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BENCHMARKING

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The example of Ford Motor company's development of its Taurus model is an off

quoted one on Benchmarking.

Ford president, directed the Ford team in charge of the Taurus' car project thatthey should pinpoint all the features of all the "best in class" cars and ensure that

Taurus carried all those features.

In implementing the direction, the Ford team naturally used benchmarking. The

team gathered data on the best features of all the top-selling cars in the world. No

car was omitted and no feature was overlooked. Months of studies conducted on50 competing models (sourced from different manufacturers) provided valuable

insights on quality perceptions, customer-centric focus, continuous improvement,

employee and supplier involvement etc

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Firms Use Certain Tools in Diagnosing and Building CA

(Competitive advantage )

Two useful tools in identifying and building competitive advantage are:

(i) Benchmarking

(ii) Value chain analysis

Benchmark ing

Benchmarking can be described as the process of improving one'sperformance by locating benchmarks/ standards in other firms and replicating

them in one's own organization.

It is a learning process, by which a firm seeks to identify best practices that

produce superior results in other firms, and to replicate them to enhance its own

competitive advantage.

McKinsey & Co views benchmarking as a skill, an attitude and a practice that

ensures excellence, instead of mere improvement.

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Benchmarking has larger scope than inter-firm comparison

Benchmarking is larger than inter-firm comparison.

First, benchmarking does not stop with comparison. It helps the firm secure amodel for emulation.

Second, in benchmarking, companies go a step beyond inter-firm comparison and

trace the best practices across industries and across countries, gathering still

higher standards for emulation.

Third, unlike with inter-firm comparison, with benchmarking, firms encourage their

internal departments to benchmark against one another and upgrade their

performance.

Analyzing other players and locating the best practices is the first task in

benchmarking. The firm then identifies and quantifies the performance gap .Thegap between its own performance and the benchmark. And, then, it bridges the

gap. This externally oriented approach makes people in the firm aware of the

distance they have to travel in achieving excellence. It has an eye-opening effect

on them.

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Types of benchmarking

Firms resort to four different types of benchmarking:

1) Internal,2) Functional,

3) Competitive

4) Generic.

The distinction among them lies essentially in the scope of comparison.

Internal benchmarking means comparisons within the organization, typically,

between related divisions, site-to-site and department-to-department

comparisons.

Functional benchmarking refers to comparison of the firm's performance in a

specific functional area with other firms.

Competitive benchmarking is the comparison of a company's performance

against the best in the same industry, i.e. against direct competitors.

Generic benchmarking refers to comparison across companies and industries on

the universal level; here, the firm's performance in a universal work process

(example: billing) is compared with that of the best anywhere in the world, in

any industry.

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