The objective of this project work is to explain the characteristics of selected pasta, macaroni and biscuits producing firms in terms of the industrial organization model of structure-conduct-performance. The finding reveals that the market is highly concentrated. The concentration of pasta and macaroni producing firms as measured by CR3 of i.e. three of the firms producing pasta and macaroni - Dire Dawa Food Complex, Kaliti Foods SC, and Kokeb Flour and Pasta Factory have been dominating the market from 2002/03 to 2005/06 with a concentration ratio of 76% to 46% respectively. As the concentration ratio dropped from 76% to 46% due to new entrants so did the performances to a certain extent. The combined performances of these three firms as measured in terms of their operating profits and return on investment dropped from 7.75% to 0.19% and from 7.10% to 0.14% respectively in the period under review. The return on invest was lower than the bank interest rate which proves the poor performances of these firms. Market entry in terms of capital requirement and access to quality wheat supply in the pasta and macaroni business is higher than that of biscuits investment. That is why the number of existing firms operating in the biscuits market are fourteen, while that of pasta and macaroni markets are eight.