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James Millar
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Analysis of the level and quality of existing and potential competition is vital. It is forms a large part of any risk / swot analysis.

The important thing is to determine the level of growth and likely growth there is in the market. If it’s unlikely to expand for some reason then I’d suggest the risk of starting and competing against well established businesses may impact the decision on whether to proceed. It comes down to supply and demand. Lots of suppliers with static demand is never good.

Really you need more than just a unique selling proposition – more of a sustainable competitive advantage that competitors can’t match (because if you bring in a variant that proves successful they will be sure to follow). Otherwise you may end up in the sea of sameness.

It’s all nice and positive to suggest that hard work and good intentions will get you to the top but in my view that is a massive over simplification. McDonalds is in a fast food market high consumption market and they have one of the strongest brands in the world. They were the first to roll out burger stores in such a way many many years ago. I’m not sure that they had well established competitors before they embarked upon their journey. We see way too many small businesses (many from this forum) throw away hard earned savings because fail to be objective or read too many Richard Branson books. The development of a financially successful (not just viable) small business requires incredibly detailed analysis of many many elements. Competitor analysis is a key part of that.

Start with a detailed SWOT analysis and review each element. If you internal strengths and weaknesses don’t meet the standard then you have your answer. You will need to be exceptionally good at outsourcing and managing your supply chain if the model is premised on leveraging external skills for everything.

I prefer to play the Devil’s advocate. It’s not always popular but if it makes you research a little more then mission accomplished.

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