What is Benchmarking?
- Benchmarking is a strategy tool of comparison.
- It is used to compare the performance of business process & products of company with best performance of other companies.
- Managers used benchmarking to identify best tool practices in other companies.
- According to Camp, benchmarking is simply “Finding and implementing the best business practices”.
Types of Benchmarking –
(a) Strategic benchmarking: This strategy says compare the winning strategies adopted by competitors or successful companies and thereafter adopt them in their own strategic processes.
(b) Performance benchmarking: This benchmarking strategy says compare your performance with competitor’s performance. l,e What are the price, quality, speed of production and what is our then adopt best practice.
(c) Process benchmarking: This benchmarking strategy says compare how the competitors manufactured their products & what is the manner of providing services.
Approaches of Benchmarking –
(a) Internal benchmarking: In internal benchmarking management compares the working team, unit, and divisions within the organization.
(b) External or competitive benchmarking: In external or competitive benchmarking company compares itself with competitors inside its industry itself. E.g. TATA & Tanishque.
(c) Functional benchmarking: In functional benchmarking managers compare their functional performance with functional performance of other companies.
(d) Generic benchmarking: In Generic benchmarking company focus on excellent work process of other companies rather than comparing with particular things.
Advantages of Benchmarking Strategy –
- Easy to understand and use.
- It’s a low cost activity that offers huge gains.
- Brings innovative ideas to the company.
- Provides with insight of how other companies organize their operations and processes.
- Increases the awareness of costs and level of performance compared to rivals.
- Facilitates cooperation between teams, units and divisions.
Disadvantages of Benchmarking Strategy –
- Requires identification of a benchmarking partner.
- Sometimes impossible to assign a metric to measure a process.
- Might need to hire a consultant.
- The initial costs could be huge.
- Managers often resist the changes.