What Is the Difference Between Indirect and Direct Competition?

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According to Inside Business Magazine, a company faces direct competition when there are other businesses within the market that offer the same services or products. Indirect competition occurs when a company faces business rivalry from substitute services or products. Both direct and indirect competition may lead to negative impacts on a company's performance. Designing and implementing a good business plan is an effective strategy in overcoming fierce competition.

Companies conduct market research in order to identify and evaluate direct and indirect competitors and their impact on business success. Successful companies limit the effects of competition by implementing innovative production and service delivery approaches or differentiating their products. Inside Business Magazine notes that production of high quality products is used to overcome direct and indirect competition.

Business enterprises focus on meeting the unique needs and preferences of their consumers in order to overcome the negative effects of direct competition. Companies that compete directly often have common marketing goals. Integrated marketing strategy and the use of social media are applied as effective business models to gain competitive advantage within a market. Managers should appreciate the importance of motivating their employees toward high productivity because the quality of service delivery and competitiveness of a company depend on the effectiveness of employees.