Business Strategy

Competitive Strategy

The competitive strategy refers to the way a business strives within an industry and how it achieves a unique competitive advantage against its rivals. 

Harbor Freight began as mail order business in 1977 but through the years have evolved into much more. What initially was a salvage company collecting tools and equipment to sell suddenly turned into a mail order business, then to a retail store business, and now an e-commerce and brick and mortar business.  In their early years, the concept and strategy that would excel this company was to become the business that offers high quality equipment at a low cost price. With that strategy in mind, the actual method of delivering information and products has not always been conducted in the same manner. Initially, in 1980 Harbor Freight launched a retail store while also acquiring "US General," a mail order business offering similar items for purchase. Around that time, the method of promoting and acquiring new customers was to deliver physical envelopes with promotions and products to many different people. That method of delivery would last until 1997, when the company website launched. The website displayed and offered company information, products offered had a customer service section which provided insight to policies and personal communication via web along with expected shipping dates and times. The website then had 10 landing pages within the website. Currently, there are over 64,00o indexed pages, sells over 5,000 products, and in 2012 there was over 43 million users visiting the site. With the combination of a website store front brick and mortor locations,  the success of the business evolved with the times; from physical mailing and paper handling to online transactions and in store purchases.

Brands:
One major influence on why products at Harbor Freight are low cost is due to the off brand offerings. The tools and equipment are not the well known and commercialized sorts like Craftsman, Dewalt, or Black and Decker offered at Home Depot or Lowes. On the contrary, Harbor Freight provides in house store brands sourced directly from manufactures. Some off brand items:

1)US general
2)Central Pneumatic
3)Pittsburgh Pro
4) Chicago Electric 

Not many of the above names are a familiar house hold name and for that reason the cost of those items are not as expensive and mainstream tools and equipment

Cost-leadership strategy: 

1. High quality Tools and Product
2. Low Value pricing

3. Not name brand so no name brand pricing

Harbor Freight implements the:
Cost Focus Competitive Advantage
They focus on the lowest cost within and industry segment.

Porters 5 Forces

Developed in 1979, Porter's five forces model is used to asses an industry structure and it lists the following 5 industry profitability competetive forces:

Bargaining power of consumers, threats of substitutions, power of suppliers, and new rivalry.

High bargaining power of suppliers:

For  Harbor Freight, they buy direct from the same factories who supply the expensive brands and pass the savings on to the costumers. They are allowed to sell same items as competitors just at a cheaper price considering the direct relationship the company has with the factories who provide tools. The suppliers have fairly high influence over Harbor Freight tools. As stated before Harbor Freight Tools prides itself on having high quality tools at low prices. If the relationship were to alter between the factories and Harbor Freight, the cost and products could have a terrible outcome for if the relationship turned sour. Therefore the bargaining power of suppliers is high. 


Low threat of substitutes:

Although there are an abundance of businesses that offer consumers tools and equipments, there are not any who provide the low cost, high quality promise Harbor Freight is known for. Thus, Harbor Freight Tools has a low threat of substitution because they are in a market where tools purchase at other locations are at a higher price point when compared to Harbor Freight items. When a customer needs a tool they can go to a competitor such as Home Depot but they won't be getting the same type of services and disccounts offered by Harbor Freight tools. Habor Freight Tools is able to provide same products as Home Depot however, they are able to do it at a low cost to costumers.

Low bargaining power of buyers:

Buyers do not have much influence on Harbor Freight considering the price point is already in the consumers favor. The tool and equipment market is a saturated market and there are many other option for buyers to chose from, yet, the price point at Harbor Freight overcomes the industries saturation if a buyer is in search for a low cost high quality item. 

Medium threat of new entrants:
Considering the barrier to entry is the highest cost at beginnning and development of recognized reputable brands like Harbor Freight is not easy to attain. It is possible for a new entrant to offer the same equipment and products at a lower cost but the initial investment in creating all the resources necessary to obtain a low price point MSRP is a high capital initiative. Therefore, the the threat of new entrants is probable but also unlikely. 

Rivalry is high:

The equipment and tool industry is saturated with an a great amount of options for consumers to chose from. Some well known companies: Lowes, Home Depot, ACE Hardware, etc are just a few that have similar items to offer. So, considering the amount of options available to people, rivalry is high. Most consumers go to location based off convenience or to somewhere that has been marketed and in the face of consumers. Bigger companies like Lowes and Home Depot invest more into advertisements and marketing so that commercials are displayed on tv's or internets and because of that, less well known brands or companies fly underneath the radar to the masses. On the other hand, a cost driven customer would prefer items from Harbor Freight solely based on the low price recognition the business is known for.