well-established and stable political environment (Allen & Salim, 2005). The political stability supports foreign ventures and investments making it easy for Harbor Freight to penetrate the UK market. The presence of trade agreements between the UK and the US government will also enable Harbor Freight to easily access the UK market without any interference. Cultural Environment Research done by the marketing department of Harbor Freight indicated that the cultural environment of UK is more or less the same as that of the US. This means that the company will not be limited by cultural factors in assessing the UK market. The similarity of the cultural environment between the two countries will enable the company to apply similar consumer principles to the UK market with minimal alterations. Competitive Environment Harbor Freight is likely to face competition from competitors in the UK who offer the same products like it does. However, the reputation that it has gained over time will enable it to maintain a competitive advantage and succeed in the UK market. The company will also be compelled to establish effective strategies that will enable it to stand out from its competitors in the UK market and capture a wider customer/market base. Entry Mode Harbor Freight considered various entry modes so as to determine the best one in entering the UK market. Some of the entry modes for consideration were export/import, licensing, franchising, turnkey operations, joint venture and wholly-owned subsidiary. Exportation would make the company incur high start-up costs and capital expenses. The transportation costs would however be cheap. The use of a turnkey operation would require that Harbor Freight exports and shares its process know-how. This will be helpful in reducing transportation and operational costs. However, it would lead to higher competition in the future. Licensing would be beneficial in turn it would transfer the risk and start-up costs to the licensee (Pan & Tse, 2000). It is however disadvantageous as it occasions technology and know-how transfer. A tight control of the licensee is therefore made impossible. A franchise transfers the costs and risks of starting the new business in UK to the franchisee. The maintenance of product quality control will however be difficult. A joint venture ensures that there is a sharing of costs and risks (Pan & Tse, 2000). It also occasions an enhanced political influence. It is however challenging as Harbor Freight is likely to lose its control over technology and operations. Lastly, the wholly owned business subsidiaries make it possible to control and maintain technology (Pan & Tse, 2000). Its however requires high start-up costs. After a consideration of all these modes, the best entry mode to the UK market by Harbor Freight would be through exportation. It will be able to keep its technology and know-how and hence reducing the chances of increased competition. It will be in full control of its operations lowering the chances of deterioration of the product quality. International Functions Since Harbor Freight will mainly be exporting its products to the UK, it will only be appropriate that its human resource is made up of the US citizens. The UK residents will only be considered as employees if need arises. UK being a developed economy will make Harbor Freight to experience minimal challenges as regards to international finance and accounting. The planning of the same will however be important through the employment of a budget. International research and development will also be quite useful in establishing effective methods of succeeding in the UK market. The research would for instance be centered on the pricing strategies as well as the consumer behavior and hence, making Harbor Freight better placed in offering their products. It will also be important if Harbor Freight is to improve its profitability in the UK market considering the fact that it will be facing competition from other retail companies. Cost-Benefit Analysis A cost-benefit analysis of Harbor Freight’s entry into the UK market shows that the advantages outweigh the disadvantages. The company is likely to develop a wider market base and profitability. As such, its return on investment of the project will be high making it a worthwhile venture. The UK government is also likely to benefit with the entry of Harbor Freight. The taxes that the company will pay to the UK government will facilitate in its growth. Chances of monopoly of companies in the UK and an abuse of power will be reduced with the introduction of a new entrant. Conclusion From the foregoing analysis, it is evident that Harbor Freight can succeed in the UK market. A careful study of the internal and external environment will be quite helpful in establishing effective strategies for entering the UK market. The use of exportation, as an entry mode, is also important as the company will be able to have total control over its products. As such, the quality of its products will not deteriorate. References Allen, D., & Salim, H. (2005). Forecasting profitability and earnings: a study of the UK market (1982-2000). Applied Economics, 37(17), 2009-2018. http://dx.doi.org/10.1080/00036840500244634 Harborfreight.com, (2015). About Us. Retrieved 23 September 2015, from http://www.harborfreight.com/about-us Kotler, P. (2000). Marketing management. Upper Saddle River, N.J.: Prentice Hall. Pan, Y., & Tse, D. (2000). The Hierarchical Model of Market Entry Modes. Journal Of International Business Studies, 31(4), 535-554. http://dx.doi.org/10.1057/palgrave.jibs.8490921 Pereira, L. (2010). Globalization and competition. Cambridge: Cambridge University Press. Read More