See pages where the term indirect competition is mentioned. How to solve the problem of competition

A feature of microcompetition is that it focuses on the struggle that unfolds within the same industry market. However, all sellers, regardless of industry, interact with each other, since their economic interests are satisfied from one source - the costs of buyers. Therefore, at the micro level, competition always takes the form of a struggle for the buyer's wallet, which is conducted not only among direct rivals, but also between those who do not directly compete with each other. Ego means that competition is carried out in the form of direct and indirect struggle, the criterion for distinguishing which is the way the competitors influence each other.

Direct competition- this is an intra-species struggle between sellers of a homogeneous product in order to switch demand for their brand. A feature of direct competition is obviousness and uncompromisingness. But it is the ego that motivates rivals to seek measures to reduce the severity of the struggle. Realizing the interdependence between their own behavior and the market result, rivals seek to coordinate their actions in order to achieve such a market condition that would best meet the realization of their long-term interests. The tendency to do so will be greater the smaller the number of competitors, the more standardized the product, and the greater the ability of individual competitors to enforce price discipline on others. All this creates the prerequisites for the development of behavior by sellers that will make it difficult to implement the functions inherent in competition.

indirect competition- this is an interspecific struggle among sellers of heterogeneous products for the distribution of the budget of buyers. A typical example is rivalry between substitutes for buyers' payment resources. Railway companies compete with air discounters, manufacturers of computer games compete with cinemas and DVDs, discount stores compete with food (clothing) wholesale markets. Bakery manufacturers compete with fig clubs, while home and furniture manufacturers compete with travel agencies and car manufacturers. But the area of ​​indirect competition is wider and includes all interactions affecting the distribution of the budget of consumers. It's "competing for the consumer's dollar." Distinctive feature indirect competition - its unpredictability. The influence of indirect competition is not so tangible, but its consequences can be very significant. Competitors often overlook indirect competition. But it is always in the field of view of buyers. Focusing on the fight against direct competitors, you can become a victim of indirect competition.

The value of indirect competition lies in the fact that, providing a redistribution between the markets of financial resources, it links the meso and micro levels of competition. Most fully, although least noticeably, this connection is realized in the financial market. Therefore, with the development of the joint-stock form of entrepreneurship, competition is shifting to the financial sector, and its edge is directed to “capturing the free capital of the country” . The ability to raise capital is becoming a determining factor in competitive success, as it provides the economic basis for development and growth.

Direct and indirect competition is not an alternative to price and non-price competition. Each of them has price and non-price methods. These forms are not alternatives to intra-industry and inter-industry competition, since they take place at other levels of the competitive system. Direct and indirect competition are forms that make it possible to understand how the struggle among sellers for demand sets in motion forces that regulate the flow of capital and lead to changes in the competitive environment. The consequences they cause are expressed in changes in the volume and range of market supply, while the consequences of intra- and inter-industry competition - in a change in the level of market concentration and inter-industry proportions.

In a free market, every single company is fighting for customers. Clients = money. There are many techniques for segmenting and determining the level of competition. Now I want to talk about primary simple concepts: direct and indirect competition.

Who are direct competitors?

- these are companies from your niche that work with you in the same sales market, fight with you for the same consumer segment, produce similar products, etc.

For example, Internet agencies operating in the same price segment "sites up to 50,000 rubles" in the Omsk market will be direct competitors to each other. The two premium menswear brands located in the mall also compete directly for their customers.

Such competitors can greatly influence your business.

Well-known examples of such competitors are The Coca-Cola Company and PepsiCo, BMW and Audi, McDonald’s and Burger King, whose battles the whole world has been watching with enthusiasm for years.

Who are indirect competitors?

Indirect competitors are companies with different products for the same group of target consumers. Often, the competing component is the price for a product or service (which in turn is justified by quality, service, etc.).

For example, for the same The Coca-Cola Company, Wimm-Bill-Dann, which produces juices under the J7 trademark, will be an indirect competitor. Although it would be more correct to say it produced, because in 2011 Wimm-Bill-Dann was absorbed by PepsiCo. A good example of how indirect competitors often team up to become even stronger.

An example of indirect competition on the price component is any manufacturer of budget smartphones and Apple. And the task of this manufacturer is to convince the target audience that its products are also hoo and it’s not worth paying for brand fame. At the same time, the price gap should not be too large. It is unlikely that a cheap hostel on the outskirts of Moscow will be able to compete with the Ritz-Carlton, but some boutique hotel is quite capable of this.

Who are product competitors?

