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Now the listing points to a URL owned by an online business directory which lists the company, and the specific home page text, and then links to the widget website. The Google listing looks exactly the same apart from the URL. Basically it seems as though this online directory has indexed the widget site, used the same keywords from the widget home page, and Google has decided to list the business directory page instead of the original widget page when the particular keyword phrase I mentioned at the start is searched for. Essentially this big business directory has used their size to re-direct searchers to their site. The original company site no longer seems to appear in the SERPs - Google thinks it's a duplicate perhaps?
Apart from removing the entry from the online directory site (which in itself isn't a bad thing) is there a way to convince Google to 'prioritise' the original source for these particular keyword phrases?
I have occasionally encountered such sites that truly didn't know that what they were doing was wrong. They figured a link back to you was adequate.
Some of these fake directories allow you to go in and change the text of the listings, but often you don't know about them unless you monitor, say by Copyscape... or if you drop out of the serps.
In this particular case, where the directory listing replaces your friend's site in Google, it's likely that your friend's inbound links are pretty weak. Getting better links might bring back your friend's rankings, but it may be that the directory listing, which apparently distills your friend's content, is also better optimized.
You shouldn't have to compete with your own content, though. Have your friend complain to the directory. If all else fails, he can report it to Google as a DMCA violation. Unfortunately, this does take time and effort, and it's truly a colossal drag.