Question

Compare direct and indirect competition. Give some examples for both of them.

Answer 1

Competitors (both direct and indirect) are organized around needs not products, not technologies, nor even industries.

A direct competitor is a company that offers the same primary services to the same customer base.An indirect competitor is a company that offers the same or similar services as part of a wider service offering, or that offers a good or service that can serve as a viable substitute.

A direct competitor, the competing business must be in the same specific industry as the company under consideration.Direct competitors serve the same customer base, so online rental establishments would be a direct competitor, even though the company may not be located in the same geography.

Indirect competition is "stealth" competition precisely because it doesn't take the same-product form of direct competition.

Indirect competitors, would be stores that offer the same product or service, but not as their primary service.

Example for Direct Competition

Burger King and McDonald’s are direct competitors. So are the grocery store bakery and the patisserie on the same street, or the independent plumber and the local Mr Rooter franchise.

For example, hunger creates a need to consume food. A customer may choose a local burger joint, grab some take-out sushi, or pick up a frozen pizza from the grocery store and take it home to cook. All three of these products are very different from each other, but they compete indirectly because they all satisfy hunger.

For example,a consumer who needs transportation would logically shop for a car. That consumer has many vehicles to choose from, including trucks, compact cars, sports cars and Sport Utility Vehicles. These direct competitors have different prices and satisfy different needs; some are more spacious, some are faster, and some are more fuel efficient. However, the consumer could also choose to buy a bicycle, a motorcycle, or a bus pass; all of these options create indirect competition for car dealerships. Regardless of which option the consumer chooses, his or her need for transportation will be satisfied. Evaluating your consumer’s many options will help you assess the level of direct and indirect competition within your industry.