What is Indirect Competition And How to Recognise it?

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‍What is indirect competition and how to recognise it?

So what is indirect competition? Indirect competition is a little more subtle than its counterpart. While direct competition involves directly competing with another company (or brands within the same company) to sell the same product to the same customer, indirect competition is much less direct. Indirect competition occurs when one company places another company in an untenable position through actions that are not strictly branded as “competition”. 

‍What is indirect competition

The classic example of indirect competition is what happened between Video Game consoles and VHS tapes. However, indirect competition can occur in any circumstance where one business has the ability to make life difficult for another business without directly competing with them. 

Conditional Cooperation

Some indirect competition is rooted in conditional cooperation and tacit collusion strategies. A simple example of these concepts can be applied to the banking industry. Conditional cooperation is the practice wherein competing companies cooperate to achieve a shared goal at the cost of the consumer. So conditional cooperation is an example of indirect competition because the companies involved with it do not actually compete with one another. Conditional cooperation is still a form of competition, but it is a form that is less obvious. Another example of conditional cooperation is between large agricultural businesses and the Federal Government. The farmers and the government work together with one another for the benefit of all parties involved. However, the actions of both organisations negatively impact the consumer.

Exclusive Distribution Rights

Exclusive distribution rights are contracts that give one company the sole right to distribute a product in a particular area. And exclusive distribution rights can be applied in a wide number of industries, but they are most commonly seen in the food and beverage industries. Exclusive distribution rights to a region or a customer is a clear example of indirect competition because the distributor doesn’t create the product. Still, they put another company in a difficult position nonetheless. Exclusive distribution rights to a customer are complicated because the customer isn’t even aware that they are receiving a product their usual brand doesn’t make. Exclusive distribution rights to a region are slightly different in how the products are available to the customer. Still, the customer may not be able to access those products unless they go to the distribution centre.

Product Consolidation

Product consolidation is the process of combining two or more similar products into one single product. And product consolidation is another example of indirect competition that is difficult for customers to recognise. Product consolidation is most often applied to raw materials and supplies. A good example of product consolidation is the aluminium industry. The aluminium industry is a large and complicated business that relies heavily on one another for raw materials and supplies.

Marketing Collision

Marketing collision occurs when two or more companies use similar marketing strategies to advertise their product. And marketing collision is a common occurrence in different types of industries, but it is widespread in the food and beverage industries. A great example of marketing collision is the cola industry. A few brands have dominated the cola industry for decades; however, the emergence of new cola brands has caused a sudden increase in marketing activity. The sudden increase in activity has resulted in a large amount of marketing collision between the brands.

Peer-to-Peer Disc convinced Advertising

Peer-to-peer disc convinced advertising is a form of indirect competition that has become increasingly common in recent years. And peer-to-peer disc convinced advertising is the process of advertising one product using another product’s popularity. A great example of this is the use of celebrity endorsements. Celebrity endorsements are often used for advertising products that aren’t made by the celebrity. Celebrity endorsement is used to convince potential customers to purchase advertised products. Still, the customer doesn’t know that the star doesn’t make the product they buy.

How to Recognise Indirect Competition in your Market

There are a few key indicators that your company is facing indirect competition. The most obvious is that your company is losing market share even though you aren’t actually competing with your customers. If you lose business to companies that aren’t competing with you, you may face indirect competition. There may be a sudden increase in customers purchasing from a different brand. The sudden increase in sales may be due to a marketing strategy on behalf of the other company causing customers to switch to their products. Another indicator is a sudden increase in the number of customers who aren’t purchasing from you. If you have a typical customer base and suddenly start losing business, it may be due to the actions of another company that isn’t actually competing with you.

‍What is indirect competition and how to recognise it?

In conclusion, indirect competition is a real threat to businesses across all industries. The best way to combat indirect competition is to become aware of it and recognise when it affects your company. The more you can remember indirect competition, the better equipped you will be to respond to it. These companies are engaging in indirect competition by leveraging their own strengths against one another. Whether through advertising, exclusive distribution rights, product consolidation, or another marketing technique, these businesses are working together to take market share away from each other. This article asked what is indirect competition and how to recognise it?

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