Threat of substitute products

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Entrepreneurs often seem unaware of the competitive threat posed by substitute products. One of the reasons entrepreneurs may be unaware of substitute products is that by definition, substitutes come from another industry. Despite all the potential warnings, the retail and recorded music industries were hardly prepared for the consequences when millions of customers switched from CD purchases to downloaded iTunes. Thus, the entrepreneur needs to monitor not only his/her own industry for potential competitors, but also must scan other industries that pose a potential threat.