Direct competition in modern day business defines an economic situation where two or more firms offer essentially the same good or service that fulfills the same need(s) or want(s) of a costumer. For most of the time, between two direct competitors, because competition takes place between the two, the rise and fall of prices in their products are closely related. For example, if the price of Swatch falls by 5%, the demand for Swatch will increase relatively; and hence, Diesel will also have to decrease its price by approximately 5% in order to keep the competition balanced.
On the other hand, indirect competition is usually to describe the competition between two unrelated businesses, where neither of them provides goods or services that satisfy the same interests of a certain group of customers. For instance, from a fashion point of view, indirect competitors would include brands like H&M VS Quicksilver.
Furthermore, one of the major business concepts nowadays is a crossover. Crossover is generally regarded as a co-operation between two indirect competing brands that aim to produce something spectacular in order to gain customers’ attentions which will in turn boost the image and reputations of each individual brands. Through crossover, not only will there be no negative competition between the two brands, but both brands will enjoy extra credits and recognition from customers who bought the crossover products, and hence this will be a “win-win situation”.
Competition relates to the guiding question, as companies respond to the needs and wants of the market as they have to consider the competition that they are constantly facing.