3.9.2 Activity 2 – Benchmarking –
There are many different products on the market. Choose four (in any industry) and carry out a benchmarking exercise. Identify important factors that you might use to compare them – for example price and brand. List out those factors, and then analyse each of the products in terms of those factors. Summarise what you have learnt about the specific industry from this exercise. Share your analysis and conclusions on the discussion board below.
Additional information
In making decisions, it is often important to think about comparisons. For example, we might want to develop a new product, and in doing so we need to set an appropriate price for that product. One way of determining the price is to look at the cost of the materials, the cost of labour, and the other costs associated with making it – and then add these together, and add something for a profit margin. But if the total figure we come up with is uncompetitive then the product is unlikely to be successful. We need to know how similar products are priced by competitors.
One way of addressing this is to carry out a benchmarking exercise. The term ‘benchmarking’ is developed from the idea of making a mark on a wooden bench to indicate where you are, and then making another mark to indicate where the competitors are – a little like making a mark of our height on the wall, as many of us did as children whilst we were growing up.
Benchmarking can be an internal activity – maybe comparing absence levels of each department against each other.
Benchmarking can also be an external activity – maybe comparing performance of our organisation against another.
In benchmarking the main question is what information is to be used. There is the need to have as much consistency as possible between the two or more sets of information that are being compared, so that the comparison is valid. If the benchmarking is an internal activity that process can be quite straightforward, because the information will be accessible. It is not always easy to get information about competitors, however. Hence, when carrying out an external benchmarking activity, there is the constraint imposed by the information that is available.
