1. International Strategic Marketing
Essay
“Advantages and disadvantages of
Benchmarking”
04 / 06 / 2011

2. Introduction
Benchmarking is the systemic measurement of business performance against an
outside group. Through benchmarking, a company uncovers gaps in its performance /
areas to target for improvement. Benchmarking is a practical tool for continuous
improvement. It disturbs companies into action, uncovers new ways of improving
business and activities, and provides external examples for success. It helps ensure that a
company strives for excellence.1 Additionally, according to Robert Camp (1989)
“Benchmarking is the search for best industry practices that will lead to superior
performance…”2
Benchmarking is a tool to help us improve our business processes. Any
business can be benchmarked. Apart from the definition we are going to be
referred to the evolution of benchmarking, its levels, its varieties and its
advantages and disadvantages…
Discussion
Watson (1993) in scrutinizing the historical development of concepts
suggests that benchmarking is moving from an art to science. So, he distinct five
generations of development. These are the following:
1st generation: Reverse engineering
Characteristics: a) Comparison of product characteristics, functionality,
performance of competitive offerings, b) Competitive analysis on market-
oriented features.
2nd generation: competitive benchmarking (1976-86)
Characteristics: comparison of processes with those of competitors.
1
http://www.globalbestpractices.com/Help/benchmarking.asp
2
“Integrated Manufacturing Systems, Volume: 10, Number: 1, 1999, p.1, Copyright MCB University
Press.

3. 3rd generation: process benchmarking (1982-88)
Characteristics: a) Recognition that learning can be made from companies
outside their industry, b) Need to understand similarities in processes, which on
the surface appear widely different.
4th generation: strategic benchmarking
Characteristics: Involves a systemic process for evaluating alternatives,
implementing strategies and improving performance by understanding and
adopting successful strategies from external partners. It is continuous and long-
term. And, finally
5th generation: global benchmarking
Characteristics: a) Involves applying and learning globally, b) Cross-cultural
barriers, c) Must bridge international trade issues. 3
On 14 November 1996, the Council of Ministers invited the Commission to
present proposals on developing the use of benchmarking as a means of
improving the competitiveness of European industry. It was suggested that there
were three levels of benchmarking:
1.Framework conditions – which covers factors at infrastructure level (financial,
educational, transport, etc…);
2.Sector level – which concentrates on comparing one sector to another on an
international basis (automotive, chemical, etc…); and
3.Company benchmarking – which looks at the individual aspects of success
within companies in order to identify both strengths and weaknesses.4
3
Benchmarking for Quality Management & Technology, “Integrated Benchmarking: a holistic examination
of select techniques for benchmarking analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB
University Press.
4
The TQM Magazine, “Company benchmarking a tool to aid competitiveness”, Volume: 11, Number: 1,
1999, pp. 1, Copyright MCB University Press.

4. There exist numerous varieties of benchmarking. The most common and
important are the following:
Internal benchmarking: involves comparison of activities, functions and
processes within the same organizations.
External benchmarking: comparison of similar operations, systems, processes
with external organizations.
Competitive benchmarking: where comparison is made between functions,
activities with direct competitors in order to catch up or surprise competitor
performance.
Industry benchmarking: comparisons are made with a group larger than direct
competitor (suppliers, distributors, customers etc…)
Generic benchmarking: (or functional benchmarking), the comparison is not
made between anyone in the market or industry. The search is for general best
practices, which are common across industry, sectors/markets.
Process benchmarking: involves comparisons between discrete work processes
and systems.
Performance benchmarking: involves comparison and scrutiny of performance
attributes such as price, time to market, reliability, etc…
Strategic benchmarking: involves benchmarking at a higher level than
operational. In particular it seeks to address strategic issues or processes. Also
referred to as “core competence benchmarking”. 5
We should also say that the critical issue is what to benchmark! There are
four key questions that we must ask ourselves:
1.What should we benchmark?
2.Whom should we benchmark?
3.How do we perform the process?
4.How do they (the other companies – competitors) perform the process?
5
Benchmarking for Quality Management & Technology, “Integrated Benchmarking: a holistic examination
of select techniques for benchmarking analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB
University Press.

5. Benchmarking as a tool has undoubtedly advantages and disadvantages.
The advantages on the whole are the following:
Benchmarking tools create interaction among management and tool
administrators.
In a process analysis they facilitate the prioritization of the use of rare
resources.
It helps organizations for orienting their strategy and processes.
An organization can uncover gaps in its performance.
It is practical for continuous improvement.
Provides external examples for success. And,
It helps ensure that a company strives fro excellence. 6
On the other hand the disadvantages are the following:
It does not give solutions to the problem that an organization has.
Many organizations misunderstand the use of benchmarking – they
benchmark only the industry they belong to.
We might not have sufficient amount of data for very specific
benchmark group comparisons. And,
It is not detailed enough to be used for implementation phases of
projects. 7
Conclusion
To sum up, benchmarking is a useful tool for any company if it wishes to
be aware of what is going on in the industry and out of it, generally what the
competitors do, how they do it and their recipe for success… The worst problem
is that one of the biggest mistakes people make when they benchmark is that
they only look to benchmark someone within their own industry. And they only
chase competitors! They forget the case that the competitors may be worse than
6
http://www.globalbestpractices.com/Help/benchamarking.asp
7
http://www.globalbestpractices.com/Help/benchamarking.asp

6. they are… So, benchmarking should be used correctly in order to have only
positive results.
BIBLIOGRAPHY
1.http://www.globalbestpractices.com/Help/benchmarking.asp
2.http://www.globalbestpractices.com/Help/benchamarking.asp
3.“Integrated Manufacturing Systems, Volume: 10, Number: 1, 1999, p.1,
Copyright MCB University Press.
4.Benchmarking for Quality Management & Technology, “Integrated
Benchmarking: a holistic examination of select techniques for benchmarking
analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB University Press.
5.The TQM Magazine, “Company benchmarking a tool to aid competitiveness”,
Volume: 11, Number: 1, 1999, pp. 1, Copyright MCB University Press.
6.Benchmarking for Quality Management & Technology, “Integrated
Benchmarking: a holistic examination of select techniques for benchmarking
analysis”, Volume: 5, Number: 3, 1998, pp. 2-3, Copyright MCB University Press.