International Strategic MarketingEssay“Advantages and disadvantages ofBenchmarking” 04 / 06 / 2011
Introduction Benchmarking is the systemic measurement of business performance against anoutside group. Through benchmarking, a company uncovers gaps in its performance /areas to target for improvement. Benchmarking is a practical tool for continuousimprovement. It disturbs companies into action, uncovers new ways of improvingbusiness and activities, and provides external examples for success. It helps ensure that acompany strives for excellence.1 Additionally, according to Robert Camp (1989)“Benchmarking is the search for best industry practices that will lead to superiorperformance…”2 Benchmarking is a tool to help us improve our business processes. Anybusiness can be benchmarked. Apart from the definition we are going to bereferred to the evolution of benchmarking, its levels, its varieties and itsadvantages and disadvantages…Discussion Watson (1993) in scrutinizing the historical development of conceptssuggests that benchmarking is moving from an art to science. So, he distinct fivegenerations of development. These are the following:1st generation: Reverse engineeringCharacteristics: a) Comparison of product characteristics, functionality,performance of competitive offerings, b) Competitive analysis on market-oriented features.2nd generation: competitive benchmarking (1976-86)Characteristics: comparison of processes with those of competitors.1 http://www.globalbestpractices.com/Help/benchmarking.asp2 “Integrated Manufacturing Systems, Volume: 10, Number: 1, 1999, p.1, Copyright MCB UniversityPress.
3rd generation: process benchmarking (1982-88)Characteristics: a) Recognition that learning can be made from companiesoutside their industry, b) Need to understand similarities in processes, which onthe surface appear widely different.4th generation: strategic benchmarkingCharacteristics: Involves a systemic process for evaluating alternatives,implementing strategies and improving performance by understanding andadopting successful strategies from external partners. It is continuous and long-term. And, finally5th generation: global benchmarkingCharacteristics: a) Involves applying and learning globally, b) Cross-culturalbarriers, c) Must bridge international trade issues. 3 On 14 November 1996, the Council of Ministers invited the Commission topresent proposals on developing the use of benchmarking as a means ofimproving the competitiveness of European industry. It was suggested that therewere three levels of benchmarking:1.Framework conditions – which covers factors at infrastructure level (financial,educational, transport, etc…);2.Sector level – which concentrates on comparing one sector to another on aninternational basis (automotive, chemical, etc…); and3.Company benchmarking – which looks at the individual aspects of successwithin companies in order to identify both strengths and weaknesses.43 Benchmarking for Quality Management & Technology, “Integrated Benchmarking: a holistic examinationof select techniques for benchmarking analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCBUniversity Press.4 The TQM Magazine, “Company benchmarking a tool to aid competitiveness”, Volume: 11, Number: 1,1999, pp. 1, Copyright MCB University Press.
There exist numerous varieties of benchmarking. The most common andimportant are the following:Internal benchmarking: involves comparison of activities, functions andprocesses within the same organizations.External benchmarking: comparison of similar operations, systems, processeswith external organizations.Competitive benchmarking: where comparison is made between functions,activities with direct competitors in order to catch up or surprise competitorperformance.Industry benchmarking: comparisons are made with a group larger than directcompetitor (suppliers, distributors, customers etc…)Generic benchmarking: (or functional benchmarking), the comparison is notmade between anyone in the market or industry. The search is for general bestpractices, which are common across industry, sectors/markets.Process benchmarking: involves comparisons between discrete work processesand systems.Performance benchmarking: involves comparison and scrutiny of performanceattributes such as price, time to market, reliability, etc…Strategic benchmarking: involves benchmarking at a higher level thanoperational. In particular it seeks to address strategic issues or processes. Alsoreferred to as “core competence benchmarking”. 5 We should also say that the critical issue is what to benchmark! There are four key questions that we must ask ourselves:1.What should we benchmark?2.Whom should we benchmark?3.How do we perform the process?4.How do they (the other companies – competitors) perform the process?5 Benchmarking for Quality Management & Technology, “Integrated Benchmarking: a holistic examinationof select techniques for benchmarking analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCBUniversity Press.
Benchmarking as a tool has undoubtedly advantages and disadvantages.The advantages on the whole are the following: Benchmarking tools create interaction among management and tool administrators. In a process analysis they facilitate the prioritization of the use of rare resources. It helps organizations for orienting their strategy and processes. An organization can uncover gaps in its performance. It is practical for continuous improvement. Provides external examples for success. And, It helps ensure that a company strives fro excellence. 6On the other hand the disadvantages are the following: It does not give solutions to the problem that an organization has. Many organizations misunderstand the use of benchmarking – they benchmark only the industry they belong to. We might not have sufficient amount of data for very specific benchmark group comparisons. And, It is not detailed enough to be used for implementation phases of projects. 7Conclusion To sum up, benchmarking is a useful tool for any company if it wishes tobe aware of what is going on in the industry and out of it, generally what thecompetitors do, how they do it and their recipe for success… The worst problemis that one of the biggest mistakes people make when they benchmark is thatthey only look to benchmark someone within their own industry. And they onlychase competitors! They forget the case that the competitors may be worse than6 http://www.globalbestpractices.com/Help/benchamarking.asp7 http://www.globalbestpractices.com/Help/benchamarking.asp
they are… So, benchmarking should be used correctly in order to have onlypositive results.BIBLIOGRAPHY1.http://www.globalbestpractices.com/Help/benchmarking.asp2.http://www.globalbestpractices.com/Help/benchamarking.asp3.“Integrated Manufacturing Systems, Volume: 10, Number: 1, 1999, p.1,Copyright MCB University Press.4.Benchmarking for Quality Management & Technology, “IntegratedBenchmarking: a holistic examination of select techniques for benchmarkinganalysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB University Press.5.The TQM Magazine, “Company benchmarking a tool to aid competitiveness”,Volume: 11, Number: 1, 1999, pp. 1, Copyright MCB University Press.6.Benchmarking for Quality Management & Technology, “IntegratedBenchmarking: a holistic examination of select techniques for benchmarkinganalysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB University Press.