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Eastern University

Report on Benchmarking Managerial Accounting (Act-335) Group-2

Prepared For Ms.Sharmin Biva


Lecturer, Faculty of Business Administration Eastern University

Prepared By
M d. Shahidul Isla m Tania Alam ID No: 093200082 ID No: ID No: ID No:

January 14, 2012

Table of Content
Topic
Benchmarking Definition

Page
1

Usefulness & Benefits

Advantage

Disadvantage

Research

Conclusion

11

References

12

Executive Summary

For collecting information about Benchmarking we searched through many different web sites and used help of text book. We acquired a lot of raw data from which we took the important data for our report. Benchmarking is a continuous process of measuring products, services, and processes against the industry best practices in a systematic way. Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Benchmarking was originally developed by companies operating in an industrial environment, benchmarking and therefore has been predominately applied within business enterprises. Performance Benchmarking or Competitive Benchmarking is used where organizations consider their positions in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. Process Benchmarking is used when the focus is on improving specific critical processes and operations. Benchmarking partners are sought from best practice organizations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. Functional Benchmarking or Generic Benchmarking is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes.

Benchmarking
1. Definition
Benchmarking is the practice of identifying, understanding, and adapting the successful business practices and processes used by other companies to increase your own business success. It is a business strategy that is used by manufacturers and service-oriented companies alike. While it may involve learning from one's competitors, benchmarking is more focused and narrowly defined than competitive analysis. It is the process of identifying "best practice" in relation to both products and the processes by which those products are created and delivered. The search for "best practice" can take place both inside a particular industry, and also in other industries. It is also a self-improvement tool for organizations. It allows them to compare themselves with others, to identify their comparative strengths and weaknesses and learn how to improve. Benchmarking is a way of finding and adopting best practices. [http://www.answers.com/topic/benchmarking#ixzz1XcoVTmCm] Benchmarking is a continuous process of measuring products, services, and processes against the industry best practices in a systematic way. Best practices are those practices that produce superior performance, are selected by a systematic approach and can be adapted to fit a particular organization. Benchmarking is a process whereby organizations pursue enhanced performance by learning about their own organization through comparison with their historical performance and with the practices and outcomes of others. The main outcome of benchmarking is therefore learning how to change and improve organizational performance. There is considerable evidence showing that businesses that benchmark make more money. Businesses prepared to question how they operate and behave in a systematic way by comparing with best in class operators will be significantly more profitable than businesses achieving average industry performance. Benchmarking helps minimize business complacency by challenging the acceptability of current performance and asking the question "where can we do better?" Businesses that become complacent with their performance tend not to make the necessary changes to maintain and develop achievements within their industry. [http://tutor2u.net/business/strategy/benchmarking.htm]

Benchmarking purpose:
The objective of benchmarking is to understand and evaluate the current position of a business or organization in relation to "best practice" and to identify areas and means of performance improvement. Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another

industry where similar processes exist, and compare the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.

The Benchmarking Process


Benchmarking involves looking outward to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organization or in key areas of the business environment. Application of benchmarking involves four key steps: (1) Understand in detail existing business processes (2) Analyze the business processes of others (3) Compare own business performance with that of others analyzed (4) Implement the steps necessary to close the performance gap

Background in Benchmarking
The concept of benchmarking in a modern commercial and industrial sense came to the forefront in the 1970s when Japan captured significant market shares from the USA corporations. These WE corporations and, Xerox in particular, used benchmarking to identify and demonstrate that they were under-performing relative to the management standards set in Japan. These corporations were then able to remain competitive by using benchmarking to continually assess performance and then use the data to develop strategies to improve that performance. Benchmarking was originally developed by companies operating in an industrial environment, benchmarking and therefore has been predominately applied within business enterprises. However, organizations such as government agencies, hospitals and universities have recently discovered the value of benchmarking and now apply it to improve their processes and systems. In addition, industry associations now increasingly use the tool to improve sector-specific processes. Most recently, public authorities have begun to explore the use of benchmarking as a tool for improving policy implementation processes, by focusing on the framework conditions which underlie the business environment and the economy more generally.

