Benchmarking is a strategy used to evaluate a company’s performance in an industry. It involves comparing a company’s productivity, quality, service delivery, and cost to recognized standards of excellence. Benchmarking helps identify areas for improvement and can lead to innovation and increased sales. It is an ongoing process necessary for companies to stay competitive in a constantly changing market.
Benchmarking is a strategy that is often used to evaluate the overall performance level of a company operating within a specific industry. The benchmarks themselves are those standards of excellence for productivity, quality, service delivery and cost that are recognized as the ideal in that particular field. The benchmarking process helps a business get a sense of its overall standing within the community and helps identify areas where it can improve.
The establishment of a point of reference within an industry or profession does not appear overnight. Often, the benchmark is created over several years. From then on, any new businesses entering the same field will judge their overall performance against the standards that already exist in the industry. Such standards remain the norm until a competitor exhibits qualities that exceed the standard and thereby raise the benchmark for all other companies in the industry.
An early example of benchmarking can be seen in the field of telecommunications in the second half of the 20th century. Before the deregulation of the telephone industry in the United States in 1984, one company had established itself in terms of products, services and customer support. For emerging companies to compete, it was necessary to at least match those same standards at a lower rate, or exceed those standards while still maintaining a rate that consumers would find attractive. The end result is that the general benchmark for telecommunications in the United States has begun to shift, as companies have vied for the honor of setting the new industry standard.
Internally, benchmarking is one of the most effective strategies a company can use to position itself for growth. Because the proper assessment of how well the company is meeting industry standards relies on being brutally honest about policies, procedures, pricing, and service delivery, companies can get a clear picture of where they need to improve to increase market share, or even to maintain the market share they currently command. When used effectively, benchmarking can lead a company to become more innovative, think about its business model in new ways, and even identify new consumer markets that could be targeted, thereby increasing the overall sales generated by the company.
It’s important to note that benchmarking is not a process that is conducted once in a while, then set aside for a few years. Companies that want to stay competitive are constantly in the process of evaluating their practices and procedures against the standards for their industries and looking for ways to meet or exceed those standards. At a time when technology is constantly changing the way consumers make decisions about what to buy and who to buy it from, benchmarking has taken on even greater importance for companies that want to be in business for many years to come.
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