Marketing theory from the view of individual firms in order to solve problem of market was formed to create demand by marketing-mix that was integrated competition means by firm, operationary in accordance with the firm goal. But, an approach to the analysis in terms of business policy might lead to an systemtic treatment by introducing industrial organization. Consequently, this approach focuses not only on the anlysis on the behavior of the firm but also leads directly unto the analysis of the problem of group adjustment (equilibrum) in the one of industry (partial equilibrum). Although in the simple model of pure and perfect competition there appears a simple and predictable relationship between market structure, conduct and performance, however in more complex situations of imperfect competition with powerful organizations is that market structure and market conduct interact.
Especially in competition among the few (oligopoly), it must be that the price, products, market channel, selling, market organization and so on, the polices of one firm become the action parameters for other firms, and that, in the dynamics of market competition, these action parameters will be in moves and respones, aggressive and defensive, of the market competition on terms of innovation and market growth. In competition structure analysis, the primary focus of economic analysis is on performance that results from the degree of concentration, product differentiation and actual potential entry rank. Secondly, the competitive strategy and marketing-mix as business policy should be supported by the analysis of the multiple action parameters.
In case of applying industrial organization theory to interrerional competition, some matters should be considered in particular:
1. Pure competition structure in agriculture banish the effect of imperfect competition created by powerful organization, and competition that arises where excess capacity meets with impossibility of producers to hold production undercontrol. As a result of it, an industry experiences subnormal earning over a considerable period.
2. Though the method of product differentiation does not go on without forming of differential advantage that relate the market segmentation with location and productivity of the region.
3. The phases of competition structure, as a whole, change responding to the behavior of individual farm be willing to enlarge profit and earnings. As long as the scale of production can not expand by the limit of family labor, the phases of competition structure will shift to level of cost in accordance with the farm and region in relation to the production structure.