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Competitive and generic benchmarking

Competitive and generic benchmarking

Benchmarking, according to Hansen and Mowen (2005, p. 558), is ‘complimentary to kaizen costing and activity-based management, and it can be used as a search mechanism to identify opportunities for improvement’. Two of the three types of external benchmarking are competitive benchmarking and generic benchmarking, which is the focus of this assignment. Competitive benchmarking is a comparison of activity performance with direct competitors, while generic benchmarking studies the best practices of non-competitors outside a firms industry.

The results of both external benchmarking types, once determined, can help in the decision-making about what should be changed in the enterprise. Likewise, competitive and generic benchmarking together makes sense as a means of gaining insight into how the enterprise compares to its competitors and the best outside its industry. Once the comparison has been carried out, then performance standards for the enterprise can be established. Improved decision-making can be achieved through the complex procedures of evaluation, comprehension, estimation, measurement and comparison of both generic and competitive benchmarking types. The main advantage of generic benchmarking against competitive benchmarking is the former’s relatively easier identification of superior external best practices in opposition to latter’s problem of difficulty in obtaining information beyond that found

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in the public domain. Conversely, the difficulty of generic benchmarking may be found in knowing how to implement what was learned from non-competitors to one’s own organization, as compared to competitive benchmarking which when monitoring what competitors do succeeds, following suit is comparatively easier to do. As can be seen, a combination of the two types of benchmarking can be more relevant. A solely internal comparison has only a limited value as very little of entirely new information is available while an exclusively external comparison makes it more difficult for the organization to determine what to benchmark or what to leave out.

WORK CITED

Hansen, D. & Mowen, M. (2005). Cost Management: Accounting and Control. (5th Ed.). Mason, Ohio: Thomson South-Western.

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