Chapter 5: Competitive Rivalry and Competitive Dynamics 151
Aw a re n e s s, which is a prerequisite to any competitive action or response taken by a
firm, refers to the extent to which competitors recognize the degree of their mutual inter-
dependence that results from market commonality and resource similarity.^36 Awareness
affects the extent to which the firm understands the consequences of its competitive
actions and responses. A lack of awareness can lead to excessive competition, resulting in
a negative effect on all competitors’ performance.^37
Awareness tends to be greatest when firms have highly similar resources (in terms
of types and amounts) to use while competing against each other in multiple markets.
Komatsu Ltd., Japan’s top construction machinery maker, and U.S.-based Caterpillar Inc.
have similar resources and are aware of each other’s actions given that they compete
against each other in markets throughout the world. Founded in 1925, Caterpillar is the
world’s leading manufacturer of construction and mining equipment, diesel and natural
gas engines, and industrial gas turbines, while Komatsu is the world’s second largest seller
of construction and mining machinery behind Caterpillar. Recently, differences in the
exchange rates for the U. S. dollar and the Japanese yen have favored Komatsu. Komatsu
has used this advantage to aggressively seek new customers and sales through its product
pricing strategies.^38 Over the years, these firms have competed aggressively against each
other for market share in multiple countries and regions.
Motivation, which concerns the firm’s incentive to take action or to respond to a
competitor’s attack, relates to perceived gains and losses. Thus, a firm may be aware of
competitors but may not be motivated to engage in rivalry with them if it perceives that
its position will not improve or that its market position won’t be damaged if it doesn’t
respond.^39 A benefit of not having the motivation to engage in rivalry at a point in time
with a competitor is that the firm that lacks motivation to compete against another firm
retains resources that can be used for other purposes including competing against a dif-
ferent rival.
Market commonality affects the firm’s perceptions and resulting motivation. For
example, a firm is generally more likely to attack the rival with whom it has low market
commonality than the one with whom it competes in multiple markets. The primary rea-
son for this is the high stakes involved in trying to gain a more advantageous position over
a rival with whom the firm shares many markets. As mentioned earlier, multimarket com-
petition can result in a competitor responding to the firm’s action in a market different
from the one in which that action was taken. Actions and responses of this type can cause
both firms to lose focus on core markets and to battle each other with resources that had
been allocated for other purposes. Because of the high competitive stakes under the con-
dition of market commonality, the probability is high that the attacked firm will respond
to its competitor’s action in an effort to protect its position in one or more markets.^40
In some instances, the firm may be aware of the markets it shares with a competitor and
be motivated to respond to an attack by that competitor, but lack the ability to do so. Ability
relates to each firm’s resources and the flexibility they provide. Without available resources
(such as financial capital and people), the firm is not able to attack a competitor or respond
to its actions. For example, smaller and newer firms tend to be more innovative but gen-
erally have fewer resources to attack larger and established competitors. Likewise, foreign
firms often are at a disadvantage against local firms because of the local firms’ social capital
(relationships) with consumers, suppliers, and government officials.^41 However, similar
resources suggest similar abilities to attack and respond. When a firm faces a competitor
with similar resources, careful study of a possible attack before initiating it is essential
because the similarly resourced competitor is likely to respond to that action.^42
Resource dissimilarity also influences competitive actions and responses between
firms in that the more significant the difference between resources owned by the acting
firm and those against whom it has taken action, the longer is the delay by the firm