All industries have competition. Whenever there is an opportunity for profit, entrepreneurs will create new businesses to capitalize on it. However, over time, this could drive down profits and growth. This is especially the case with commodity businesses such as those that produce products that have little differentiation. Examples include: beef, natural gas, gold, grains, oil, and so on.

This is why you want to look for an industry that has barriers for entry and is not easy for new entrants to enter the market. For example, in an existing market, companies may benefit from substantial investments, as is the case with railroads. Simply put, it would be too expensive for a new player to enter the market. Other entry barriers include patents and well-known brands.