Why Benchmark?
In the private sector, the purpose of benchmarking is to gain a competitive edge. A benchmarking approach has become embedded in successful commercial organizations as a means of seeking innovation outside the industry paradigm - a way of keeping at the forefront of the competition. Recent surveys show that benchmarking is the third most used management tool. Interest in benchmarking is continuing to grow across the world. Benchmarking is also being recognized as a valuable tool for external learning strategies. Bill Cock-up, the Managing Director of BT Group stated, In my experience, identifying the toughest competitors and world class performers, and then aspiring to beat them is the best way to achieve competitive advantage". There are many benefits of benchmarking. The key benefits to organizations are: 1. provides realistic and achievable targets 2. Creates an atmosphere conducive to continuous improvement 3. Allows employees to visualize the improvement which can be a strong motivator for change 4. Confirms the belief that there is a need for change 5. Helps to identify weak areas and indicates what needs to be done to improve.

Types of Benchmarking
Benchmarking is a very versatile tool that can be applied in a variety of ways to meet a range of requirements for improvement. At the outset of benchmarking projects, it is vital to be clear on exactly what is to be achieved through benchmarking and apply an appropriate methodology. Different terms are used to distinguish the various ways of applying benchmarking. The first word in each term relates to either the purpose for benchmarking or the type of a partner. Standard benchmarking terms include: Strategic Benchmarking is used where organizations seek to improve their overall performance by examining the long-term strategies and general approaches that have enabled highperformers to succeed. It involves considering high level aspects such as core competencies, developing new products and services; changing the balance of activities; and improving capabilities for dealing with changes in the background environment. The changes resulting from this type of benchmarking may be difficult to implement and the benefits are likely to take a long time to materialize.

Performance Benchmarking or Competitive Benchmarking:


Performance Benchmarking or Competitive Benchmarking is used where organizations consider their positions in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. However, in the commercial world, it is common for companies to undertake this type of benchmarking through trade associations or third parties to protect confidentiality.

Process Benchmarking:
Process Benchmarking is used when the focus is on improving specific critical processes and operations. Benchmarking partners are sought from best practice organizations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking can result in benefits in the short term.

Functional Benchmarking or Generic Benchmarking:


Functional Benchmarking or Generic Benchmarking is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.

Internal Benchmarking:
Internal Benchmarking involves seeking partners from within the same organization, for example, from business units located in different areas. The main advantages of internal benchmarking are that access to sensitive data and information are easier; standardized data is often readily available; and, usually less time and resources are needed. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organization. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.

External Benchmarking:
External Benchmarking involves seeking outside organizations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at

the leading edge, although it must be remembered that not every best practice solution can be transferred to others. In addition, this type of benchmarking may take up more time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.

International Benchmarking:
International Benchmarking is used where partners are sought from other countries because best practitioners are located elsewhere in the world and/or there are too few benchmarking partners within the same country to produce valid results.

Who provides benchmarks?


Associations for benchmarking and benchmarking clubs that are either industry-specific or process-focused engage in collecting information from their members in order to identify "Best in Class" business processes, which, when implemented, will lead member companies to exceptional performance as perceived by their customers.

Their objectives are the following:


To create a cooperative environment where full understanding of the performance and enablers of "best in class" business processes can be obtained and shared at reasonable cost. 1. To use the efficiency of the consortium to obtain process performance data and related best practices from inside the industry. 2. To support the use of benchmarking to facilitate process improvement and the achievement of total quality.

2. Usefulness and Benefits


Benchmarking is the systematic process of comparing business processes and performance metrics to industry best practices in term of quality, time, and cost dimensions, and making such comparisons the basis to do things better, faster, and cheaper, First introduced by Xerox Corporation in the mid-1990s, benchmarking is a key tool of business performance management and finds use by enhancing the competitiveness of the organization. In 2008, a comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries. The results showed that: 1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis

(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%. 2. The tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.

Benefits of Benchmarking in business


Benchmarking plays an important role in business. There are lots of competitors for one service/ one product in this world, Benchmarking is the only way to determine, who is performing well, and on what areas the business should improve benchmarking is the only way to determine it.

