Distinguish the three(3) groups of competitors a new firm will face.

A new firm will encounter three different types of competitors. First is called direct competitors. When a business is established in a sector where other businesses offer a similar product, direct competition arises. For the business to make it in this competition, the marketing strategy and its relation to customers is the key factor. The more you offer excellent services to your customers, the more will attract more customer; hence you will experience more sales.

The second group is called indirect competitors. When a small business is venturing into products that are not within your portfolio, it results in indirect competition. The small business is now an indirect competitor. It results in the customers moving from your business to your competitors. For example, in banks, a bank is dealing only with saving accounts. An indirect competitor will be realized when another bank comes up with mutual funds and the stock market. Most clients who were saving with your bank will opt not to save more but now invest using your competitors' business. However, the strategy that you use can still maintain your customers. For instance, a savings account can maintain its customers if the percentage returns can increase savings accounts.

Thirdly, phantom competitors. It is a kind of competition where your competitor's products are not similar to the one that your business is offering. For examples, a customer might prefer to acquire some commodities from other business that sells different product from you. For instance, a business might venture into movies. However, your customer prefers not to pay for the movie; instead, the customer can be busy reading the newspaper. In this case, the marketing strategy does not work. Instead, the feasibility of a business is conducted.