Economists have identified four types of competition: perfect competition, monopolistic competition, oligopoly, and monopoly. Many of our readers already know this, but we've found that they usually focus exclusively on direct competition. Brands that serve similar customer needs and that work in a similar way will, of course, be your most direct competitors. Those companies that operate differently but that continue to meet similar customer needs (such as the brand that sells aroma diffusers but not candles) will be indirect competitors.
Direct competitors are those who compete for the same audience and who offer similar products or services. Indirect competitors will focus on the needs of similar customers, but with different capabilities. Knowing how to identify each type of competitor and not just direct competitors is an essential part of competitive analysis and research. Let's look at the example of Quickbooks.
Freelancers are a core segment of your target audience, and you know they're looking for reliable, flexible, and low-cost options. Knowing this, you can research other low-cost, flexible, and widely accepted billing software options to find direct competitors. For B2B representatives and sales teams who want to turn completely unknown people into paying customers Some famous examples of direct competitors are Apple vs. Android, Pepsi vs.
Coca-Cola, and Netflix vs. Hulu. However, direct competition is not exclusive to well-known national or international brands. Two shoe stores in a rural town are direct competitors.
So are a handful of real estate agents who provide services in an area. Since direct competitors sell similar products in a similar way, this type of competition is usually a zero-sum game, meaning that a customer who buys the competing product will not buy theirs. For example, if you buy a hamburger at McDonald's, you're not likely to go to Burger King for buy another one. Indirect competitors are companies in the same category that sell different products or services to solve the same problem.
For example, a restaurant and coffee shop in the same neighborhood could replace other competitors. When walking down the street, some customers may choose to eat something to go at the cafeteria, while others prefer to go to the restaurant. However, we can find other ways to discover this information, such as asking customers for feedback or monitoring their mentions on social networks. With this information, you can better understand your audience and identify your replacement competitors.
Then, note the top companies on the first page of the search results. You may notice that your keywords are yielding thousands of results, but you don't need to stress out. The most relevant section is the first page and the competition that's just above and below you. These tend to be your direct competitors. This is a solid strategy for finding your indirect competition, as they are likely to target the same keywords.
For example, the keyword fast food may show that Subway and Taco Bell are indirect competitors between the top two. All of these types of competitors can take market share from your company now or in the future. But how do you begin to discover who your competitors really are? Now that companies are focusing on digital marketing to advertise their businesses, the first step is to visit a search engine. Brainstorm and come up with some search queries relevant to your company and the different types of competitors.
Later, you can use this list to use internal, external and technical SEO to move up positions in the ranking of those search terms. But to research the competition, you only need the inquiries. At the other end of the spectrum of a perfectly competitive market is a pure monopoly. This is a market in which a single company represents all sales of a particular good or service.
The company is the industry, since there are no other suppliers. A market of monopolistic competition represents the majority of typical consumer goods. These include clothing, food, cosmetics, household items, and education. In such a market, companies must differentiate their brands and products from those of their competitors to gain customers.
Under conditions of monopolistic competition, companies have more control over the price of the products they sell, as consumers do not see other similar products as a perfect substitute. Therefore, to gain a competitive advantage in such a market, companies focus on demonstrating to what extent their product is better than that of their competitors. This is why, in a market of monopolistic competition, companies spend a lot on marketing and product design, as all companies try to outdo each other. In monopolistic competition, prices are determined primarily by supply and demand.
However, suppliers may have some pricing power, as they can create product differentiation. A good example of a market of monopolistic competition would be the market for sneakers or casual wear. Although each company makes similar products, they use different tactics, such as advertisements and advertisements, to convince their customers that the version of sneakers they make is the best. The price in an oligopoly is usually set by one of the most dominant players.
In an oligopoly, a cartel of companies sometimes sets prices, usually illegal in the United States, or set by a leading and dominant company. Once the leading company sets the price, all the others have to compete for that price. This is why prices in oligopolies are much higher than in a competitive market, where the price of goods is more or less determined by the marginal cost of production. In a competitive market, marginal revenue equals marginal cost.
In oligopolies, prices are determined by industry leaders. This is also the reason why the marginal benefits are much greater in an oligopoly. A great example of an oligopoly is the aircraft construction industry. Basically, Boeing and Airbus build and supply all the large aircraft in the Western world.
Another great example would be Apple and Google, which provide operating systems for smartphones. These are good examples because we can have the feeling that any change in one company will have an immediate response from other companies. For example, if Apple lowers the price it charges for apps to operate on its phone, Google will also have to lower prices or it could risk losing its smartphone market share. Another example of an oligopoly is commercial airlines. Most economists will characterize the airline industry as an oligopoly market structure.
Due to the very high cost of entering the market, only a few airlines provide air travel to the market. In fact, we often see mergers between airlines, as the high cost makes competition difficult. As you will see in all the examples of oligopoly, there is a certain sense of imperfect competition. This is because there are only a few sellers in the market and they can have market power when it comes to setting prices.
This is the case when you have another company that competes for the same media space as you, but doesn't compete with you from a business perspective.