[mdesq]

I wouldn't recommend competing primarily on price. Start fresh with solving the problem in a way you think would address the needs of the market better. MP3 players existed well before the iPod and cost a lot less.

Find and talk to target customers and try to discern what would meet their needs best. I've been trying to take Jason Cohen's number of 30 to heart...find 30 customers who would buy your product, or tweak your offering until you do. Don't ignore the competition entirely, but don't base what you do just on what is out there.