Benefits of Benchmarking
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To find who the best is in that particular industry, what is the cost; their service will be known in other business circle. Help companies/organization to find out their positive and negative points of their product/services compared to their competitor. When you try to benchmark you will need to research to get the proper findings of it, when you do that you will know what is to be done and what not to be done. Complete evaluation of your business process helps to find ways to cut the costs of the business. Finding out the areas of scope of improvement, comparative study helps to achieve your company goals faster by realizing what to do and what not to do.

3. Advantage of Benchmarking:
The advantages of benchmarking include enabling organizations to outperform competitors, opening minds to new ideas, and placing organizations in a continuous improvement mode. Benchmarking is the systematic process of comparing business processes and performance metrics to industry best practices in terms of quality, time, and cost dimensions, and making such comparisons the basis to do things better, faster, and cheaper. First introduced by Xerox Corporation in the mid-1990s, benchmarking is a key tool of business performance management and finds use by enhancing the competitiveness of the organization. It enables organizations to outperform competitors, opens minds to ideas from new sources, and places the organization in a continuous improvement mode. It goes beyond competitive analysis to understanding not just the competitors output, but also the process of obtaining such output.

Performance Improvement
A primary advantage of benchmarking is that it sets the foundation of performance improvement aimed at enhancing competitiveness. By showing how to better competitors, benchmarking ensures the basic survival of the business.

Precision Measurement
Benchmarking identifies best practices in key business processes and determines what constitutes superior performance. It then quantifies the gap between the expected performance and the actual state; in the process it drives home uncomfortable facts and harsh realities about the business. This provides the organization with both the reason to improve and a definition of what constitutes improvement.

New Paradigms
A permanent benchmarking program forces organizations out of their comfort zones and provides specific and measurable short-term improvement plans based on current reality rather than historical performance. Very often, organizations set goals based on past trends and established internal patterns. Benchmarking helps remove such paradigm blindness and forces the organization to take a fresh approach to goal setting based on a broader perspective, including the external perspective, the most critical factor that drives customer expectations.

Change
Benchmarking help place organizational focus on change and provides the direction for the change process. Benchmark heralds change by: 1. making explicit the competitors' standards that provide the organization with minimum standards of excellence. 2. Providing new ideas and better ways of doing things. 3. Benchmarking opens minds to new ideas, heralding a process of continuous learning that leads to a learning organization.

[http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx#ixzz1YIAhDo3M] Business experts point to several factors that can a company's efforts to institute meaningful benchmarking practices. These include:

Unexamined core business processes: - The ultimate quality, price, or reliability of the end product or service that is made available to customers is predicated on many aspects of a company's operations, and these facets need to be taken into consideration when examining internal processes. Inadequate people or technology resources: - A business should make sure that it has the resources to both launch a thorough benchmarking program and implement its findings. Unwillingness or inability to accept the authority of business ideas or practices from outside sources: - Many employees and organizations are resistant to change, because of general contentedness, fear of the unknown, perceived challenges to their abilities, etc. Resistance can be minimized, however, if owners and managers make it clear that benchmarking is not a fault-finding exercise but rather an established program to help the company grow and prosper in a fast-changing business world. Speed of in-house benchmarking processes: - Effective benchmarking programs are given mandates to conduct their investigates in a timely manner, so that improvements can be implemented quickly. Inadequate follow-up training: - Benchmarking programs can uncover many areas in which companies can improve their performance. But if the company does not provide its work force with sufficient training to implement needed changes in a timely and effective fashion, then the initiative becomes a waste of time and resources [http://www.answers.com/topic/benchmarking#ixzz1XcofyEW4]

4. Disadvantages
A major limitation of benchmarking is that while it helps organizations in measuring the efficiency of their operational metrics, it remains inadequate to measure the overall effectiveness of such metrics. Benchmarking reveals the standards attained by competitors but does not consider the circumstances under which the competitors attained such standards. If the competitors goals and visions were flawed or severely restricted due to some specific factor, an organization by benchmarking such standards runs the risk of trying to ape such flawed standards or settling for extremely low standards. A bigger disadvantage of benchmarking is the danger of complacency and arrogance. Many organizations tend to relax after excelling beyond competitors' standards, allowing complacency to develop. The realization of having become the industry leader soon leads to arrogance, when considerable scope for further improvements remains.

