Direct vs indirect competition

Most companies attempt to understand and counter direct competition. The best do likewise with indirect competition. (Alternatives that customers can choose instead of buying from your firm; even though the product or service acquired may not be identical, it uses the same “budget” money to do so). I was reminded of this today in reading an article about Samsung and San Jose.

Apparently the City of San Jose has recognized that Austin is a direct competitor for Silicon Valley companies (the fact that it has been for 30 years may say more about the blind-eye one can have even to direct competitors), and is responding strongly to an attempt by that city’s (which I called home for two years a long time ago) attempt to lure Samsung away. (Not sure lure away is even correct: there are 350 Samsung employees in Silicon Valley and 2,500 in Austin.) Anyway, San Jose, like many competitors often do, seems to have reached the “enough is enough” point and has put together a $7M incentive plan to keep Samsung in San Jose. Seems like it will work, but what about the indirect competition?

This scenario is public and made the paper. However, every day companies leave Silicon Valley and California in general because taxes and business climates are not attractive. While some companies expand (Facebook and LinkedIn to name two), more are leaving for Nevada, Texas and other areas. These indirect competitors are stealing California’s “customers” and the State refuses to deal with it. If it is worth $7M to save Samsung, how many other companies could the State save by revamping its approach to business?

Is your company so focused on direct competitors, or so smug in your position, that indirect competitors are stealing customers from you while you look at macro-data and miss the real picture?

Mitch

 

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