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 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:
Customer feedback – the first and most obvious way is to survey consumers. Who were the various brands they considered before making a purchase?
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?
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:
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.
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.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A business model wheel provides a structured approach to defining a business model. Each model wheel is broken down into three core components: offering, monetization and sustainability. Each component in turn contributes to a total of eight areas that make up an ideal business model.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
The Cynefin Framework gives context to decision making and problem-solving by providing context and guiding an appropriate response. The five domains of the Cynefin Framework comprise obvious, complicated, complex, chaotic domains and disorder if a domain has not been determined at all.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The SWOT analysis is commonly used as a strategic planning tool in business. However, it is also well suited for personal use in addressing a specific goal or problem. A personal SWOT analysis helps individuals identify their strengths, weaknesses, opportunities, and threats.
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
A Blindspot Analysis is a means of unearthing incorrect or outdated assumptions that can harm decision making in an organization. The term “blindspot analysis” was first coined by American economist Michael Porter. Porter argued that in business, outdated ideas or strategies had the potential to stifle modern ideas and prevent them from succeeding. Furthermore, decisions a business thought were made with care caused projects to fail because major factors had not been duly considered.
A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.
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.
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.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.
A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