If companies have similar products but different target consumers, then they are product competitors. Some publishing house publishes a women's fashion magazine, for example, Hearst Corporation is the publisher of Cosmopolitan. Then it will be a commodity competitor for men's magazines like GQ. Products are targeted at different groups of buyers, respectively, and marketing campaigns will be different.

Another example is the producers of professional albums for artists MOLESKINE and ordinary children's sketchbooks. Or a manufacturer of conventional dairy products and a manufacturer of soy "dairy" products. Such competitors also often combine to capture more market segments. For example, Danone manufactures and sells both of these dairy products under different brand names.

Who are the implicit competitors?

Implicit competitor companies may have different products and services, different target groups. But they are united by one important metric - a limited amount of money in the pockets of potential consumers.

To understand who they are implicit competitors, I will give an example: Ikea will be an indirect competitor for travel agencies, as the furniture company competes during the holiday season for the money of their potential customers. A person can spend his vacation pay, either on new furniture, or on a ticket and vacation.

Completely unexpected business representatives can fall into the category of implicit competitors. For example, the Detsky Mir chain of stores before the New Year holidays competes with the L'Etoile chain for the family budget allocated for gifts. By the same principle, implicit competitors can be a beauty salon and a restaurant. The consumer himself decides what is more important for him to spend money on. And the task of competitors is to incline his choice in their favor.

Who are potential competitors?

Another type of competition can be distinguished - potential competitors. These are companies that can enter your market with a similar product or service. Potential competitors, in turn, can also be divided into direct and indirect ones.

The most obvious potential competitors are firms from other geographical regions. For example, the spread of Starbucks to the eastern regions of Russia is a serious danger for local regional coffee shops.

The possibility of expanding the range is also a competitive threat. For example, when Danone expanded its product portfolio with soy products, it became a strong competitor for other small producers of lactose-free and vegan products.

1. Competition and monopoly (9)

   Coursework >> Economics

   Notifying consumers of price cuts. indirect competition distinguishes secrecy. An example is ... , then with an imperfect competition appears possibility dominate the market. ... Missouri has repeatedly warned of danger"concentration of land in the hands ...

2. Competition and monopoly (6)

   Coursework >> Economics

   Using direct and indirect state control over income ... economy, significantly limiting opportunities development competition and the spread of market ... only with the most dangerous types of antitrust violations...

3. Ways to improve state regulation of banking competition

   Abstract >> Banking

   And outside forces constricting opportunities price competition. First, interest rates ... non-economic risks, and the slightest danger loss of property can push ... the authorities directly or indirectly preferential treatment of individual...

4. Marketing price management competition

   Thesis >> Marketing

   Competitors". The limits that limit opportunities price competition, are, on the one hand ... the sum of the cost of manufactured products, indirect taxes included in the price, ... sales, which makes dangerous another pricing strategy...

5. cheat sheet by competition

   Cheat sheet >> Economics

   ... competition: 1) competition makes you constantly look for and use in production new opportunities; 2) competition requires improvement of technique and technology; 3) competition... poor quality, often dangerous for life... application indirect measure...

The success of the product in the segment largely depends on which companies become direct and indirect competitors of the company. That is why it is necessary to choose competitors correctly and with caution. In this article, we will talk about the main types of competitors in marketing and present a convenient technique that will help you find and identify the main competitors for your business. The technique is a step-by-step instruction with a ready-made example of analysis.

Introduction from the author

Not all market players are your competitors. Choosing the right competitors and developing appropriate programs against them will help to significantly increase the efficiency of the company. We offer you a simple three-step methodology with which you can quickly and correctly identify the main competitors in the market and form the right strategies for working with them.

Before starting, I would like to make a theoretical digression regarding the terms used in this article:

• Competitors are companies, products or services that you compete with for the ultimate customer.
• Competitive products are those products that your actual and potential customers switch to or may switch to.

Step One: Make a List of Possible Competitors

List a complete list of companies that your target customer can choose between to meet their need or solve their problem.

From what sources can I get information about competitors? There are quite a few of them, here are just the main ones:

Step Two: Identify Key Competitors

Select key competitors from the listed list. Divide key competitors into direct and indirect competitors.

Let's give a brief description of the types of competitors listed above:

Key competitors - companies whose actions can significantly affect your sales (both upward and downward)

Direct competitors are companies selling a similar product in a similar market and working with your target audience.

Indirect competitors are companies that sell goods with different characteristics or a completely different product, but work with your target audience.

How to identify key competitors?

Very simple! Key competitors are the companies to which your consumers leave, from whom they come to you; companies operating in your price segment and offering a similar product, but operating in a different segment; as well as major market players.

