Direct And Indirect Competitors

Direct competitors are companies that offer the same product or service and that might have the same business and financial profile. Indirect competitors, on the other hand, are companies whose products or services while different could potentially satisfy the same customer needs. Competition in the digital era has become way more fluid, thus it’s important to take into account various overlapping factors to assess the competitive landscape.

Direct competitors

Direct competitors are two or more companies that offer the same product or service in the same market to satisfy the same consumer need.

McDonald’s and Burger King are one example with their respective Big Mac and Whopper hamburgers. Direct competition also occurs between Apple and Samsung smartphones in the consumer electronics industry.

Identifying direct competitors

Companies can identify their direct competitors in the following ways:

  1. Customer feedback – the first and most obvious way is to survey consumers. Who were the various brands they considered before making a purchase?
  2. Market research – a more intensive process requiring the business to gather information from the websites and social media accounts of related businesses. Are their prices, values, business methods, online activities, or customer loyalty programs similar? 
  3. Social media – consumers often share their buying experiences on platforms such as Reddit, Quora, and Tumblr. Others will ask for brand-specific recommendations.

Indirect competitors

Indirect competitors describe businesses that offer different approaches to consumers to reach the same goal or satisfy the same need.

Many assume McDonald’s only competes with other fast-food restaurants, but the company also indirectly competes with home cooking, diet plans, and subscription meal boxes. Each of the businesses involved in offering these services is an indirect competitor because they are satisfying the same consumer need to avoid hunger.

When discussing indirect competition, it is also important to note that the comparison may be between two companies or two products. Indeed, the Monash University Marketing Dictionary says this about indirect competition: “A product that is in a different category altogether but which is seen as an alternative purchase choice; for example, coffee and mineral water are indirect competitors.

Identifying indirect competitors

Indirect competition can be identified using these methods:

  1. Keyword research – companies can use a dedicated keyword research tool to identify competitors who are targeting the same keywords. Alternatively, it may also be useful to perform a simple Google search for a broad keyword and take note of the competitors occupying the first few positions.
  2. Content research – many indirect competitors also write SEO-friendly blog posts and landing pages that are closely related to a product or service. In this context, indirect competitors may include businesses, individual bloggers, and publications.

Key takeaways:

  • Direct competitors are companies that offer the same product or service. Conversely, indirect competitors are companies whose products or services while different could potentially satisfy the same customer needs.
  • McDonald’s and Burger King are one example of direct competitors with their respective Big Mac and Whopper hamburgers. Businesses endeavoring to determine their direct competitors can do so via market research, customer feedback, and social media.
  • McDonald’s also has indirect competitors, including home-cooked meals, diet plans, and subscription meal boxes. Each of these is a McDonald’s competitor because they address the same need.

Main Free Guides:

Companion Business Frameworks To The Competitive Analysis

The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.
The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning.
Nike PESTEL analysis
Psychosizing is a form of market analysis where the size of the market is guessed based on the targeted segments’ psychographics. In that respect, according to psychosizing analysis, we have five types of markets: microniches, niches, markets, vertical markets, and horizontal markets. Each will be shaped by the characteristics of the underlying main customer type.
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.
Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.
Social psychologist Kurt Lewin developed the force-field analysis in the 1940s. The force-field analysis is a decision-making tool used to quantify factors that support or oppose a change initiative. Lewin argued that businesses contain dynamic and interactive forces that work together in opposite directions. To institute successful change, the forces driving the change must be stronger than the forces hindering the change.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.
It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
A SOAR analysis is a technique that helps businesses at a strategic planning level to:
Focus on what they are doing right.
Determine which skills could be enhanced.
Understand the desires and motivations of their stakeholders.
Developed by American academic Michael Porter, the Four Corners Analysis helps a business understand its particular competitive landscape. The analysis is a form of competitive intelligence where a business determines its future strategy by assessing its competitors’ strategy, looking at four elements: drivers, current strategy, management assumptions, and capabilities.
The 3C Analysis Business Model was developed by Japanese business strategist Kenichi Ohmae. The 3C Model is a marketing tool that focuses on customers, competitors, and the company. At the intersection of these three variables lies an effective marketing strategy to gain a potential competitive advantage and build a lasting company.
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