Category: Business/Financial Management

Analysis:

Benchmarking is to seek continuous improvement by comparing a company's performance with the best existing performance The process of enterprise operation activities and effective ways and methods to improve performance. Its main purpose is to identify gaps and find ways to continuously improve. The method is to conduct research on organizations or institutions with the most significant performance in similar activities or similar product production to discover best business practices and apply them to your own company. There are usually three categories of best performance: internal benchmarks, competitor benchmarks and general benchmarks. The ideal thing is to compare with competitors, that is, use competitive benchmarks to identify the best practitioners among competitors and determine the factors that lead to their best practices for reference. This is essentially conducting a competitor analysis.

To use the benchmarking method to conduct competitor analysis, you must first clarify who are the real competitors of the enterprise. Secondly, it is necessary to clarify the basic competitive strategies adopted by competitors, because it determines the company's cost measures. Companies that adopt a cost leadership strategy take low cost as their first goal and use various ways and means to reduce costs; while companies that adopt a differentiation strategy take differentiation as their first goal and use ways and means to reduce costs that do not affect the company. Differentiation is the limit; companies that implement a target aggregation strategy aim to occupy specific market segments. In specific market segments, they will still adopt cost aggregation or differentiation strategies. Cost benchmarking is most valuable when analyzing competitors using the same basic competitive strategy. The third step is to analyze competitors' value chains and cost drivers and compare them with the company's own value chain and cost drivers. If competitors provide similar products or services to the target market and adopt the same basic competitive strategies, then the market environment they operate in is basically the same, and the focus of the analysis should be on internal factors of the enterprise.