Finally, many organizations make the mistake of undertaking benchmarking as a standalone activity. Benchmarking is only a means to an end, and it is worthless if not accompanied by a plan to change. Comparing the pros and cons of benchmarking, the advantages of benchmarking overshadow disadvantages. The 2008 Global Benchmarking Network survey finds organizations preferring benchmarking over any other performance analysis tools, including SWOT. Most organizations include benchmarking as a part of continuous improvement initiatives such as Total Quality Management and Six Sigma. [http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx#ixzz1YC2CNQha]

5. Research
Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration. Financial benchmarking - performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. Benchmarking from an investor perspective - extending the benchmarking universe to also compare to peer companies that can be considered alternative investment opportunities from the perspective of an investor. Performance benchmarking - allows the initiator firm to assess their competitive position by comparing products and services with those of target firms. Product benchmarking - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. Strategic benchmarking - involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries.

Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison. Best-in-class benchmarking - involves studying the leading competitor or the company that best carries out a specific function. Operational benchmarking - embraces everything from staffing and productivity to office flow and analysis of procedures performed. Energy benchmarking - developing an accurate model of a building's energy consumption with the purpose of measuring reductions in usage.

Market Research & Competitor Benchmarking


(Export to Bangladesh Market Research Services - Taking the gamble out of doing business in Bangladesh and Asia.)

If you are considering entering the dynamic and competitive markets of Asia via the natural gateway that is Bangladesh this service is of crucial importance for your business. Whatever you choose to do in your export markets, your business will only be a success if customers like what you are offering and are prepared to give you money in exchange. It's that simple. People buy to enable them to do what they want to do and to fulfill their needs. Unless you have an idea of your specific target customers and an understanding of those needs, you will find it very difficult to market your product or service. If you are considering exports to Bangladesh and beyond Export to Bangladesh can
        

Define your position in the market place. Define your product or service. Identify your potential customers, their needs and expectations. Determine the price your customers will be prepared to pay. Identify the level of quality and service your customers require. Describe your competitors, what they offer and their strengths and weaknesses. Describe how best to communicate your message to your prospective customers; Decide where your advertising campaign should be conducted; Estimate your potential market share.

The more detailed your market insight the sounder, more reliable the rest of your business planning will be. Export to Bangladesh has access to numerous published sources that can provide information related to your business idea. However this is rarely good enough, or sufficiently up to date, to base strategic decisions about the future direction of your business. Export to Bangladesh research involves talking to and observing your customers, potential customers and your competitor's customers. This kind of research provides information that is specific to you, and is concerned with the impact of your business on the market, as well as that of your direct competitors. For existing businesses, this will involve talking to customers, both actual and potential, and looking at past performance on indicators such as sales volume. For companies new to Bangladesh this kind of research will require an assessment of likely demand, by dealing with potential customers to find out the level of interest. Our primary research is always validated by secondary research to ensure accuracy and honesty of respondents. It is essential to research the market for any product or service very carefully. If others are already offering something similar, why will customers change supplier? Conversely, gaps may exist because of lack of demand rather than lack of supply.

[http://www.exporttobangladesh.com/service-details.asp?id=4]

6. Conclusion
Benchmarking is a very effective strategy which should be adopted by companies in Bangladesh such as service- oriented companies or manufacturers. If the organizations (private/government) our country implements this strategy properly then we would become more developed and more efficient as benchmarking opens minds to new ideas, indicating a process of continuous learning that leads to a learning organization. It is a self-improvement tool for organizations. It allows them to compare themselves with others, to identify their comparative strengths and weaknesses and learn how to improve. Any strategy is a good strategy if it is used properly.

6. Reference
[http://www.answers.com/topic/benchmarking#ixzz1XcoVTmCm] [http://tutor2u.net/business/strategy/benchmarking.htm] [http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx#ixzz1YIAhDo3M] [http://www.answers.com/topic/benchmarking#ixzz1XcofyEW4] [http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx#ixzz1YC2CNQha] [http://www.exporttobangladesh.com/service-details.asp?id=4]