Kitten. Cat. Turning in to a tiger?

John has a tea shop on Gold Street. He sells only tea. His most popular drink is the Chinese Green tea. Selling Chinese tea helped him grow from $1,000 profit to over $8,000 a month. It also helped him introduce comfortable sofas and antique furniture, just to sip tea. His business is flourishing.

Just down the road, there is an ex-serviceman, Bill, selling coffee, tea and all sorts of things. However Bill does have something that sells really well. Australian cookies. As a matter of fact, selling cookies gets him a lot more profit than anything else. Bill also sells green tea and strangely almost 30% of people buying green tea buys these cookies!

The talk of the town is that both John and Bill make nourishing green tea.

Now John could learn to make cookies and possibly eat in to Bill's business. How can Bill the ex-serviceman survive on the long run?

Well Bill can make it hard for John, by dropping prices for Green Tea and attract more people to his shop. This would put pressure on John to reduce prices. This would make it harder for him to bootstrap his business and possibly diversifying in to Bill's business. On the short run it may reduce revenues for Bill, but not necessarily as Bill may be selling more cookies now.

Can John try the same strategy ? Yes, if can take the risk to hire a good Australian baker. Well Bill better take care before that happens.