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First, you should look at your direct competitors. Take, for example, a McDonald’s restaurant in a busy downtown area. Its direct competitors would be any nearby Burger King or Wendy’s restaurants. Its indirect competitors would be other restaurants in the same downtown area, even upscale ones. Customers eat lunch just once a day, and all these restaurants are fighting for this finite group of customers.
Examine any substitutes. Instead of going out for lunch, some people may opt to bring lunch from home, or skip lunch entirely. These are both factors McDonald’s would need to examine when analyzing a location’s competitive position...
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