Within a market businesses are faced by direct competitors. These are firms that produce the same or very similar goods e.g. fruit and vegetable sellers on a Saturday market.
However, most products are differentiated in some way. For example, although soap powders may look highly similar each will offer some form of special ingredient that sets them apart. Indeed, in recent years differentiation in this market has been increasingly differentiated by the development of dissolvable sachets of liquid, solid tablets and other forms of detergent.
In addition to direct competition, businesses also face indirect competition.
For example, in the leisure industry cinemas are faced by indirect competition from other providers of leisure activities such as bowling alleys, and discotheques.