Step three: strategize

For each competitor, determine the principles of interaction and the strategy of competition. There are only two possible directions of work with competitors: defense and attack.

• Defensive strategies consist of developing programs aimed at retaining the brand's current customer base.
• The attack lies in the development of programs aimed at capturing competitors' consumers.

Analyze the list of key competitors in terms of the following indicators: market share (business size), availability of support (any: TV, press, radio, points of sale, etc.), level of brand awareness.

Assess the strength of a competitor according to the selected indicators. A strong competitor is a player with a higher market share; investing in supporting product sales higher than your company; with a higher level of knowledge.

Place all competitors in the following table and the strategy for working with them will become obvious.

Strong competitors should be considered as a threat to the company. Against these players, the right defense strategies are needed to retain and increase the loyalty of current customers.

Weak competitors are sources of business growth. Consumers of these players are the most attractive potential customers. The principle of working with weak competitors: programs and actions aimed at switching customers.

Only these three types of competitors matter. This model of competition is applicable to all industries and for all business entities.

Three types of competition

Direct competitors

This type of competition occurs whenever there are other businesses within the same market sector that offer the same products and services as your company. You directly compete with each other in terms of location, reach of the target audience and for your products. In the case of direct competition, your customer relationship management plays an important role, allowing you to take market share. If a customer receives excellent service from a company, they are unlikely to move to a competitor.

Indirect competitors

This type of competition occurs when someone from another company takes a customer away from you by offering products or services that are not in your range. For example, for cinemas, the Internet and cable television become an indirect competitor. A certain part of the target audience is given the opportunity to watch movies in good quality exclusively at home. Thus, this type of competition makes it necessary to build barriers to lure customers.

In the case of indirect competition, your marketing strategy should include a broader selling proposition, and you should run strong promotions so that the customer cannot ignore you.

Competitors are phantoms

This phenomenon occurs when, instead of buying your service or your product, the customer is going to buy something completely different. This type of competition includes offerings from companies that don't exist in the typical mindset of customers. For example, in the example above, instead of going to the cinema, the customer can easily change their plans when they go to the mall. He can get carried away shopping or, having met friends, spend time with them in a cafe for a friendly conversation. At this point, the client changed his plans and did not spend his money in your company.

The selection of such competitors is very difficult to conduct, because it is completely in the minds of customers. Marketers are aware of direct and indirect competitors, but if a product has too many phantom competitors and eventually your offer is ignored by a potential customer, then the product or service will have a very short life cycle. Against phantom competitors, more engaging promotional activities are needed.

The nature of competition in business

In a market economy country, there are a number of different market systems that depend on the industry and the company within that industry. It is also important for entrepreneurs and small business owners to understand what type of market system they operate in when making decisions about the price and production of products. The behavior of your company in the market is predetermined by 5 types of competition and their corresponding market relations.

Perfect Competition

This is a system characterized by the presence of a large number of different sellers and buyers. With such a large number of participants in the local market, it is almost impossible to drastically change the prevailing price in the market and get a strategic victory. If someone tries to set a dumping price, then the sellers will have an infinite number of alternative options to repel the attack and lead the initiator to negative economic results.

Monopoly

The exact opposite of perfect competition. In a pure monopoly, there is only one producer of a particular good or service, and there is no reasonable substitute at all. In such a system of market relations, the monopolist is able to charge any price. The one he wants because of the lack of competition. But its total income will be limited by the ability or willingness of consumers to pay the price of the monopolist.

Oligopoly

Similar in many ways to a monopoly. The main difference is that instead of one producer of a good or service, there are several companies that make up the dominant majority of production in the market. While oligopolies do not have as high price power as a monopoly, it is likely that without government regulation, oligopolists will collude with each other to set prices in the same way as a monopolist.

Monopolistic (imperfect) competition

P is a type of market relations that combines elements of monopoly and perfect competition. The difference is that each participant is sufficiently differentiated from the others. Therefore, some of them may charge higher prices than under perfect competition. Accordingly, this type of relationship allows you to extract additional profit due to visible differences.

Monopsony

Market systems can be differentiated by more than just the number of suppliers in the market. They can also be differentiated depending on the number of buyers. Whereas in a perfectly competitive market there is theoretically an infinite number of buyers and sellers, in a monopsony there is only one buyer for a particular good or service. This gives considerable power to the buyer in lowering the price of the producers' goods and services. An example of such relations is the modern form of public procurement, in which a state enterprise, forming unique requirements for a government contract, becomes a monopsony in a very narrow local market.

