Tight competition causes companies to have the ability to compete. Companies that fail will experience failure. The dynamics of competition make organizations that survive are organizations that have an element of differentiation namely innovation, uniqueness and renewal. The company is tested for its character through positive community views or in other words its reputation is tested. Winners of the competition dynamics get prizes in the form of defense and increased financial performance. However, it turns out that this is also not always true. The above phenomenon shows that companies are very vulnerable to being affected by market changes. This study uses primary data by surveying samples from a population using a questionnaire and analyzing respondents as the object of research. The population in this study is the medium and large scale food industries in accordance with the characteristics set in the Surabaya region, namely 207 business units. The analysis technique used to analyze data is Partial Least Square (PLS). The results of data analysis show that the level of differentiation has a significant effect on market-based capabilities, market-based capabilities have a significant effect on financial performance,differentiation level has no significant effect on financial performance, organizational reputation has a significant effect on market-based capabilities,and organizational reputation has a significant effect on financial performance.