This study relies on managerial cognition literature and extends our understanding of firm strategy antecedents. The model suggests that the firm’s perceived competition and market experience affect its differentiation. The model contrasts two competition contingencies stemming from industrial organization theory and competitive dynamics theory (barriers to competition and competitors’ differentiation). Hypotheses were tested on 168 Swedish firms competing in the Swedish and Polish markets. First, it was found that perceived competition may consist of three reliable factors: government requirements, dominant competitors, and the main competitor’s differentiation. Second, the barrier of dominant competitors and the main competitor’s differentiation affect the firm’s differentiation positively, while the firm’s market experience has a reinforcing effect. The main effect of market experience is negative. Contributions to literature are discussed.