STRATEGIC MANAGEMENT - TOPIC 3 Benchmarking

Benchmarking

to compare key activities/processes with the best practices from within or outside the organization

Why is benchmarking used?

To measure performance compared to others using similar performance metrics e.g. cost, productivity, cost of quality, kaizen, value analysis

3 Types of Benchmarking

1. Internal - comparing different business units within the organization that have the same processes

2. External - identify processes that need improving then comparing within processes external from the organization

3. Competitive - comparing performance from information gathered about direct competitors

Reverse Engineering

analysis of competitors products to find how they are made, their costs and so on

Advantages of Benchmarking

1. It is cost beneficial. A company saves time and money by avoiding mistakes of other organizations

2. Promotes forward and strategic thinking

3. Provides direction and continuous improvement

4. Boosting profitability by improving efficiency and lowering costs.

5. Enhancing product or service quality to improve customer satisfaction.

Disadvantages of Benchmarking

1. Backward-looking: Benchmarks typically reflect past performances and may not indicate future trends or innovations

2. Measurement issues: There can be problems with how performance is measured

3. Difficulty in finding comparisons: It can be challenging to find appropriate benchmarks or competitors to compare against