• Market commonality and resource similarity shape
the firm’s awareness (the degree to which it and its
competitor understand their mutual interdependence),
motivation (the firm’s incentive to attack or respond), and
ability (the quality of the resources available to the firm to
attack and respond). Having knowledge of a competitor
in terms of these characteristics increases the quality of
the firm’s predictions about that competitor’s actions and
responses.
• In addition to market commonality and resource similarity
and awareness, motivation, and ability, three more specific
factors affect the likelihood a competitor will take competitive
actions. The first of these concerns first-mover incentives.
First movers, those taking an initial competitive action,
often earn above-average returns until competitors can successfully
respond to their action and gain loyal customers.
Not all firms can be first movers in that they may lack the
awareness, motivation, or ability required to engage in this
type of competitive behavior. Moreover, some firms prefer to
be a second mover (the firm responding to the first mover’s
action). One reason for this is that second movers, especially
those acting quickly, can successfully compete against the
first mover. By evaluating the first mover’s product, customers’
reactions to it, and the responses of other competitors
to the first mover, the second mover can avoid the early
entrant’s mistakes and find ways to improve upon the value
created for customers by the first mover’s good or service.
Late movers (those that respond a long time after the original
action was taken) commonly are lower performers and are
much less competitive.
• Organizational size, the second factor, tends to reduce
the variety of competitive actions that large firms launch
while it increases the variety of actions undertaken by
smaller competitors. Ideally, the firm would like to initiate a
large number of diverse actions when engaged in competitive
rivalry. The third factor, quality, is a base denominator
to successful competition in the global economy. It is a
necessary prerequisite to achieve competitive parity. It
is a necessary but insufficient condition for gaining an
advantage.