Big fish, little fish
Successful business people learn to evaluate potential: theirs, their employees, and their businesses. Without an objective evaluation of potential, it's impossible to make good decisions.
The old saw says that it's better to be a big fish in a small pond. In business, however, there's no guarantee that a weaker competitive set will lead to greater success. In fact, the opposite is often true. The truly great rise to the challenge of greater competition, and become even bigger fish when transferred to a big pond.
Take Michael Jordan. Michael Jordan was cut from his junior high school basketball team. From that humble beginning, as a small fish in a small pond, his growth outpaced his surroundings. He was a good high school player, a very good college player, and the greatest player that ever played in the NBA. Each time the bar for his performance rose, his level of play rose even further. Michael Jordan grew with his pond.
In contrast, Steve Alford was better off as a big fish in a small pond. Alford was a legendary player in Indiana high school basketball, had a stellar career at Indiana University, and was a massive failure in the NBA. By the end, he was clearly a small fish in a big pond.
What separated Jordan and Alford wasn't work ethic or mental toughness; Alford was an incredibly hard worker, and a true student of the game of basketball. What separated them was potential. Jordan had "upside." Alford had already maxed out his potential as a ballplayer by the time he entered college.
However, Steve Alford didn't let his failure as a player discourage him. Instead, he became a basketball coach, and is now ascending the coaching ranks, and growing with each new job. He was a good assistant coach, a very good head coach at Southwest Missouri State, and is now an outstanding head coach at the University of Iowa.
The lesson to take away from this is that you need to figure out where you, your employees, and your business stand in terms of potential, and choose accordingly.
If you believe that you have a great deal of upside and potential growth, moving to a bigger pond with stronger competitors will improve your performance and bring about growth. If believe that you are close to your maximum potential, moving to a bigger pond will get you eaten, and you should learn to be content with being a big fish in a small pond.