Brief structure of market relations in the economy

Fundamental and structural differences in the nature of competitors

Variety of goods and services

• In perfect (pure) competition, products are standardized because they are either identical to each other or homogeneous. The buyer does not see any differences in the products offered on the market, as they are absolute substitutes for each other. For example, food at different retail outlets, automotive fuel at different gas stations.
• Monopoly, by definition, means that there is only one producer of a product in the market. The buyer has no choice of any other option. An important factor is state regulation and restrictions on natural monopolies in order to maintain a balance of interests of the state, producers and consumers.
• Oligopoly implies the production of homogeneous products, as in pure competition, and differentiated products (as in monopolistic competition). The main problem for entrepreneurs is the barrier to entry to the market.
• In monopolistic competition, products are differentiated in terms of product brand, shape, color, style, trademark, quality, and durability. Buyers can easily distinguish a product offered on the market from those available on the market by more than one criterion. However, under monopolistic competition, the products on the market are close substitutes for each other. For example, cars of the same class, but different manufacturers.
• With monopsony, conditions are created under which product differentiation is influenced by the production needs of the buyer. At the same time, state-approved standards and regulatory procedures become important factors.

Market Barriers

• In pure competition, the number of producers is large, so that any single change in the entry or exit of any of the participants in the market does not have a significant effect on the total volume of goods or services offered. Market barriers are minimal and are determined by the availability of funds for the entrepreneur. In this situation, we can talk about the infinite elasticity of demand. The level of profit within the local market will be distributed evenly.
• The main reason for the existence of monopolies is the high barriers to entry into the market. These barriers include exclusive ownership of resources, copyrights, high initial investment, and other restrictions on the part of the government in order to maintain proper welfare in the state.
• Oligopolies seek to prevent new competitors from entering the market, as this affects sales and profits. New companies cannot easily enter the market due to various legal, social and technological barriers. In this case, existing enterprises have full control over the sales market.
• It is understood that under monopolistic competition there are no restrictions placed on organizations to enter and exit the market. A large number of small sellers can be on the market at the same time, selling differentiated, but not close to substitution, products.
• Monopsony implies a large number of suppliers of goods and services and low barriers to entry. Thus, conditions are formed for reducing the cost of purchased products and increasing their own profits.

Business mobility

• Under pure competition, there is perfect mobility of production. This helps companies in adjusting their own supplies according to demand. It also means that resources can move freely from one industry to another.
• For monopolies, there is no mobility as such. Such structures have the exclusive right to certain resources, which by their nature are limited. These may be raw materials, or monopolies may arise due to specific knowledge of production techniques (patent law).
• For oligopolies, mobility is limited or absent. In monopoly and perfect competition, businesses do not take into account the decisions and reactions of other companies. Oligopolies are influenced by each other's decisions. These decisions include pricing issues and decisions on the volume and production of own products, taking into account the situation in the market.
• Monopsony does not imply mobility due to its own characteristics. Technological advances and economies of scale from innovation are important factors in this situation.

Efficiency and business size

• It is assumed that under perfect competition, buyers and sellers have perfect knowledge of the prices of products prevailing in the market. In such a case, when sellers and buyers are fully aware of the current market price of a product, neither of them will sell or buy at a higher rate. As a result, the market price will dominate the market. The efficiency and size of the business is primarily affected by demand and the organizational and economic indicators of the company itself.
• The effectiveness of the monopoly is achieved through many years of experience, innovative potential, financial strength, but is reduced due to managerial competence and the availability of financial markets with a lower cost of borrowed capital.
• Oligopolies are not uniform in size. Some businesses become very large in size, while some remain very small. Market capacity determines the size, therefore, business efficiency is determined by the monopoly model. Oligopolies tend to avoid rash changes in the price of their products for fear of losing market share.
• In monopolistic competition, each seller's product is unique, which is a sign of a monopoly market. Therefore, it can be said that monopolistic competition is the integration of perfect competition and monopoly. Therefore, the same factors affect the efficiency and size of a business as in pure competition as in a monopoly.
• In a monopsony, the efficiency and size of the business do not depend on the market for goods and services.

Conclusion

The somewhat abstract issues described above tend to define the major, but not all, details of a particular market environment where buyers and sellers actually meet and transact. Competition is useful because it shows the real demand of buyers and encourages sellers to provide a sufficient level of quality of service and a level of competitive prices. In other words, competition can combine the interests of the seller with the interests of the buyer. In the absence of perfect competition, three main approaches can be taken to address the problems associated with the control of market power.